Gray Reports Record Revenue

Gray Reports Record Revenue

Gray Also Reports Broadcast and Corporate Expenses that are Below Guidance

ATLANTA, Nov. 5, 2014 /PRNewswire/ -- Gray Television, Inc. ("Gray," "we," "us" or "our") (NYSE: GTN and GTN.A) today announced results of operations for the three-month period (the "third quarter of 2014") and nine-month period ended September 30, 2014. Revenue for both the third quarter of 2014 and the just-concluded nine-month period set new records for the Company. In addition, our revenue was at the high end of the range of our previously issued guidance of $128.0 million to $132.0 million; our broadcast expenses were below the range of our previously issued guidance of $74.0 million to $75.0 million and our corporate and administrative expenses were below the range of our previously issued guidance of $5.5 million to $6.0 million.

During the nine-month period ended September 30, 2014, we completed six acquisitions. During the third quarter of 2014, we completed the acquisition of WJRT-TV and WTVG-TV, which serve the Flint-Saginaw-Bay City, Michigan, and Toledo, Ohio, television markets, respectively (the "SJL Acquisition"). The stations acquired in the SJL Acquisition contributed $2.0 million of revenue and $0.9 million of broadcast expense to our results for the third quarter of 2014. These amounts were not considered in developing our previously issued guidance for the third quarter of 2014. The financial results of all other acquisitions completed during the nine-month period ended September 30, 2014 had been considered in connection with our previously issued guidance.

For the third quarters and nine-month periods ended September 30, 2014 and 2013, our revenue, broadcast expense, corporate and administrative expense, net income and certain non-GAAP cash flow amounts were as follows:





Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------

2014 2013 % Change 2014 2013 % Change
---- ---- -------- ---- ---- --------


Revenue (less agency commissions):

Total $131,702 $88,288 49 % $330,248 $250,742 32 %

Political $22,029 $1,377 1500 % $33,437 $2,769 1108 %


Operating expenses (1):

Broadcast $73,218 $53,516 37 % $199,604 $158,817 26 %

Corporate and administrative $5,271 $4,470 18 % $21,618 $13,587 59 %


Net income $13,940 $7,073 97 % $16,808 $13,087 28 %


Non-GAAP Cash Flow (2):

Broadcast Cash Flow $58,429 $34,603 69 % $129,578 $91,419 42 %

Broadcast Cash Flow Less

Cash Corporate Expenses $53,885 $30,388 77 % $110,766 $79,551 39 %

Free Cash Flow $25,309 $13,319 90 % $41,644 $27,021 54 %


(1) Excludes depreciation, amortization and gain on disposal of assets.

(2) See definition of non-GAAP terms and a reconciliation of the non-GAAP amounts to net income included elsewhere herein.


Highlights:


-- We achieved record revenue for both the third quarter of 2014 and
nine-month period ended September 30, 2014, as a result of increased
revenue at our preexisting stations, as well as the addition of revenue
from our Acquired Stations (defined below).
-- Between October 31, 2013 and September 30, 2014, we completed eight
acquisitions in which we acquired the operations of 19 television
stations (the "Acquired Stations"). We are successfully integrating the
Acquired Stations into our station group.
-- Our only currently pending acquisitions are as follows: (1) the
acquisition of KKHD-LD and the programming of KJCT-TV in Grand Junction,
Colorado (2) the programming of KXJB-TV in Fargo, North Dakota and (3)
the acquisition of KMTF-TV in Helena, Montana. The total consideration
remaining to be paid for these acquisitions is approximately $3.7
million. We anticipate closing these transactions in the fourth quarter
of 2014.
-- Corporate and administrative expense for the third quarter of 2014
included non-recurring expenses of $0.6 million of legal and other
professional expenses associated with our completed and pending
acquisitions.
-- For the periods ended September 30, 2014 and December 31, 2013, our
total leverage ratio calculated on a trailing eight quarter basis under
the terms of our senior credit facility was 6.3 and 5.7, respectively.
Comments on Results of Operations for the Three-Month Period Ended September 30, 2014:

Revenue As Reported.

Total revenue increased $43.4 million, or 49%, to $131.7 million for the third quarter of 2014 compared to the third quarter of 2013. For the third quarters of 2014 and 2013, the Acquired Stations accounted for approximately $28.2 million and $0.0 million of our total revenue, respectively.

