UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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, 2004 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.
| 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
Not Applicable
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). Yes [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) |
|
| 44,264,199 shares outstanding as of July 22, 2004 | 5,830,645 shares outstanding as of July 22, 2004 |
INDEX
GRAY TELEVISION, INC.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GRAY TELEVISION, INC.
| June 30, | December 31, | |||||||
| 2004 |
2003 |
|||||||
Assets: |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 31,761 | $ | 11,947 | ||||
Trade accounts receivable, less allowance for doubtful accounts
of $912 and $1,145 respectively |
53,460 | 55,215 | ||||||
Inventories |
1,107 | 1,521 | ||||||
Current portion of program broadcast rights, net |
2,372 | 7,487 | ||||||
Related party receivable |
1,610 | -0- | ||||||
Other current assets |
3,498 | 1,865 | ||||||
Total current assets |
93,808 | 78,035 | ||||||
Property and equipment: |
||||||||
Land |
17,609 | 17,606 | ||||||
Buildings and improvements |
35,097 | 34,325 | ||||||
Equipment |
194,719 | 186,225 | ||||||
| 247,425 | 238,156 | |||||||
Allowance for depreciation |
(115,456 | ) | (104,197 | ) | ||||
| 131,969 | 133,959 | |||||||
Deferred loan costs, net |
12,987 | 13,112 | ||||||
Broadcast licenses |
925,711 | 925,711 | ||||||
Goodwill |
153,858 | 153,858 | ||||||
Other intangible assets, net |
3,287 | 3,807 | ||||||
Investment in broadcasting company |
13,599 | 13,599 | ||||||
Related party receivable |
-0- | 1,610 | ||||||
Other |
1,398 | 1,638 | ||||||
| $ | 1,336,617 | $ | 1,325,329 | |||||
See notes to condensed consolidated financial statements.
3
GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Unaudited)
(in thousands)
| June 30, | December 31, | |||||||
| 2004 |
2003 |
|||||||
Liabilities and stockholders’ equity: |
||||||||
Current liabilities: |
||||||||
Trade accounts payable |
$ | 1,431 | $ | 8,134 | ||||
Employee compensation and benefits |
12,899 | 14,195 | ||||||
Accrued interest |
2,052 | 4,040 | ||||||
Other accrued expenses |
4,346 | 4,332 | ||||||
Federal and state income taxes |
1,984 | -0- | ||||||
Current portion of program broadcast obligations |
3,995 | 8,976 | ||||||
Acquisition related liabilities |
1,563 | 1,678 | ||||||
Deferred revenue |
2,852 | 3,022 | ||||||
Unrealized loss on derivatives |
33 | 210 | ||||||
Current portion of long-term debt |
89 | 124 | ||||||
Total current liabilities |
31,244 | 44,711 | ||||||
Long-term debt, less current portion |
655,799 | 655,778 | ||||||
Program broadcast obligations, less current portion |
708 | 1,014 | ||||||
Deferred income taxes |
227,522 | 217,666 | ||||||
Other |
2,973 | 4,109 | ||||||
| 918,246 | 923,278 | |||||||
Commitments and contingencies (Note E) |
||||||||
Redeemable Serial Preferred Stock, no par value; cumulative;
convertible; designated 5 shares, issued and outstanding 4
shares ($40,000 aggregate liquidation value) |
39,320 | 39,276 | ||||||
Stockholders’ equity: |
||||||||
Common Stock, no par value; authorized 100,000 shares and
50,000 shares, respectively, issued 44,274 shares and 44,032
shares, respectively |
395,439 | 392,436 | ||||||
Class A Common Stock, no par value; authorized 15,000
shares; issued 7,962 shares, respectively |
15,241 | 15,241 | ||||||
Retained earnings (deficit) |
(4,446 | ) | (17,500 | ) | ||||
Accumulated other comprehensive loss, net of tax |
(20 | ) | (126 | ) | ||||
Unearned compensation |
(1,244 | ) | (1,357 | ) | ||||
| 404,970 | 388,694 | |||||||
Treasury Stock at cost, Common Stock, 12 shares, respectively |
(200 | ) | (200 | ) | ||||
Treasury Stock at cost, Class A Common Stock, 2,131 shares,
respectively |
(25,719 | ) | (25,719 | ) | ||||
| 379,051 | 362,775 | |||||||
| $ | 1,336,617 | $ | 1,325,329 | |||||
See notes to condensed consolidated financial statements.
