Gray Reports Record Operating Results

Gray Reports Record Operating Results

ATLANTA, May 9, 2016 /PRNewswire/ -- Gray Television, Inc. ("Gray," "we," "us" or "our") (NYSE: GTN and GTN.A) today announced results of operations for the three-months ended March 31, 2016 (the "first quarter of 2016") including revenue of $173.7 million (+30%), Broadcast Cash Flow of $65.9 million (+41%), net income of $9.0 million, and free cash flow of $24.2 million (+10%). On a Combined Historical Basis, as defined herein, our year-over-year results were also impressive with revenue of $187.1 million (+12%), Broadcast Cash Flow of $69.3 million (+11%), and Free Cash Flow of $30.9 million (+9%). Diluted net income per share was $0.12 for the first quarter of 2016. Excluding the $6.7 million of transaction costs discussed below, adjusted diluted net income per share would have been $0.18 for the first quarter of 2016. These results set new records that demonstrate the success of our recent acquisitions, as well as strong organic growth, across our entire portfolio of television stations.

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Highlights:


-- Record Revenue, Net Income and Broadcast Cash Flow - Our revenue for the
first quarter of 2016 was $173.7 million, which was the highest for any
first quarter in our history ($187.1 million on a Combined Historical
Basis). Moreover, total revenue increased $40.4 million, or 30%, for the
first quarter of 2016 compared to the three months ended March 31, 2015
(the "first quarter of 2015"). Our net income was $9.0 million for the
first quarter of 2016, which was also the highest for any first quarter
in our history. Our Broadcast Cash Flow was $65.9 million for the first
quarter of 2016, which was also the highest for any first quarter in our
history ($69.3 million on a Combined Historical Basis).

-- Total Leverage Ratio - As of March 31, 2016, our total leverage ratio,
as defined in our senior credit facility, was 5.25 times on a trailing
eight-quarter basis, netting all $120.7 million of cash on our balance
sheet against our debt balance.

-- Schurz Acquisition and Related Transactions Completed - During February
2016, we completed the Schurz Acquisition and Related Transactions, as
defined herein. The net adjusted purchase price, excluding transaction
and financing costs, was approximately $457.4 million. This amount was
funded by additional borrowings under our senior credit facility and
proceeds from the sale of certain assets acquired in the transaction.
Excluding transaction and financing costs, our net consideration paid
was approximately $416.2 million. In the first quarter of 2016, these
acquired stations contributed $16.6 million of net revenue and $5.8
million of broadcast cash flow to our results of operations. Our station
group now includes 50 television markets broadcasting approximately 180
programming streams, including 35 affiliates of the CBS Network ("CBS"),
26 affiliates of the NBC Network ("NBC"), 19 affiliates of the ABC
Network ("ABC") and 13 affiliates of the FOX Network ("FOX").

-- Transaction Costs - In connection with our acquisition activities, we
incurred professional fees of approximately $6.7 million and $0.3
million in the first quarter of 2016 and 2015, respectively. These
expenses are included in our corporate and administrative operating
expenses.
Effects of Acquisitions and Divestitures on Our Results of Operations

From October 31, 2013 through March 31, 2016, we completed 17 acquisition transactions and three divestiture transactions. These transactions added a net total of 41 television stations in 28 television markets to our operations, including 19 new television markets. During February 2016, we completed the Schurz Acquisition and Related Transactions that added the following 10 television stations to our operations:



Station Primary Network Affiliation Market
------- --------------------------- ------

WBXX-TV CW Knoxville, TN

KWCH-TV (1) CBS Wichita-Hutchinson, KS

WDBJ-TV CBS Roanoke, VA

KYTV-DT NBC Springfield, MO

KCZ CW Springfield, MO

KSPR-TV (2) ABC Springfield, MO

WAGT-TV NBC Augusta, GA

KTUU-TV NBC Anchorage, AK

KOTA-TV (3) ABC Rapid City, SD

WLUC-TV NBC/FOX Marquette, MI




(1) The acquired station includes three satellite stations, re-broadcasting the programming associated with the primary (CBS) network
affiliation.

(2) Gray provides certain non-sales, back-office services to KSPR-TV, acquired by Schurz Communications, Inc., on February 16, 2016.

