INDEX

GRAY TELEVISION, INC.

PART I.FINANCIAL INFORMATION

Item 1.Financial Statements

See notes to condensed consolidated financial statements.

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions except for share data)

See notes to condensed consolidated financial statements.

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands

See notes to condensed consolidated financial statements.

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)

(in thousands

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

GRAY TELEVISION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The accompanying condensed consolidated balance sheet of Gray Television, Inc. (and its consolidated subsidiaries, except as the context otherwise provides,“Gray,” the “Company,” “we,” “us,” and “our”) as of December 31, 2016, 2021, which was derived from the Company’s audited financial statements as of December 31, 2016, 2021, and our accompanying unaudited condensed consolidated financial statements as of September 30, 2017 March 31, 2022 and for the three-month periods ended September 30, 2017 March 31, 2022 and 20162021, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q10-Q and Article 10 of Regulation S-X.S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statementpresentation have been included. Our operations consistWe manage our business on the basis of one reportable segment.two operating segments: broadcasting and production companies. Unless otherwise indicated, all station rank, in-market share and television household data herein are derived from reports prepared by Comscore, Inc. (“Comscore”). While we believe this data to be accurate and reliable, we have not independently verified such data nor have we ascertained the underlying assumptions relied upon therein and cannot guarantee the accuracy or completeness of such data. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K10-K for the year ended December 31, 2016 (the “20162021 (the “2021 Form 10-K”10-K”). Our financial condition as of, and operating results for the nine-month periodthree-months ended September 30, 2017 March 31, 2022, are not necessarily indicative of the financial condition or results that may be expected for any future interim period or for the year ending December 31, 2017.2022.

OverviewOverview.

We are a television broadcastmultimedia company headquartered in Atlanta, Georgia, that owns and/or operates over 100Georgia.  We are the nation’s largest owner of top-rated local television stations and leading digital assets in markets throughout the United States.  As of September 30, 2017, we owned and/or operatedOur television stations in 57serve 113 television markets broadcasting over 200 programming streams, including over 100 channels affiliatedthat collectively reach approximately 36 percent of US television households.  This portfolio includes 80 markets with the CBS Network (“CBS”),top-rated television station and 100 markets with the NBC Network (“NBC”),first and/or second highest rated television station.  We also own video program companies Raycom Sports, Tupelo Honey, PowerNation Studios, as well as the ABC Network (“ABC”)studio production facilities Assembly Atlanta and the FOX Network (“FOX”). As of September 30, 2017, our station group reached approximately 10.4% of total United States television households.Third Rail Studios. 

CyclicalityInvestments in Broadcasting, Production and SeasonalityTechnology Companies. We have investments in several television, production and technology companies. We account for all material investments in which we have significant influence over the investee under the equity method of accounting. Upon initial investment, we record equity method investments at cost. The amounts initially recognized are subsequently adjusted for our appropriate share of the net earnings or losses of the investee. We record any investee losses up to the carrying amount of the investment plus advances and loans made to the investee, and any financial guarantees made on behalf of the investee. We recognize our share in earnings and losses of the investee as miscellaneous (expense) income, net in our consolidated statements of operations. Investments are also increased by contributions made to and decreased by the distributions from the investee. The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired.

Broadcast advertising revenuesInvestments in non-public businesses that do not have readily determinable pricing, and for which the Company does not have control or does not exert significant influence, are generally highestcarried at cost less impairments, if any, plus or minus changes in observable prices for those investments. Gains or losses resulting from changes in the second and fourth quarters each year. This seasonality results partly from increasescarrying value of these investments are included as miscellaneous (expense) income, net in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. Broadcast advertising revenuesour consolidated statements of operations. These investments are also typically higher in even-numbered years due to increased spending by political candidates, political parties and special interest groups in advance of elections. This political spending typically is heaviest during the fourth quarter.reported together as a non-current asset on our consolidated balance sheets.

Use of EstimatesEstimates.

The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements.accompanying notes. Our actual results could differ materially from these estimates. Theestimated amounts. Our most significant estimates we make relate toare our allowance for doubtful accountscredit losses in receivables, valuation of goodwill and intangible assets, amortization of program broadcast rightsrights and intangible assets, pension costs, income taxes, employee medical insurance claims, useful lives of property and equipment and contingencies.

Variable Interest Entity (“VIE”)

We consolidate a VIE when we are determined to be the primary beneficiary. In accordance with U.S. GAAP, in determining whether we are the primary beneficiary of a VIE for financial reporting purposes, we consider whether we have the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether we have the obligation to absorb losses or the right to receive returns that would be significant to the VIE.