The principal components of our revenue for the third quarter of 2014 compared to the third quarter of 2013 were as follows:


-- Local advertising revenue increased $13.3 million, or 27%, to $62.0
million.
-- National advertising revenue increased $2.6 million, or 19%, to $16.2
million.
-- Local and national advertising revenue combined increased $15.9 million,
or 25%, to $78.2 million.
-- Internet advertising revenue increased $1.0 million, or 15%, to $7.4
million.
-- Political advertising revenue increased $20.7 million, or 1500%, to
$22.0 million.
-- Retransmission consent revenue increased $10.5 million, or 115%, to
$19.7 million.
-- Other revenue increased $2.6 million, or 142%, to $4.4 million.
-- Consulting revenue decreased $7.1 million to $0.0 million.
Political advertising revenue increased due to increased advertising by political candidates, political parties and special interest groups in the "on year" of the two-year election cycle. Retransmission consent revenue increased primarily due to increased subscriber rates. During the third quarter of 2013, we recognized a one-time payment of $7.1 million as incentive consulting revenue associated with a now-expired consulting agreement. We did not recognize any consulting revenue in the third quarter of 2014.

Strong demand for our advertising inventory from political advertisers affected advertising revenue from our non-political advertising revenue categories. Excluding revenue attributable to the Acquired Stations and political advertisers, our five largest advertising categories on a combined local and national basis by customer type for the third quarter of 2014 demonstrated the following changes in revenue during the third quarter of 2014 compared to the third quarter of 2013:


-- automotive decreased 3%;
-- medical increased less than 1%;
-- restaurant decreased 8%;
-- communications decreased 15%; and
-- furniture and appliances decreased 16%.
Revenue on a Combined Historical Basis.

In order to provide more meaningful period over period comparisons, we also present herein certain historical revenue and broadcast expense information on a "Combined Historical Basis." Combined Historical Basis reflects financial results that have been prepared by adding Gray's historical revenue and broadcast expenses with the historical revenue and broadcast expenses of each of the Acquired Stations from January 1, 2013 (the beginning of the earliest period presented), but it does not include any adjustments for other events attributable to the acquisitions.

On a Combined Historical Basis, total revenue increased $19.5 million, or 16%, to $139.4 million in the third quarter of 2014 as compared to the third quarter of 2013.

On a Combined Historical Basis, the principal components of revenue for the third quarter of 2014 compared to the third quarter of 2013 were approximately as follows:


-- Local advertising revenue decreased $0.9 million, or 1%, to $66.3
million.
-- National advertising revenue decreased $1.6 million, or 8%, to $17.2
million.
-- Local and national advertising revenue combined decreased $2.4 million,
or 3%, to $83.5 million reflecting, in part, the strong demand on
advertising inventory from political advertisers.
-- Internet advertising revenue increased $0.4 million, or 5%, to $7.5
million.
-- Political advertising revenue increased $21.3 million, or 1184%, to
$23.1 million.
-- Retransmission consent revenue increased $7.0 million, or 51%, to $20.9
million.
-- Other revenue increased $0.4 million, or 10%, to $4.4 million.
-- Consulting revenue decreased $7.1 million to $0.0 million.
Broadcast Operating Expenses As Reported.

Broadcast expenses (before depreciation, amortization and loss on disposal of assets) increased $19.7 million, or 37%, to $73.2 million for the third quarter of 2014 compared to the third quarter of 2013. For the third quarters of 2014 and 2013, the Acquired Stations accounted for approximately $15.8 million and $0.0 million of our total broadcast expenses, respectively.


-- Compensation expense increased $9.6 million due primarily to the net of
the following:
-- Salary expense increased $7.6 million resulting primarily from the
addition of personnel at the Acquired Stations.
-- Incentive compensation increased $1.0 million.
-- Healthcare costs increased $0.3 million reflecting increased claim
activity.
-- Non-cash stock-based compensation increased $0.3 million. Broadcast
non-cash stock-based compensation expense increased due to the grant
of restricted common stock to certain employees in 2014.
-- Pension expense decreased $0.6 million.
-- Non-compensation expense increased $10.1 million due primarily to the
following:
-- Network affiliation fees increased $3.4 million reflecting in part,
increased fees payable to the ABC network under our affiliation
agreements that renewed January 1, 2014.
-- National sales representation fees increased $1.2 million due to
commissions paid on increased revenue.
-- Syndicated programming costs, software license fees, consulting fees
expense and other professional fees also increased.
Broadcast Operating Expenses on a Combined Historical Basis.