(3) We have acquired the indicated program stream in this market and are broadcasting this program stream on our previously existing station
in this market, which has changed its call letters to KOTA-TV (ABC), as well as two satellite stations that we also acquired in the
transaction.
During February 2016, we completed the acquisition of several television and radio stations from Schurz Communications, Inc.; divested certain of these stations; exchanged KAKE-TV for WBXX-TV and cash; and exchanged WSBT-TV for WLUC-TV (the "Schurz Acquisition and Related Transactions"). We refer to the stations acquired and retained in these transactions as the "2016 Acquired Stations." During 2015, we completed six acquisitions which transactions collectively added a total of seven television stations in six markets (four new markets) to our operations at various times during that year, and we refer to the stations acquired in those acquisitions as the "2015 Acquired Stations." During 2014, we completed seven acquisitions, which transactions collectively added a total of 22 television stations in 12 markets (10 new markets) to our operations at various times during that year, and we refer to the stations acquired in those acquisitions as the "2014 Acquired Stations." Unless the context of the following discussions requires otherwise, we refer to the 2016 Acquired Stations, the 2015 Acquired Stations and the 2014 Acquired Stations, collectively, as the "Acquired Stations."

Due to the significant effect that our acquisitions and divestitures have had on our results of operations, and in order to provide more meaningful period over period comparisons, we also present herein certain financial information on a "Combined Historical Basis." Unless otherwise defined, Combined Historical Basis reflects financial results that have been compiled by adding Gray's historical revenue and broadcast expenses to the historical revenue and broadcast expenses of the Acquired Stations; and removing the historical revenues and historical broadcast expenses of divested stations; as if they had been acquired and divested, respectively, on January 1, 2014 (the beginning of the earliest period presented). In addition, our Combined Historical Basis non-GAAP terms "Broadcast Cash Flow," "Broadcast Cash Flow Less Cash Corporate Expenses," "Operating Cash Flow as Defined in our Senior Credit Facility" and "Combined Historical Free Cash Flow" give effect to the financings related to the acquisition of the Acquired Stations, as if these financings occurred on January 1, 2014, and certain anticipated net expense savings resulting from the completed acquisitions. Combined Historical Basis financial information for acquisitions does not reflect all purchase accounting and other adjustments required for Regulation S-X pro formas.

Select Operating Data:




As-Reported Basis

Three Months Ended March 31,
----------------------------

% Change % Change

2016 to 2016 to

2016 2015 2015 2014 2014
---- ---- ---- ---- ----

(dollars in thousands, except per share data)

Revenue (less agency commissions):

Total $173,723 $133,303 30 % $91,297 90 %

Political $9,655 $1,159 733 % $2,792 246 %


Operating expenses (1):

Broadcast $108,568 $86,847 25 % $60,384 80 %

Corporate and administrative $15,678 $6,847 129 % $6,499 141 %


Net income $8,990 $5,595 61 % $1,277 604 %


Non-GAAP Cash Flow (2):

Broadcast Cash Flow $65,894 $46,724 41 % $30,619 115 %

Broadcast Cash Flow Less

Cash Corporate Expenses $51,186 $40,627 26 % $25,473 101 %

Free Cash Flow $24,215 $21,991 10 % $7,453 225 %


Free Cash Flow Per Share:

Basic $0.34 $0.38 $0.13

Diluted $0.33 $0.37 $0.13






Combined Historical Basis

Three Months Ended March 31,
----------------------------

% Change % Change

2016 to 2016 to

2016 2015 2015 2014 2014
---- ---- ---- ---- ----

(dollars in thousands, except per share data)

Revenue (less agency commissions):

Total $187,076 $167,421 12 % $153,228 22 %

Political $9,863 $1,238 697 % $4,881 102 %


Operating Expenses (1):

Broadcast $120,730 $111,415 8 % $100,204 20 %

Corporate and administrative $15,678 $6,847 129 % $6,499 141 %


Net Income $6,406 $6,679 (4)% $10,600 (40)%


Non-GAAP Cash Flow (2):

Broadcast Cash Flow $69,292 $62,399 11 % $56,895 22 %

Broadcast Cash Flow Less Cash

Corporate Expenses $54,584 $56,302 (3)% $51,749 5 %

Operating Cash Flow as defined in

the Gray senior credit facility $60,839 $58,703 4 % $52,360 16 %

Free Cash Flow $30,924 $28,469 9 % $19,626 58 %


Free Cash Flow Per Share Data:

Basic $0.43 $0.49 $0.34

Diluted $0.43 $0.48 $0.34


(1) Excludes depreciation, amortization and loss 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.
Results of Operations for the First Quarter of 2016


Reclassification of Revenue.