4
GRAY TELEVISION, INC.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
Operating revenues: |
||||||||||||||||
Broadcasting (less agency commissions) |
$ | 71,235 | $ | 63,551 | $ | 133,144 | $ | 116,152 | ||||||||
Publishing |
11,320 | 11,143 | 22,283 | 21,540 | ||||||||||||
Paging |
1,798 | 1,953 | 3,654 | 3,930 | ||||||||||||
| 84,353 | 76,647 | 159,081 | 141,622 | |||||||||||||
Expenses: |
||||||||||||||||
Operating expenses before depreciation and amortization |
||||||||||||||||
Broadcasting |
37,053 | 35,744 | 74,451 | 70,642 | ||||||||||||
Publishing |
8,040 | 7,933 | 16,088 | 15,688 | ||||||||||||
Paging |
1,238 | 1,381 | 2,591 | 2,850 | ||||||||||||
Corporate and administrative |
2,163 | 2,084 | 4,536 | 4,199 | ||||||||||||
Depreciation |
5,870 | 5,336 | 11,672 | 10,526 | ||||||||||||
Amortization of intangible assets |
237 | 1,781 | 519 | 3,643 | ||||||||||||
Amortization of restricted stock awards |
94 | 23 | 189 | 44 | ||||||||||||
(Gain) loss on disposal of assets |
(626 | ) | 25 | (622 | ) | 37 | ||||||||||
| 54,069 | 54,307 | 109,424 | 107,629 | |||||||||||||
Operating income |
30,284 | 22,340 | 49,657 | 33,993 | ||||||||||||
Miscellaneous income, net |
262 | 76 | 407 | 153 | ||||||||||||
Interest expense |
(10,474 | ) | (10,972 | ) | (20,935 | ) | (22,242 | ) | ||||||||
Income before income taxes |
20,072 | 11,444 | 29,129 | 11,904 | ||||||||||||
Federal and state income tax expense |
7,875 | 4,412 | 11,429 | 4,701 | ||||||||||||
Net income |
12,197 | 7,032 | 17,700 | 7,203 | ||||||||||||
Preferred dividends |
821 | 821 | 1,643 | 1,643 | ||||||||||||
Net income available to common stockholders |
$ | 11,376 | $ | 6,211 | $ | 16,057 | $ | 5,560 | ||||||||
Basic per share information: |
||||||||||||||||
Net income available to common stockholders |
$ | 0.23 | $ | 0.12 | $ | 0.32 | $ | 0.11 | ||||||||
Weighted average shares outstanding |
49,958 | 50,406 | 49,907 | 50,367 | ||||||||||||
Diluted per share information: |
||||||||||||||||
Net income available to common stockholders |
$ | 0.22 | $ | 0.12 | $ | 0.32 | $ | 0.11 | ||||||||
Weighted average shares outstanding |
50,588 | 50,697 | 50,546 | 50,559 | ||||||||||||
See notes to condensed consolidated financial statements.
5
GRAY TELEVISION, INC.
| Class A | Class A | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock |
Common Stock |
Retained | Treasury Stock |
Treasury Stock |
Accumulated Other |
Total | ||||||||||||||||||||||||||||||||||||||||||
| Earnings | Comprehensive | Unearned | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
(Deficit) |
Shares |
Amount |
Shares |
Amount |
Income (Loss) |
Compensation |
Equity |
|||||||||||||||||||||||||||||||||||||
Balance at December 31, 2003 |
7,961,574 | $ | 15,241 | 44,032,138 | $ | 392,436 | $ | (17,500 | ) | (2,130,754 | ) | $ | (25,719 | ) | (11,750 | ) | $ | (200 | ) | $ | (126 | ) | $ | (1,357 | ) | $ | 362,775 | |||||||||||||||||||||
Net income
|
17,700 | 17,700 | ||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on
derivatives, net of
income taxes |
106 | 106 | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income
|
17,806 | |||||||||||||||||||||||||||||||||||||||||||||||
Common Stock cash dividends
($0.06 per share) |
(3,003 | ) | (3,003 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock dividends |
(1,643 | ) | (1,643 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of Common Stock: |
||||||||||||||||||||||||||||||||||||||||||||||||
401(k) plan |
85,914 | 1,269 | 1,269 | |||||||||||||||||||||||||||||||||||||||||||||
Non-qualified stock plan |
150,705 | 1,658 | 1,658 | |||||||||||||||||||||||||||||||||||||||||||||
Directors’ and officers
restricted stock plans |
5,000 | 76 | (76 | ) | -0- | |||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned
compensation |
189 | 189 | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2004 |
7,961,574 | $ | 15,241 | 44,273,757 | $ | 395,439 | $ | (4,446 | ) | (2,130,754 | ) | $ | (25,719 | ) | (11,750 | ) | $ | (200 | ) | $ | (20 | ) | $ | (1,244 | ) | $ | 379,051 | |||||||||||||||||||||
See notes to condensed consolidated financial statements.
6
GRAY TELEVISION, INC.
