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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
       For the quarterly period ended June 30, 2003 or

[  ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                        to                        ..

Commission file number 1-13796

Gray Television, Inc.

(Exact name of registrant as specified in its charter)
     
Georgia   58-0285030
 
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)
     
4370 Peachtree Road, NE, Atlanta, Georgia   30319
 
(Address of principal executive offices)   (Zip code)

(404) 504-9828

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  [X]    No  [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  [X]    No  [  ]

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

     
Common Stock, (No Par Value)   Class A Common Stock, (No Par Value)
 
43,767,684 shares as of August 8, 2003   6,848,467 shares as of August 8, 2003

 

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

Table of Contents

INDEX

GRAY TELEVISION, INC.

                 
            PAGE
           
PART I.  
FINANCIAL INFORMATION
        
Item 1.  
Financial Statements
        
       
Condensed consolidated balance sheets - June 30, 2003 (Unaudited) and December 31, 2002
     3  
       
Condensed consolidated statements of operations (Unaudited) -
Three months ended June 30, 2003 and 2002
Six months ended June 30, 2003 and 2002
     5  
       
Condensed consolidated statement of stockholders’ equity (Unaudited) - Six months ended June 30, 2003
     6  
       
Condensed consolidated statements of cash flows (Unaudited) -
Six months ended June 30, 2003 and 2002
     7  
       
Notes to condensed consolidated financial statements (Unaudited) -
June 30, 2003
     8  
Item 2.  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
     16  
Item 3.  
Quantitative and Qualitative Disclosure About Market Risk
     23  
Item 4.  
Controls and Procedures
     23  
PART II.  
OTHER INFORMATION
        
Item 1.  
Legal Proceedings
     23  
Item 4.  
Submission of Matters to a Vote of Security Holders
     23  
Item 6.  
Exhibits and Reports on Form 8-K
     24  
SIGNATURES  
 
     25  

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                     
        June 30,   December 31,
        2003   2002
       
 
        (Unaudited)        
Assets:
                
Current assets:
                
   
Cash and cash equivalents
   $ 14,769     $ 12,915  
   
Trade accounts receivable, less allowance for doubtful accounts of $917 and $1,339 respectively
     50,502       54,770  
   
Recoverable income taxes
     1,006       234  
   
Inventories
     1,051       1,178  
   
Current portion of program broadcast rights, net
     2,919       8,082  
   
Other current assets
     2,553       1,691  
 
    
     
 
Total current assets
     72,800       78,870  
 
    
     
 
Property and equipment:
                
   
Land
     16,787       16,758  
   
Buildings and improvements
     33,345       32,767  
   
Equipment
     171,146       164,834  
 
    
     
 
 
     221,278       214,359  
   
Allowance for depreciation
     (96,272 )     (86,127 )
 
    
     
 
 
     125,006       128,232  
Deferred loan costs, net
     13,990       13,756  
Broadcast licenses
     878,108       878,108  
Goodwill
     174,150       173,341  
Other intangible assets, net
     5,780       9,423  
Other
     15,247       14,994  
 
    
     
 
 
   $ 1,285,081     $ 1,296,724  
 
    
     
 

See notes to condensed consolidated financial statements.

3

Table of Contents

GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands)

                     
        June 30,   December 31,
        2003   2002
       
 
        (Unaudited)        
Liabilities and stockholders’ equity:
                
Current liabilities:
                
   
Trade accounts payable
   $ 3,042     $ 6,044  
   
Employee compensation and benefits
     12,229       13,454  
   
Accrued interest
     1,943       1,119  
   
Other accrued expenses
     4,015       3,276  
   
Current portion of program broadcast obligations
     4,134       9,472  
   
Acquisition related liabilities
     2,762       8,051  
   
Deferred revenue
     3,502       3,791  
   
Current portion of long-term debt
     171       887  
 
    
     
 
Total current liabilities
     31,798       46,094  
Long-term debt, less current portion
     656,264       657,333  
Program broadcast obligations, less current portion
     1,115       1,126  
Deferred income taxes
     178,803       174,765  
Other
     7,586       8,796  
 
    
     
 
 
     875,566       888,114  
 
    
     
 
Commitments and contingencies
               
Redeemable Serial Preferred Stock, no par value; cumulative; convertible; designated 5 shares, issued and outstanding 4 shares ($40,000 aggregate liquidation value)
     39,233       39,190  
 
    
     
 
Stockholders’ equity:
                
   
Common Stock, no par value; authorized 50,000 shares, respectively; issued 43,746 and 43,436, respectively
     388,790       385,762  
   
Class A Common Stock, no par value; authorized 15,000 shares; issued 7,962 shares, respectively
     15,241       20,173  
   
Retained deficit
     (24,633 )     (28,176 )
   
Accumulated other comprehensive loss
     (382 )     -0-  
   
Unearned compensation
     (395 )     -0-  
 
    
     
 
 
     378,621       377,759  
   
Treasury Stock at cost, Class A Common Stock, 1,113 shares, respectively
     (8,339 )     (8,339 )
 
    
     
 
 
     370,282       369,420  
 
    
     
 
 
   $ 1,285,081     $ 1,296,724  
 
    
     
 

See notes to condensed consolidated financial statements.