Historically, we have reported our local television advertising revenues and our internet/digital/mobile advertising revenues separately. Beginning in 2016, we will report a single line item identified as "Local (including internet/digital/mobile)" which will combine both our local television advertising revenues and our internet/digital/mobile advertising revenues. Since this revenue originates within each local market in which we operate and is sold by each local sales force, we believe this classification is more consistent and more representative of our operating focus, to maximize all aspects of local revenue. All prior periods presented have been reclassified to reflect our current presentation.

Revenue (less agency commissions) on As-Reported Basis.

The table below presents our revenue (less agency commissions) or "net revenue" by type for the first quarter of 2016 and 2015, respectively, dollars in thousands:



Three-Months Ended March 31,
----------------------------

2016 2015
---- ----

Percent Percent

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

Revenue (less agency commissions):

Local (including internet/digital/
mobile) $89,354 51.4% $74,865 56.2%

National 22,079 12.7% 17,767 13.3%

Political 9,655 5.6% 1,159 0.9%

Retransmission consent 47,269 27.2% 36,251 27.2%

Other 5,366 3.1% 3,261 2.4%

Total $173,723 100.0% $133,303 100.0%
======== ===== ======== =====
Total revenue increased $40.4 million, or 30%, to $173.7 million for the first quarter of 2016 compared to the first quarter of 2015. Revenue from the 2016 Acquired Stations and 2015 Acquired Stations, collectively, accounted for approximately $30.7 million of our total revenue in the first quarter of 2016. Revenue from the 2015 Acquired Stations had no effect on the first quarter of 2015 as none of the 2015 Acquired Stations were acquired in the first quarter of 2015.

Our revenue increased in the first quarter of 2016 as compared to the first quarter of 2015 primarily due to the additional revenue from the 2016 Acquired Stations and 2015 Acquired Stations; increases in retransmission revenue due primarily to increased retransmission consent rates; and increases in political advertising revenue due to 2016 being the "on year" of the two-year election cycle. Local and national advertising revenue included approximately $2.1 million of revenue from the broadcast of the 2016 Super Bowl on our CBS channels, an increase of approximately $0.6 million compared to the $1.5 million of revenue from the broadcast of the 2015 Super Bowl on our NBC channels.

The principal types of revenue for the first quarter of 2016 compared to the first quarter of 2015 were as follows:


-- Local advertising revenue (including internet/digital/mobile) increased
$14.5 million, or 19%, to $89.4 million.
-- National advertising revenue increased $4.3 million, or 24%, to $22.1
million.
-- Political advertising revenue increased $8.5 million, or 733%, to $9.7
million.
-- Retransmission consent revenue increased $11.0 million, or 30%, to $47.3
million.
-- Other revenue increased $2.1 million, or 65%, to $5.4 million.
Within our local and national advertising revenue categories, and excluding the 2016 Acquired Stations and 2015 Acquired Stations, our five largest customer categories experienced the following approximate changes during the first quarter of 2016 compared to the first quarter of 2015:


-- Automotive increased 2%;
-- Medical increased 4%;
-- Restaurant increased 2%;
-- Furniture and appliances increased 5%; and
-- Communications decreased 12%.
Revenue on Combined Historical Basis.

On a Combined Historical Basis, total revenue increased $19.7 million, or 12%, to $187.1 million in the first quarter of 2016 as compared to the first quarter of 2015. On a Combined Historical Basis, the principal types of revenue for the first quarter of 2016 compared to the first quarter of 2015, were approximately as follows:


-- Local advertising revenue (including internet/digital/mobile) increased
$3.0 million, or 3%, to $96.7 million.
-- National advertising revenue decreased $0.8 million, or 3%, to $24.0
million.
-- Political advertising revenue increased $8.6 million, or 697%, to $9.9
million.
-- Retransmission consent revenue increased $8.6 million, or 21%, to $50.3
million.
-- Other revenue increased $0.3 million, or 5%, to $6.3 million.
Within our local and national advertising revenue categories, and including the revenue attributable to the 2016 Acquired Stations and the 2015 Acquired Stations, our five largest customer categories experienced the following approximate changes during the first quarter of 2016 compared to the first quarter of 2015:


-- Automotive was unchanged;
-- Medical was unchanged;
-- Restaurant increased 3%;
-- Furniture and appliances increased 6%; and
-- Communications decreased 12%.
Broadcast Operating Expenses on As-Reported Basis.