On a Combined Historical Basis, broadcast expenses (before depreciation, amortization and loss (gain) on disposal of assets) increased $4.7 million, or 6%, to $78.2 million for the third quarter of 2014 compared to the third quarter of 2013.

Corporate Operating Expenses As Reported.

Corporate and administrative expenses (before depreciation, amortization and loss on disposal of assets) increased $0.8 million, or 18%, to $5.3 million.


-- Non-compensation expense increased $0.6 million primarily due to
increases in legal and other professional fees associated with our
completed and pending acquisitions.
-- Compensation expense increased $0.2 million primarily due to increases
in non-cash stock-based compensation and routine increases in salary
expense.
Comments on Results of Operations for the Nine-Month Period Ended September 30, 2014:

Revenue as Reported.

Total revenue increased $79.5 million, or 32%, to $330.2 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. For the nine months ended September 30, 2014 and 2013, the Acquired Stations accounted for approximately $40.7 million and $0.0 million of our total revenue, respectively.

The principal components of our revenue for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 were as follows:


-- Local advertising revenue increased $23.7 million, or 16%, to $169.8
million.
-- National advertising revenue increased $2.3 million, or 5%, to $44.3
million.
-- Local and national advertising revenue combined increased $26.0 million,
or 14%, to $214.1 million.
-- Internet advertising revenue increased $2.2 million, or 12%, to $20.7
million.
-- Political advertising revenue increased $30.7 million, or 1108%, to
$33.4 million.
-- Retransmission consent revenue increased $25.2 million, or 89%, to $53.5
million.
-- Other revenue increased $2.6 million, or 42%, to $8.6 million.
-- Consulting revenue decreased $7.1 million to $0.0 million.
Political advertising revenue reflected increased advertising by political candidates, political parties and special interest groups during the "on year" of the two-year political advertising cycle. Retransmission consent revenue increased primarily due to increased subscriber rates. Local and national advertising revenue in the nine months ended September 30, 2014 benefited from approximately $3.8 million earned from the broadcast of the 2014 Winter Olympic Games on our then fourteen NBC affiliated stations. There was no corresponding Olympic Games advertising revenue during the nine months ended September 30, 2013. Local and national advertising revenue included the broadcast of the 2014 Super Bowl on our then five FOX channels, which earned us approximately $0.2 million, a decrease of approximately $0.9 million compared to the broadcast of the 2013 Super Bowl on our then 20 CBS channels that earned us approximately $1.1 million. As noted in our discussion of our revenue for the third quarter of 2014, we recorded a one-time payment of $7.1 million during 2013 as incentive consulting revenue associated with a now-expired consulting agreement.

Strong demand for our advertising inventory from political advertisers affected advertising revenue from our non-political advertising revenue categories. Excluding revenue attributable to the Acquired Stations and political advertisers, our five largest advertising categories on a combined local and national basis by customer type for the nine-month period ended September 30, 2014 demonstrated the following changes in revenue during the nine-month period ended September 30, 2014 compared to the nine-month period ended September 30, 2013:


-- automotive increased 4%;
-- medical increased 5%;
-- restaurant decreased 11%;
-- communications decreased 8%; and
-- furniture and appliances decreased 10%.
Revenue on a Combined Historical Basis.

On a Combined Historical Basis, total revenue increased $50.0 million, or 15%, to $393.9 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

On a Combined Historical Basis, the principal components of revenue for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 were approximately as follows:


-- Local advertising revenue increased $4.3 million, or 2%, to $205.2
million.
-- National advertising revenue decreased $4.3 million, or 8%, to $52.8
million.
-- Local and national advertising revenue combined decreased $0.1 million,
or 0%, to $257.9 million reflecting, in part, the strong demand on
advertising inventory from political advertisers.
-- Internet advertising revenue increased $1.5 million, or 7%, to $22.0
million.
-- Political advertising revenue increased $33.5 million, or 975%, to $37.0
million.
-- Retransmission consent revenue increased $22.5 million, or 55%, to $63.7
million.
-- Other revenue decreased $0.4 million, or 3%, to $13.4 million.
-- Consulting revenue decreased $7.1 million to $0.0 million.
Broadcast Operating Expenses As Reported.