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
Operating activities |
||||||||
Net income (loss) |
$ | 17,700 | $ | 7,203 | ||||
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
||||||||
Depreciation |
11,672 | 10,526 | ||||||
Amortization of intangible assets |
519 | 3,643 | ||||||
Amortization of deferred loan costs |
936 | 864 | ||||||
Amortization of bond discount |
72 | 72 | ||||||
Amortization of directors’ restricted stock award |
189 | 44 | ||||||
Amortization of program broadcast rights |
5,515 | 5,437 | ||||||
Payments for program broadcast rights |
(5,399 | ) | (5,440 | ) | ||||
Supplemental employee benefits |
(22 | ) | (14 | ) | ||||
Common Stock contributed to 401(k) Plan |
952 | 1,200 | ||||||
Deferred income taxes |
9,785 | 4,249 | ||||||
(Gain) loss on disposal of assets |
(622 | ) | 37 | |||||
Changes in operating assets and liabilities: |
||||||||
Receivables, inventories and other current assets |
536 | 2,637 | ||||||
Accounts payable and other current liabilities |
(2,145 | ) | (3,329 | ) | ||||
Accrued Interest |
(1,987 | ) | -0- | |||||
Income taxes payable |
1,984 | -0- | ||||||
Net cash provided by operating activities |
39,685 | 27,129 | ||||||
Investing activities |
||||||||
Acquisition of television businesses |
-0- | (692 | ) | |||||
Payments on acquisition related liabilities |
(1,160 | ) | (6,489 | ) | ||||
Purchases of property and equipment |
(15,807 | ) | (7,571 | ) | ||||
Other |
938 | (270 | ) | |||||
Net cash used in investing activities |
(16,029 | ) | (15,022 | ) | ||||
Financing activities |
||||||||
Proceeds from borrowings on long-term debt |
938 | -0- | ||||||
Repayments of borrowings on long-term debt |
(1,024 | ) | (1,894 | ) | ||||
Deferred loan costs |
(811 | ) | (1,097 | ) | ||||
Proceeds from issuance of common stock |
1,658 | 1,287 | ||||||
Dividends paid |
(4,603 | ) | (3,617 | ) | ||||
Purchase of common stock warrants |
-0- | (4,932 | ) | |||||
Net cash used in financing activities |
(3,842 | ) | (10,253 | ) | ||||
Increase in cash and cash equivalents |
19,814 | 1,854 | ||||||
Cash and cash equivalents at beginning of period |
11,947 | 12,915 | ||||||
Cash and cash equivalents at end of period |
$ | 31,761 | $ | 14,769 | ||||
See notes to condensed consolidated financial statements.
7
GRAY TELEVISION, INC.
NOTE A—BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Gray Television, Inc. (“Gray” or “the Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.
Stock-Based Compensation
The Company follows the provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). The provisions of SFAS No. 123 allow companies to either expense the estimated fair value of stock options or to continue to follow the intrinsic value method set forth in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, (“APB25”), but disclose the pro forma effects on net income had the fair value of the options been expensed. The Company has elected to continue to apply APB 25 in accounting for its stock option incentive plans.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma information follows (in thousands, except per common share data):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
Net income available to common stockholders, as reported |
$ | 11,376 | $ | 6,211 | $ | 16,057 | $ | 5,560 | ||||||||
Add: Stock-based employee compensation expense included
in reported net income, net of related tax effects |
-0- | -0- | -0- | -0- | ||||||||||||
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects |
(262 | ) | (533 | ) | (538 | ) | (927 | ) | ||||||||
Net income available to common stockholders, pro forma |
$ | 11,114 | $ | 5,678 | $ | 15,519 | $ | 4,633 | ||||||||
Net income per common share: |
||||||||||||||||
Basic, as reported |
$ | 0.23 | $ | 0.12 | $ | 0.32 | $ | 0.11 | ||||||||
Basic, pro forma |
$ | 0.22 | $ | 0.11 | $ | 0.31 | $ | 0.09 | ||||||||
Diluted, as reported |
$ | 0.22 | $ | 0.12 | $ | 0.32 | $ | 0.11 | ||||||||
Diluted, pro forma |
$ | 0.22 | $ | 0.11 | $ | 0.31 | $ | 0.09 | ||||||||
8
NOTE A—BASIS OF PRESENTATION (Continued)
Earnings Per Share
The Company computes earnings per share in accordance with FASB Statement No. 128, “Earnings Per Share” (“EPS”). The following table reconciles weighted average shares outstanding – basic to weighted average shares outstanding – diluted for the three months and six months ended June 30, 2004 and 2003 (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
Weighted average shares outstanding – basic |
49,958 | 50,406 | 49,907 | 50,367 | ||||||||||||
Stock options, warrants, convertible
preferred stock and restricted stock |
630 | 291 | 639 | 192 | ||||||||||||
Weighted
average shares outstanding – diluted |
50,588 | 50,697 | 50,546 | 50,559 | ||||||||||||
Reclassifications
Certain prior year amounts in the accompanying condensed consolidated financial statements have been reclassified to conform with the 2004 presentation.
NOTE B—LONG-TERM DEBT
As of May 28, 2004, the Company amended its existing senior credit facility to reduce the interest rate by 0.5%