Broadcast operating expenses (before depreciation, amortization and gain or loss on disposal of assets) increased $21.7 million, or 25%, to $108.6 million for the first quarter of 2016 compared to the first quarter of 2015. The 2016 Acquired Stations and 2015 Acquired stations, collectively, accounted for approximately $18.4 million of our total broadcast operating expenses in the first quarter of 2016. The 2015 Acquired Stations had no effect on the first quarter of 2015 as none of the 2015 Acquired Stations were acquired in the first quarter of 2015.


-- Non-compensation expense increased $11.1 million in the first quarter of
2016, primarily due to network program fees that increased $5.4 million
reflecting increased fees payable to networks under our affiliation
agreements. National sales commissions decreased $0.9 million in the
first quarter of 2016 primarily as a result of the termination of
substantially all of our national sales representation agreements at the
beginning of 2016. Other operating expenses totaling $5.8 million
increased in the first quarter of 2016 as a result of expenses
associated with the 2016 Acquired Stations and 2015 Acquired Stations.
-- Compensation expense increased by $10.6 million in the first quarter of
2016, primarily as a result of $8.5 million in additional salary and
bonus expense attributable to the 2016 Acquired Stations and 2015
Acquired Stations. Compensation related expenses, other than salary and
bonus expenses, increased by $2.8 million also attributable to the 2016
Acquired Stations and 2015 Acquired Stations. Matching contributions to
our defined contribution 401(k) plan were $1.4 million in the first
quarter of 2016; these matching contributions began in the second half
of 2015. These increases were offset, by a decrease of $2.3 million in
expenses of our defined benefit pension plan in the first quarter of
2016, related to the freeze of that plan also in the second half of
2015. Non-cash share based compensation expenses were $0.3 million in
the first quarter of 2016 compared to $0.2 million in the first quarter
of 2015.
Broadcast Operating Expenses on Combined Historical Basis.

On a Combined Historical Basis, broadcast operating expenses (before depreciation, amortization and gain or loss on disposal of assets) increased $9.3 million, or 8%, to $120.7 million in the first quarter of 2016 as compared to the first quarter of 2015. The increase reflects, in part, the following:


-- Network program fees increased $5.2 million consistent with the growth
of retransmission consent revenue. National sales commissions decreased
$1.0 million in the first quarter of 2016, primarily as a result of the
termination of substantially all of our national sales representation
agreements at the beginning of 2016. In addition, other programming
fees, news services, professional fees and promotions together decreased
by approximately $1.0 million.
-- Compensation expense increased by approximately $3.1 million in the
first quarter of 2016 compared to the first quarter of 2015. Non-cash
share based compensation expenses were $0.3 million in the first quarter
of 2016 compared to $0.2 million in the first quarter of 2015.
Corporate and Administrative Operating Expenses on As-Reported Basis.

Corporate and administrative expenses (before depreciation, amortization and gain or loss on disposal of assets) increased $8.8 million, or 129%, to $15.7 million in the first quarter of 2016 as compared to the first quarter of 2015. The increase reflects, in part, the following:


-- Non-compensation expense increased $8.5 million in the first quarter of
2016 primarily due to $6.7 million of professional fees related to the
acquisition of the 2016 Acquired Stations compared to $0.3 million of
professional fees incurred in the first quarter of 2015 related to the
acquisition of the 2015 Acquired Stations.
-- Compensation expense increased $0.3 million primarily due to increases
in incentive compensation costs; offset, in part, by reductions in
relocation expenses. Non-cash share based compensation expenses were
$1.0 million in the first quarter of 2016 compared to $0.7 million in
the first quarter of 2015.
Detailed table of operating results on As-Reported Basis