Broadcast expenses (before depreciation, amortization and loss (gain) on disposal of assets) increased $40.8 million, or 26%, to $199.6 million for the nine-month period ended September 30, 2014 compared to the nine-month period ended September 30, 2013. For the nine months ended September 30, 2014 and 2013, the Acquired Stations accounted for approximately $25.3 million and $0.0 million of our total broadcast expenses, respectively.


-- Compensation expense increased $19.2 million due primarily to the net of
the following:
-- Non-cash paid-time-off increased $3.9 million reflecting the
non-cash increase in expense for paid-time-off due to a change in
our employee benefit policy. This non-cash charge is a non-recurring
charge.
-- Salary expense increased $16.2 million resulting primarily from the
addition of personnel at the Acquired Stations.
-- Healthcare costs increased $1.1 million reflecting increased claim
activity.
-- Non-cash stock-based compensation increased $1.2 million. Broadcast
non-cash stock-based compensation expense increased due to the grant
of restricted common stock to certain employees in 2014.
-- Pension expense decreased $1.8 million.
-- Non-compensation expense increased $21.6 million due primarily to the
net of the following:
-- Network affiliation fees increased $7.9 million reflecting, in part,
increased fees payable to the ABC network under our affiliation
agreements that renewed January 1, 2014.
-- National sales representation fees increased $1.8 million due to
commissions paid on increased revenue.
-- Programming costs, software license fees, consulting fees, bad debt
expense and other professional fees also increased.
Broadcast Operating Expenses on a Combined Historical Basis.

On a Combined Historical Basis, broadcast expenses (before depreciation, amortization and loss (gain) on disposal of assets) increased $18.5 million, or 8%, to $236.3 million for the nine-month period ended September 30, 2014 compared to the nine-month period ended September 30, 2013.

Corporate Operating Expenses As Reported.

Corporate and administrative expenses (before depreciation, amortization and loss (gain) on disposal of assets) increased $8.0 million, or 59%, to $21.6 million.


-- Non-compensation expense increased $6.2 million primarily due to
increases in legal and other professional fees of $5.7 million
associated with our completed and pending acquisitions.
-- Compensation expense increased $1.8 million primarily due to increases
in non-cash stock-based compensation expenses and routine increases in
salary expense.
Detailed table of operating results:





Gray Television, Inc.

Selected Operating Data (Unaudited)

(in thousands except for net income per share data)


Three Months Ended

September 30,
-------------


2014 2013
---- ----


Revenue (less agency
commissions) $131,702 $88,288

Operating expenses before depreciation,
amortization

and loss on disposal of assets, net:

Broadcast 73,218 53,516

Corporate and
administrative 5,271 4,470

Depreciation 8,228 6,024

Amortization of
intangible assets 3,823 9

Loss on disposals of
assets, net 6 49

Operating expenses 90,546 64,068
------ ------

Operating income 41,156 24,220

Other income (expense):

Miscellaneous income
(expense), net 11 -

Interest expense (18,619) (12,656)
------- -------

Income before income
tax 22,548 11,564

Income tax expense 8,608 4,491
----- -----

Net income $13,940 $7,073
======= ======


Basic per share information:

Net income $0.24 $0.12
===== =====

Weighted-average
shares outstanding 57,863 57,713
====== ======


Diluted per share information:

Net income $0.24 $0.12
===== =====

Weighted-average
shares outstanding 58,394 58,078
====== ======


Political
advertising revenue
(less agency
commissions) $22,029 $1,377




Gray Television, Inc.

Selected Operating Data (Unaudited)

(in thousands except for net income per share data)


Nine Months Ended

September 30,
-------------


2014 2013
---- ----


Revenue (less agency
commissions) $330,248 $250,742

Operating expenses before depreciation,
amortization

and loss (gain) on disposal of assets, net:

Broadcast 199,604 158,817

Corporate and
administrative 21,618 13,587

Depreciation 21,598 17,762

Amortization of
intangible assets 5,291 40

Loss (gain) on
disposals of assets,
net 385 (56)

Operating expenses 248,496 190,150
------- -------

Operating income 81,752 60,592

Other income (expense):

Miscellaneous income,
net 14 -

Interest expense (49,718) (37,790)

Loss from early
extinguishment of
debt (4,897) -
------ ---

Income before income
tax expense 27,151 22,802

Income tax expense 10,343 9,715
------ -----

Net income $16,808 $13,087
======= =======


Basic per share information:

Net income $0.29 $0.23
===== =====

Weighted-average
shares outstanding 57,857 57,600
====== ======


Diluted per share information:

Net income $0.29 $0.23
===== =====

Weighted-average
shares outstanding 58,330 57,907
====== ======


Political advertising
revenue (less agency
commissions) $33,437 $2,769


Other Financial Data:





September 30, 2014 December 31, 2013
------------------ -----------------

(in thousands)


Cash $79,807 $13,478

Long-term debt
including
current
portion $1,306,470 $842,874

Borrowing
availability
under our
senior credit
facility $40,000 $30,000


Nine Months Ended September
30,

2014 2013
---- ----

(in thousands)


Net cash
provided by
operating
activities $88,404 $51,590

Net cash used
in investing
activities (477,066) (19,603)

Net cash
provided by
financing
activities 454,991 266

Net increase in
cash $66,329 $32,253
======= =======


Guidance for the Three Months Ending December 31, 2014 (the "fourth quarter of 2014"):

We currently anticipate that our results of operations (which include the expected results of operations of Excalibur Broadcasting, LLC, a variable interest entity whose results are consolidated with those of Gray in accordance with GAAP (as defined below)) for the fourth quarter of 2014, will be within the ranges presented in the table below. These estimates do not include any impact from any pending acquisitions.





Low End % Change High End % Change

Guidance for From Guidance for From Actual

the Fourth Actual Fourth the Fourth Actual Fourth Fourth

Quarter of Quarter of Quarter of Quarter of Quarter of

Selected operating data: 2014 2013 2014 2013 2013
------------------------ ---- ---- ---- ---- ----

(dollars in thousands)

OPERATING REVENUE:

Revenue (less agency commissions) $171,000 79 % $174,000 82 % $95,556


OPERATING EXPENSES

(before depreciation, amortization and

gain on disposals of assets):

Broadcast $84,500 44 % $86,500 48 % $58,594

Corporate and administrative $6,200 0 % $6,500 4 % $6,223


OTHER SELECTED DATA:

Political advertising revenue

(less agency commissions) $46,000 2415 % $47,000 2470 % $1,829


Comments on Fourth Quarter 2014 Guidance:

Fourth Quarter of 2014 on an "As Reported Basis."

Based on our current forecasts for the fourth quarter of 2014, we anticipate the following changes from the three-month period ended December 31, 2013 (the "fourth quarter of 2013") as outlined below. Our total revenue estimates for the fourth quarter of 2014 include approximately $47.4 million of revenue estimated to be contributed collectively by the Acquired Stations.

Revenue.


-- We believe our fourth quarter of 2014 local advertising revenue,
excluding political advertising revenue, will increase by approximately
28% to 32%.
-- We expect our fourth quarter of 2014 national advertising revenue,
excluding political advertising revenue, will increase by approximately
20% to 25%.
-- We anticipate our fourth quarter of 2014 internet advertising revenue,
excluding political advertising revenue, will increase by approximately
5% to 7%.
-- We believe our fourth quarter of 2014 retransmission consent revenue
will increase by approximately 88%, or $10.1 million, to $21.6 million.
Operating expenses (before depreciation, amortization and gain on disposal of assets).

Our total broadcast operating expense estimates for the fourth quarter of 2014 include approximately $21.4 million of broadcast operating expense estimated to be incurred collectively by the Acquired Stations.

The anticipated increase in corporate and administrative expense for the fourth quarter 2014 compared to the fourth quarter of 2013 is expected to be due primarily to increases in incentive compensation and legal fees.

Fourth Quarter of 2014 on a "Combined Historical Basis".

Based on our current forecasts for the fourth quarter of 2014, we anticipate the following changes from the Combined Historical Basis fourth quarter of 2013 as outlined below.

Revenue:


-- We believe our fourth quarter of 2014 total revenue will increase by
approximately ­­­35% to 37%.
-- We believe our fourth quarter of 2014 local advertising revenue,
excluding political advertising revenue, will decrease slightly by low
single digits.
-- We expect our fourth quarter of 2014 national advertising revenue,
excluding political advertising revenue, will decrease slightly by low
single digits.
-- These anticipated results of local and national advertising revenue,
excluding political advertising reflect, in part, the strong demand for
our available advertising inventory from political advertisers during
the fourth quarter of 2014.
-- We anticipate our fourth quarter of 2014 internet advertising revenue,
excluding political advertising revenue, will be generally consistent
with our 2013 results.
-- We believe our fourth quarter of 2014 political revenue will range
between $46.0 million and $47.0 million bringing anticipated full year
2014 political revenue to range between $83.0 million and $84.0 million.
Our fourth quarter of 2013 political revenue was approximately $2.7
million.
-- We believe our fourth quarter of 2014 retransmission consent revenue
will increase by approximately 35% to approximately $21.6 million.
Operating expenses (before depreciation, amortization and gain on disposal of assets) on a Combined Historical Basis:

