Gray’s 2Q Reflects Off-political Year

ATLANTA: Gray Television’s 36 TV stations beat the company’s own second-quarter estimates but fell short of analyst expectations. Gray (NYSE: GTN) posted a net loss of $6.6 million on revenues of $65 million for the three months ending June 30. Wachovia had GTN coming in with revenues of $66 million for the quarter.

“Management’s comments sounded quite conservative last quarter, which led to our above-guidance assumptions,” Wachovia’s Marci Ryvicker wrote.

Revenues were down 17 percent from 2Q08, when the company posted income of $3.2 million. Gray posted 1Q09 net loss of $8.9 million on revenues of $61.4 million. Broadcast cash flow was $19.7 million compared to nearly $32 million a year ago.

Like other broadcasters, GTN was hit by reduced ad spending and the comparison to a national election year. Political revenues fell 81 percent; automotive was down 48 percent.
Local advertising generated $43.3 million, down 13 percent.
National fell 33 percent to $12.4 million
Internet revenues fell 11 percent to $2.7 million.
Political totaled $900,000 compared to $4.9 million.
Retransmission consent revenues increased nearly four-fold, but not enough to make up the ad shortfall at $4 million.

Cash and equivalents were nearly $9.8 million as of June 30, 2009, compared to $30.6 million at the end of 2008. Long-term debt stood at $795.8 million on June 30 and $800.4 million on Dec. 31, 2008.

Gray is forecasting revenues of $63 million to $64 million for the third quarter. Wachovia and Reuters projected $65 million for 3Q09, but the ad market continues to be weaker than expected.

“Based on advertising orders received to date, pending advertising orders and advertising orders expected to be received in the future,” Gray’s 2Q release stated, “We currently believe our third quarter 2009 local revenue and national revenue, excluding political revenue, will decrease from 2008 results by approximately 9 and 30 percent, respectively.”

Retrans is expected to come in at $3.8 million, with a full-year estimate of between $15 million and $16 million, compared to $3 million in 2008.

Ryvicker said next year should be better for GTN, given “12 hotly contested gubernatorial and 15 hotly contested Senate races expected in 2010 versus the 12 and 11, respectively, that occurred in ’06,” which generated $43 million in revenues. Gray’s 10 NBC stations will get a boost from the Winter Olympics, and its 17 CBS stations will get a windfall from the Super Bowl. GTN will also start collecting its $2.2 million a year for running the Young TV stations.

The elections, Olympics, Super Bowl and the management deal are expected to yield $53 million in incremental revenues next year. A shares of Gray were trading at 76 in early afternoon, as they were most of Friday.
-- Deborah D. McAdams

More TVB coverage of Gray:
July 30, 2009: Court OKs Gray to Run Young Broadcasting Stations
The federal bankruptcy court has approved the sale of Young Broadcasting and the management of its TV stations by Gary Television.

July 22, 2009: “Gray Tapped to Run Reorganized Young Stations
The U.S. Bankruptcy Court for the Southern District of New York indicate that Gray tentatively was named the third-party operator acceptable to the new owners Terms of the management agreement were negotiated by Young “at arm’s length,” the document said.

May 8, 2009: “Gray Television Revenues Drop 14 Percent”
Gray Television’s 36 TV stations posted a net loss of $8.9 million for the first quarter, a 132 percent increase from a $3.95 million loss a year ago. Revenues were down 14 percent to $61.4 million compared to $71 million in 1Q08.

March 16, 2009: “Gray Posts Loss on $339 Million Impairment”
Revenues for Gray’s 36 TV stations ticked up in 2008 and 4Q08, but losses widened on impairment. Gray posted full-year revenues of $327 million, up 6 percent from 2007. Revenues for 4Q08 totaled $94.8 million, up 12 percent from the same period a year previous.
Net loss for the year and the quarter exceeded $200 million on a 4Q write-down of $338.7 million, including $240.1 million on TV licenses. Full-year net loss was $202 million compared to $23.2 million in 2007. For the fourth quarter, net loss was $206 million compared to a $1.5 million profit in 4Q07.

November 26, 2008: “Gray TV Executes Repurchase”
Gray Television repurchased 883,200 shares of its own common stock at 20 cents per plus commission… on the open market.

November 24, 2008: “NYSE Drops Gray Common Stock”
Gray TV received notice today from the New York Stock Exchange that the share price of its common stock had fallen below the level required to stay listed on the Exchange… The company has six months to “cure” the deficiency before the NYSE boots it off the board, and 10 days to tell the Exchange how it plans to do so.

July 16, 2008: “Gray Television Issues $25 Million in Stock”
Gray Television issued $25 million worth of Series D preferred stock in a private placement in order to make a voluntary prepayment on its outstanding term loan. Net proceeds from the placement totaled about $23 million, which reduced Gray’s term loan balance to $832.5 million.