Gray Television, Inc.
Selected Operating Data (Unaudited)
(in thousands except for per share data)


Three Months Ended

March 31,
---------

2016 2015
---- ----


Revenue (less agency commissions) $173,723 $133,303

Operating expenses before depreciation,

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

Broadcast 108,568 86,847

Corporate and administrative 15,678 6,847

Depreciation 11,126 8,798

Amortization of intangible assets 3,888 2,771

Gain on disposals of assets, net (1,648) (18)

Operating expenses 137,612 105,245
------- -------

Operating income 36,111 28,058

Other income (expense):

Miscellaneous income, net 569 7

Interest expense (21,275) (18,530)
------- -------

Income before income taxes 15,405 9,535

Income tax expense 6,415 3,940
----- -----

Net income $8,990 $5,595
====== ======


Basic per share information:

Net income $0.13 $0.10
===== =====

Weighted-average shares outstanding 71,791 58,224
====== ======


Diluted per share information:

Net income $0.12 $0.10
===== =====

Weighted-average shares outstanding 72,582 58,737
====== ======


Political revenue (less agency
commissions) $9,655 $1,159
Other Financial Data



As of
-----

March 31, December 31,

2016 2015
---- ----

(in thousands)


Cash $120,654 $97,318

Long-term debt,
including current
portion $1,636,178 $1,220,084

Borrowing
availability under
our revolving
credit facility $60,000 $50,000



Three Months Ended March
31,
-------------------------

2016 2015
---- ----

(in thousands)


Net cash provided
by operating
activities $28,260 $29,243

Net cash used in
investing
activities (420,162) (2,931)

Net cash provided
by financing
activities 415,238 167,532

Net increase in
cash $23,336 $193,844
======= ========
Guidance for the Three Months Ending June 30, 2016 (the "second quarter of 2016")

Based on our current forecasts for the second quarter of 2016, we anticipate the changes from the three-months ended June 30, 2015 (the "second quarter of 2015") as outlined below. Our estimates for the second quarter of 2016 include approximately $45.5 million of revenue and $29.7 million of broadcast operating expense estimated to be contributed by the 2016 Acquired Stations and 2015 Acquired Stations. We acquired the 2015 Acquired Stations subsequent to June 30, 2015.



Three Months Ending June 30,
----------------------------

Low End % Change High End % Change

Guidance From Guidance From

for As-Reported for As-Reported As-Reported

the Second Second the Second Second Second

Quarter of Quarter of Quarter of Quarter of Quarter of

Selected operating data: 2016 2015 2016 2015 2015
------------------------ ---- ---- ---- ---- ----

(dollars in thousands)

OPERATING REVENUE:

Revenue (less agency commissions) $195,000 36 % $197,000 37 % $143,464


OPERATING EXPENSES

(before depreciation, amortization and

gain or loss on disposals of assets):

Broadcast $121,000 40 % $123,000 42 % $86,445

Corporate and administrative $8,000 24 % $9,000 40 % $6,444


OTHER SELECTED DATA:

Political advertising revenue

(less agency commissions) $9,500 332 % $10,000 355 % $2,197
Comments on Second Quarter of 2016 Guidance

Revenue on As-Reported Basis.

Based on our current forecasts for the second quarter of 2016, we anticipate the following changes from the second quarter of 2015 as outlined below:


-- We believe our second quarter of 2016 local advertising revenue
(including internet/digital/mobile) will increase within a range of
approximately 25% to 27%.
-- We believe our second quarter of 2016 national advertising revenue will
increase within a range of approximately 37% to 40%.
-- We believe our second quarter of 2016 political revenue will be within a
range of approximately $9.5 million to $10.0 million. Our second quarter
of 2015 political revenue was approximately $2.2 million.
-- We believe our second quarter of 2016 retransmission consent revenue
will be within a range of approximately $50.0 million to $50.5 million.
Broadcast Operating Expenses (before depreciation, amortization and gain or loss on disposal of assets, net) on As-Reported Basis.

For the second quarter of 2016, we anticipate our broadcast operating expenses will increase from the second quarter of 2015, reflecting the impact of the 2016 Acquired Stations and the 2015 Acquired Stations as well as anticipated increases in payroll and related employee benefits. We anticipate that our broadcast operating expenses will also reflect increases in network fees of approximately $7.0 million (to total approximately $24.0 million for the second quarter of 2016).