Our total broadcast operating expenses for the fourth quarter of 2014 are anticipated to increase from the fourth quarter of 2013 on a Combined Historical Basis by approximately $6.7 million. This increase reflects expected increases in network affiliation fees of $2.7 million (reflecting, in part, increased fees payable to the ABC network for our affiliation agreements that renewed January 1, 2014) and an increase of approximately $2.0 million in national sales representative commissions expected to be payable in the fourth quarter of 2014 on anticipated political revenue.

Revenue (less agency commissions) by Category:

The table below presents our revenue (less agency commissions) or "net revenue" by type for the three-month and nine-month periods ended September 30, 2014 and 2013, respectively (dollars in thousands):





Three Months Ended September 30,
--------------------------------

2014 2013
---- ----

Percent Percent

Amount of Total Amount of Total
------ -------- ------ --------

Revenue (less agency commissions):

Local $62,029 47.1% $48,728 55.2%

National 16,158 12.3% 13,585 15.4%

Internet 7,431 5.6% 6,476 7.3%

Political 22,029 16.7% 1,377 1.6%

Retransmission consent 19,674 14.9% 9,165 10.4%

Other 4,381 3.4% 1,814 2.1%

Consulting - 0.0% 7,143 8.0%

Total $131,702 100.0% $88,288 100.0%
======== ===== ======= =====




Nine Months Ended September 30,
-------------------------------

2014 2013
---- ----

Percent Percent

Amount of Total Amount of Total
------ -------- ------ --------

Revenue (less agency commissions):

Local $169,751 51.4% $146,025 58.2%

National 44,332 13.4% 42,061 16.8%

Internet 20,676 6.3% 18,439 7.4%

Political 33,437 10.1% 2,769 1.1%

Retransmission consent 53,450 16.2% 28,253 11.3%

Other 8,602 2.6% 6,052 2.4%

Consulting - 0.0% 7,143 2.8%

Total $330,248 100.0% $250,742 100.0%
======== ===== ======== =====


The aggregate internet revenues presented above are derived from: (i) direct internet revenue and (ii) internet-related commercial time sales.

Non-GAAP Terms

From time to time, Gray supplements its financial results prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") by disclosing the non-GAAP financial measures Broadcast Cash Flow, Broadcast Cash Flow Less Cash Corporate Expenses, operating cash flow as defined in Gray's credit facility ("Operating Cash Flow") and Free Cash Flow. These non-GAAP amounts are used by us to approximate the amount used to calculate a key financial performance covenant contained in our debt agreements.

Broadcast Cash Flow is defined as net income plus corporate and administrative expenses, loss from early extinguishment of debt, broadcast non-cash stock based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense, less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast obligations and network compensation revenue.

Broadcast Cash Flow Less Cash Corporate Expense is defined as net income plus loss from early extinguishment of debt, non-cash stock based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast obligations and network compensation revenue.

Free Cash Flow is defined as net income plus loss from early extinguishment of debt, non-cash stock based compensation, depreciation and amortization (including amortization of intangible assets and program broadcast rights), any loss on disposal of assets, any miscellaneous expense, interest expense, any income tax expense, non-cash 401(k) expense, pension expense less any gain on disposal of assets, any miscellaneous income, any income tax benefits, payments for program broadcast obligations, network compensation revenue, contributions to pension plans, interest expense (net of amortization of deferred financing costs and amortization of original issue discount on our debt), capital expenditures (net of any insurance proceeds) and the payment of income taxes (net of any refunds received).

These non-GAAP terms are not defined in GAAP and our definitions may differ from, and therefore not be comparable to, similarly titled measures used by other companies, thereby limiting their usefulness. Such terms are used by management in addition to and in conjunction with results presented in accordance with GAAP and should be considered as supplements to, and not as substitutes for, net income and cash flows reported in accordance with GAAP.