4

Table of Contents

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands except for per share data)
                                   
      Three Months Ended   Six Months Ended
      June 30,   June 30,
     
 
      2003   2002   2003   2002
     
 
 
 
Operating revenues:
                                
 
Broadcasting (less agency commissions)
   $ 63,551     $ 29,553     $ 116,152     $ 55,006  
 
Publishing
     11,143       11,073       21,540       21,216  
 
Paging
     1,953       2,074       3,930       4,083  
 
    
     
     
     
 
 
     76,647       42,700       141,622       80,305  
 
    
     
     
     
 
Operating expenses:
                                
Operating expenses before depreciation and amortization
                                
 
Broadcasting
     35,744       16,494       70,642       31,975  
 
Publishing
     7,933       7,769       15,688       15,420  
 
Paging
     1,381       1,371       2,850       2,754  
 
Corporate and administrative
     2,107       1,116       4,243       2,116  
Depreciation and amortization
     7,117       3,700       14,169       7,433  
 
    
     
     
     
 
Total operating expenses
     54,282       30,450       107,592       59,698  
 
    
     
     
     
 
Operating income
     22,365       12,250       34,030       20,607  
Miscellaneous income, net
     51       59       116       97  
Appreciation in value of derivatives, net
     -0-       341       -0-       730  
Interest expense
     (10,972 )     (7,901 )     (22,242 )     (16,866 )
Loss on early extinguishment of debt
     -0-       -0-       -0-       (11,275 )
 
    
     
     
     
 
Income (loss) before income taxes and cumulative effect of accounting change
     11,444       4,749       11,904       (6,707 )
Federal and state income tax expense (benefit)
     4,412       1,662       4,701       (2,341 )
 
    
     
     
     
 
Net income (loss) before cumulative effect of accounting change
     7,032       3,087       7,203       (4,366 )
Cumulative effect of accounting change, net of income tax benefit of $8,873
     -0-       -0-       -0-       (30,592 )
 
    
     
     
     
 
Net income (loss)
     7,032       3,087       7,203       (34,958 )
Preferred dividends
     821       649       1,643       803  
Preferred dividends associated with the redemption of
             —                  
 
preferred stock
     -0-       3,969       -0-       3,969  
 
    
     
     
     
 
Net income (loss) available to common stockholders
   $ 6,211     $ (1,531 )   $ 5,560     $ (39,730 )
 
    
     
     
     
 
Basic per share information:
                                
Net income (loss) before cumulative effect of accounting change available to common stockholders
   $ 0.12     $ (0.10 )   $ 0.11     $ (0.58 )
Cumulative effect of accounting change, net of income tax benefit
     0.00       0.00       0.00       (1.96 )
 
    
     
     
     
 
Net income (loss) available to common stockholders
   $ 0.12     $ (0.10 )   $ 0.11     $ (2.54 )
 
    
     
     
     
 
Weighted average shares outstanding
     50,406       15,676       50,367       15,662  
 
    
     
     
     
 
Diluted per share information:
                                
Net income (loss) before cumulative effect of accounting change available to common stockholders
   $ 0.12     $ (0.10 )   $ 0.11     $ (0.58 )
Cumulative effect of accounting change, net of income tax benefit
     0.00       0.00       0.00       (1.96 )
 
    
     
     
     
 
Net income (loss) available to common stockholders
   $ 0.12     $ (0.10 )   $ 0.11     $ (2.54 )
 
    
     
     
     
 
Weighted average shares outstanding
     50,697       15,676       50,559       15,662  
 
    
     
     
     
 

See notes to condensed consolidated financial statements.

5

Table of Contents

GRAY TELEVISION, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(in thousands except for number of shares)
                                           
      Class A                        
      Common Stock   Common Stock        
     
 
  Retained
      Shares   Amount   Shares   Amount   Deficit
     
 
 
 
 
Balance at December 31, 2002
     7,961,574     $ 20,173       43,435,704     $ 385,762     $ (28,176 )
Net income for the six months ended June 30, 2003
                                     7,203  
Common Stock dividends ($0.04 per share)
                                     (2,017 )
Preferred Stock dividends
                                     (1,643 )
Issuance of Common Stock:
                                        
 
401(k) plan
                     117,667       1,200          
 
Non-qualified stock plan
                     147,620       1,371          
 
Directors’ stock plan
                     168       2          
 
Directors’ restricted stock plan
                     45,000       439          
 
Amortization of unearned compensation
                                        
 
Cost of stock issuance
                             (195 )        
Depreciation in value of derivatives, net
                                        
Purchase of warrants from related party
             (4,932 )                        
Income tax benefit relating to stock plans
                             211          
 
    
     
     
     
     
 
Balance at June 30, 2003
     7,961,574     $