Corporate and Administrative Operating Expenses (before depreciation, amortization and gain on disposal of assets) on As-Reported Basis.

For the second quarter of 2016, we anticipate our corporate and administrative operating expense will increase to within a range of approximately $8.0 million to $9.0 million, primarily attributable to routine increases in compensation and professional service fees.

Second Quarter of 2016 on Combined Historical Basis.

Based on our current forecasts for the second quarter of 2016, we anticipate the following changes from the Combined Historical Basis second quarter of 2015 as outlined below. For the purposes hereof, our Combined Historical Basis revenues and expenses for the second quarter of 2015 have been adjusted to give effect to both the 2016 Acquired Stations and 2015 Acquired Stations.

Revenue on Combined Historical Basis:


-- We believe our second quarter of 2016 total revenue will be within a
range of approximately $195.0 million to $197.0 million (or increase
approximately +8% to +9%).
-- We believe our second quarter of 2016 local advertising revenue
(including internet/digital/mobile)will be within a range of
approximately $104.0 million to $105.0 million (or increase
approximately 0% to +1%).
-- We believe our second quarter of 2016 national advertising revenue will
be within a range of approximately $26.0 million to $27.0 million (or
change approximately -3% to 0%).
-- We believe our second quarter of 2016 political revenue will be within a
range of approximately $9.5 million to $10.0 million.
-- We believe our second quarter of 2016 retransmission consent revenue
will be within a range of approximately $50.0 million to $50.5 million
(or increase approximately +18% to +19%).
Broadcast Operating Expenses (before depreciation, amortization and gain or loss on disposal of assets) on Combined Historical Basis.

Our total broadcast operating expenses for the second quarter of 2016 are anticipated to increase from the second quarter of 2015 on a Combined Historical Basis by a range of approximately $9.5 million to $11.5 million (to total within a range of approximately $121.0 million to $123.0 million for the second quarter of 2016). This increase reflects an expected increase of $5.5 million in network fees (to total approximately $24.0 million for the second quarter of 2016). Consistent with our strategy, and the realization of our operating synergies, we believe that our Combined Historical Basis broadcast compensation costs will increase by approximately $3.8 million to total approximately $64.0 million in the second quarter of 2016 compared to the second quarter of 2015.

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 Senior 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. These non-GAAP amounts may also be provided on an As-Reported Basis as well as a Combined Historical Basis.

Broadcast Cash Flow is defined as net income plus loss from early extinguishment of debt, corporate and administrative expenses, 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 Expenses 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.

Operating Cash Flow is defined in Gray's Senior Credit Facility 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, network compensation revenue, plus pension expense but less cash contributions to pension plans.

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, amortization of deferred financing costs, 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, 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.

Reconciliation on As-Reported Basis

Reconciliation of net income to the non-GAAP terms, in thousands:




Three Months Ended

March 31,
---------

2016 2015 2014
---- ---- ----


Net income $8,990 $5,595 $1,277

Adjustments to reconcile from
net income to Broadcast Cash

Flow Less Cash Corporate
Expenses:

Depreciation 11,126 8,798 6,384

Amortization of intangible
assets 3,888 2,771 289

Non-cash stock-based
compensation 1,284 993 2,071

Gain on disposals of assets,
net (1,648) (18) 331

Miscellaneous income, net (569) (7) -

Interest expense 21,275 18,530 15,274

Income tax expense 6,415 3,940 859

Amortization of program
broadcast rights 4,396 3,607 2,913

Common stock contributed to
401(k) plan

excluding corporate 401(k)
contributions 6 6 6

Network compensation revenue
recognized - - (108)

Payments for program broadcast
rights (3,977) (3,588) (3,823)

Corporate and administrative
expenses excluding

depreciation, amortization of
intangible assets and

non-cash stock-based
compensation 14,708 6,097 5,146
------ ----- -----

Broadcast Cash Flow 65,894 46,724 30,619

Corporate and administrative
expenses excluding

depreciation, amortization of
intangible assets and

non-cash stock-based
compensation (14,708) (6,097) (5,146)
------- ------ ------

Broadcast Cash Flow Less Cash
Corporate Expenses $51,186 $40,627 $25,473

Pension expense 40 2,401 1,573

Contributions to pension plans (520) - (962)