Reconciliations:

Reconciliation of net income to the non-GAAP terms (dollars in thousands):





Three Months Ended Nine Months Ended

September 30, September 30,
------------- -------------

2014 2013 2014 2013
---- ---- ---- ----

Net income $13,940 $7,073 $16,808 $13,087

Adjustments to reconcile from net income to

Broadcast Cash Flow Less Cash Corporate Expenses:

Depreciation 8,228 6,024 21,598 17,762

Amortization of intangible assets 3,823 9 5,291 40

Non-cash stock based compensation 981 255 4,032 1,719

Loss (gain) on disposals of assets, net 6 49 385 (56)

Miscellaneous (income) expense, net (11) - (14) -

Interest expense 18,619 12,656 49,718 37,790

Loss from early extinguishment of debt - - 4,897 -

Income tax expense 8,608 4,491 10,343 9,715

Amortization of program broadcast rights 3,309 2,829 9,227 8,492

Common stock contributed to 401(k) plan

excluding corporate 401(k) contributions 6 7 18 21

Network compensation revenue recognized (122) (156) (343) (470)

Payments for program broadcast rights (3,502) (2,849) (11,194) (8,549)

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock based compensation 4,544 4,215 18,812 11,868
----- ----- ------ ------

Broadcast Cash Flow 58,429 34,603 129,578 91,419

Corporate and administrative expenses excluding

depreciation, amortization of intangible assets and

non-cash stock based compensation (4,544) (4,215) (18,812) (11,868)
------ ------ ------- -------

Broadcast Cash Flow Less Cash Corporate Expenses 53,885 30,388 110,766 79,551

Pension expense 1,518 2,156 4,611 6,464

Contributions to pension plans (1,996) (1,082) (4,713) (3,686)

Interest expense (18,619) (12,656) (49,718) (37,790)

Amortization of deferred financing costs 764 412 2,158 1,235

Amortization of original issue (premium) or discount on Notes (215) 69 (647) 206

Purchase of property and equipment (9,996) (5,953) (20,452) (18,441)

Income taxes paid, net of refunds (32) (15) (361) (518)

Free Cash Flow $25,309 $13,319 $41,644 $27,021
======= ======= ======= =======


See the previous page for the definition of Non-GAAP terms.

The Company

We are a television broadcast company headquartered in Atlanta, Georgia, that owns and/or operates television stations and leading digital assets in markets throughout the United States. Upon completion of all pending transactions, we will own and/or operate television stations in 44 television markets broadcasting 139 program streams including 76 affiliates of the Big Four networks (ABC, CBS, NBC and FOX). At that time, our owned and/or operated stations will include 26 channels affiliated with the CBS Network, 24 channels affiliated with the NBC Network, 16 channels affiliated with the ABC Network and 10 channels affiliated with the FOX Network. We will then own and/or operate the number-one ranked television station in 29 of those 44 markets and the number-one or number-two ranked television station operations in 40 of those 44 markets. We reach approximately 8.1 percent of total United States television households.

Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act

This press release contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and the federal securities laws. These "forward-looking statements" are not statements of historical facts, and may include, among other things, statements regarding our current expectations and beliefs of operating results for the fourth quarter of 2014 or other periods, future expenses, the completion of pending acquisitions and other future events. Actual results are subject to a number of risks and uncertainties and may differ materially from the current expectations and beliefs discussed in this press release. All information set forth in this release is as of November 5, 2014. We do not intend, and undertake no duty, to update this information to reflect future events or circumstances. Information about certain potential factors that could affect our business and financial results and cause actual results to differ materially from those expressed or implied in any forward-looking statements are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on Form 10-K for the year ended December 31, 2013 and may be contained in reports subsequently filed with the U.S. Securities and Exchange Commission (the "SEC") and available at the SEC's website at www.sec.gov.

Conference Call Information

We will host a conference call to discuss our third quarter operating results on November 5, 2014. The call will begin at 10:00 AM Eastern Time. The live dial-in number is 1 (800) 499-4035 and the confirmation code is 3796251. The call will be webcast live and available for replay at www.gray.tv. The taped replay of the conference call will be available at 1 (888) 203-1112, Confirmation Code: 3796251 until December 5, 2014.



SOURCE Gray Television, Inc.

Gray Television, Inc.

CONTACT: Hilton Howell, President and Chief Executive Officer (404) 266-5512 or Jim Ryan, Senior V. P. and Chief Financial Officer (404) 504-9828

Web Site: http://www.gray.tv


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