Interest expense (21,275) (18,530) (15,274)

Amortization of deferred
financing costs 1,071 799 692

Amortization of net original
issue premium on

7 1/2% senior notes due 2020 (216) (216) (216)

Purchase of property and
equipment (5,931) (2,849) (3,802)

Income taxes paid, net of
refunds (140) (241) (31)

Free Cash Flow $24,215 $21,991 $7,453
======= ======= ======
Reconciliation on Combined Historical Basis

Reconciliation of net income to the non-GAAP terms, in thousands:




Three Months Ended

March 31,
---------

2016 2015 2014
---- ---- ----


Net income $6,406 $6,679 $10,600

Adjustments to reconcile from
net income to Broadcast Cash

Flow Less Cash Corporate
Expenses:

Depreciation 11,772 11,289 10,724

Amortization of intangible
assets 4,707 4,482 1,910

Non-cash stock-based
compensation 1,284 993 2,071

(Gain) loss on disposals of
assets, net (1,432) 35 (13)

Miscellaneous income, net (587) (21) 37

Interest expense 23,589 23,317 23,210

Income tax expense 6,211 3,380 58

Amortization of program
broadcast rights 4,396 3,607 2,913

Common stock contributed to
401(k) plan

excluding corporate 401(k)
contributions 6 6 6

Network compensation revenue
recognized - - -

Payments for program broadcast
rights (3,977) (3,588) (3,823)

Corporate and administrative
expenses excluding

depreciation, amortization of
intangible assets and

non-cash stock-based
compensation 14,708 6,097 5,146

Other 2,209 6,123 4,056
----- ----- -----

Broadcast Cash Flow $69,292 $62,399 $56,895

Corporate and administrative
expenses excluding

depreciation, amortization of
intangible assets and

non-cash stock-based
compensation (14,708) (6,097) (5,146)
------- ------ ------

Broadcast Cash Flow Less Cash
Corporate Expenses $54,584 $56,302 $51,749

Pension expense 40 2,401 1,573

Contributions to pension plans (520) - (962)

Other 6,735 - -
----- --- ---

Operating Cash Flow as defined
in Senior Credit Agreement $60,839 $58,703 $52,360

Interest expense (23,589) (23,317) (23,210)

Amortization of deferred
financing costs 1,071 799 692

Amortization of net original
issue premium on

7 1/2% senior notes due 2020 (216) (216) (216)

Purchase of property and
equipment (5,931) (6,250) (8,750)

Income taxes paid, net of
refunds (1,250) (1,250) (1,250)

Free Cash Flow $30,924 $28,469 $19,626
======= ======= =======
The Company

We are a television broadcast company headquartered in Atlanta, Georgia, that owns and operates television stations and leading digital assets in markets throughout the United States. We own and/or operate television stations in 50 television markets that broadcast approximately 180 separate program streams including 35 channels affiliated with CBS, 26 channels affiliated with NBC, 19 channels affiliated with ABC and 13 channels affiliated with FOX. We own the number-one or number-two ranked television station operations in 49 of those 50 markets. Our stations reach approximately 9.4 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 second quarter of 2016 or other periods, the impact of recently completed transactions, future expenses 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 May 9, 2016. 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, 2015 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 first quarter operating results on May 9, 2016. The call will begin at 11:00 a.m. Eastern Time. The live dial-in number is 1-888-430-8694 and the confirmation code is 4438631. 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: 4438631 until June 8, 2016.

Web site: www.gray.tv

Logo - http://photos.prnewswire.com/prnh/20160210/331974LOGO

SOURCE Gray Television, Inc.

Photo:http://photos.prnewswire.com/prnh/20160210/331974LOGO
http://photoarchive.ap.org/
Photo:http://photos.prnewswire.com/prnh/20160210/331974LOGO
http://photoarchive.ap.org/
Gray Television, Inc.

CONTACT: For information contact: Hilton Howell, President and Chief Executive Officer, (404) 266-5512; Kevin Latek, Executive Vice President and Chief Legal and Development Officer, (404) 266-8333; Jim Ryan, Executive Vice President and Chief Financial Officer, (404) 504-9828

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


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