On January 17, 2017, we acquired two television stations that were divested by Nexstar Broadcasting, Inc. upon its merger with Media General, Inc. (“Media General”): WBAY-TV (ABC), in the Green Bay, Wisconsin television market (DMA 69), and KWQC-TV (NBC), in the Davenport, Iowa, Rock Island, Illinois, and Moline, Illinois or “Quad Cities” television market (DMA 102), for an adjusted purchase price of $269.9 million (the “Media General Acquisition”) using cash on hand. The Media General Acquisition was completed, in part, through a transaction with a VIE known as Gray Midwest EAT, LLC (“GME”), pursuant to which GME acquired the broadcast licenses of the stations. On May 30, 2017, we exercised an option to acquire the licenses held by GME pending receipt of proceeds receivable from the FCC’s recently completed reverse auction for broadcast spectrum (the “FCC Spectrum Auction”). Upon receipt of the auction proceeds from the FCC, we completed the acquisition of the broadcast licenses from GME.

During the period that GME held those broadcast licenses we believe we were the primary beneficiary of GME, because, subject to the ultimate control of the licensees, we had the power to direct the activities that significantly impact the economic performance of GME through the services we provided, and our obligation to absorb losses and right to earn returns that would be considered significant to GME. As a result, we included the assets, liabilities and results of operations of GME in our consolidated financial statements beginning January 17, 2017 and continuing through August 7, 2017, the date that we were no longer deemed to be the primary beneficiary of GME.

Earnings Per ShareShare.

We compute basic earnings per share by dividing net income attributableavailable to common stockholders by the weighted-average number of common shares outstanding during the relevant period. The weighted-average number of common shares outstanding does not include restricted shares. These shares, although classified as issued and outstanding, are considered contingently returnable until the restrictions lapse and, in accordance with U.S. GAAP, are not included in the basic earnings per share calculation until the shares vest. Diluted earnings per share is computed by including all potentially dilutive common shares, including restricted shares, and shares underlying stock options, in the denominator of the diluted weighted-average shares outstanding calculation, unless their inclusion would be anti-dilutive. In the three-months ended September 30, 2016, we reported a net loss and therefore all common stock equivalents are excluded from the computation of diluted earnings per share for that period, since their inclusion would be anti-dilutive.antidilutive.

The following table reconciles basic weighted-average common shares outstanding to diluted weighted-average common shares outstanding for the three-month three-months ended March 31, 2022 and nine-month periods ended September 30, 2017 and 20162021, respectively (in thousands)millions):

Accumulated Other Comprehensive LossLoss.

Our accumulated other comprehensive loss balances as of September 30, 2017 March 31, 2022 and December 31, 2016 2021, consist of adjustments to our pension liability and the related income tax benefit.effect. Our comprehensive income (loss) for the three-months ended March 31, 2022 and nine-month periods ended September 30, 2017 2021 consisted solely of our net income. As of March 31, 2022 and 2016 consisted entirely of net income (loss). Therefore December 31, 2021 the consolidated statement of comprehensive income (loss) is not presented for the three and nine-month periods ended September 30, 2017 or 2016.balances were as follows (in millions):

Property and EquipmentEquipment.

Property and equipment are carried at cost.cost, or in the case of acquired businesses, at fair value. Depreciation is computed principallyprincipally by the straight-line method. The following table lists the components of property and equipment by major category (dollars in millions):

The following tables provide additional information related to gain on disposal of assets, net included in our condensed consolidated statements of operations and purchases of property and equipment acquiredincluded in connection with recent acquisitionsour condensed consolidated statements of television businesses. The remaining changes in the balances in the nine-months ended September 30, 2017 and 2016 were primarily due to routine property and equipment purchases and retirements. The following table lists the components of property and equipment by major category (dollars in thousands)cash flows (in millions):

Accounts Receivable and Allowance for Doubtful AccountsCredit Losses. We record accounts receivable from sales and service transactions in our condensed consolidated balance sheets at amortized cost adjusted for any write-offs and net of allowance for credit losses. We are exposed to credit risk primarily through sales of broadcast and digital advertising with a variety of direct and agency-based advertising customers, retransmission consent agreements with multichannel video program distributors and program production sales and services.

Our allowance for doubtful accountscredit losses is equal to a portionan estimate of expected losses over the remaining contractual life of our receivable balances that are 120 days old or older.receivables based on an ongoing analysis of collectability, historical collection experience, current economic and industry conditions and reasonable and supportable forecasts. The allowance is calculated using a historical loss rate applied to the current aging analysis. We may provide allowances for certain receivable balances that are less than 120 days oldalso apply additional allowance when warranted by specific facts and circumstances. We generally write-off accountswrite off account receivable balances when the customer files for bankruptcy or when all commonly used methods of collection have been exhausted.

The following table provides a roll-forward of the allowance for credit losses. The allowance is deducted from the amortized cost basis of accounts receivable in our condensed consolidated balance sheets (in millions):

Recent Accounting PronouncementsPronouncements.

In May 2014, March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 –2020-04, Revenue fromReference Rate Reform (Topic 848). Contracts with Customers (Topic 606). ASU 2014-09 provides new guidance on revenue recognition for revenue from contracts with customers and will replace most existing revenue recognition guidance when it becomes effective. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard is intended to improve comparability of revenue recognition practices across entities and provide more useful information through improved financial statement disclosures. In August 2015, January 2021, the FASB issued an amendment to ASU 2015-14,2020-04, ASU 2021-01, Revenue from Contracts with Customers Reference Rate Reform (Topic 848)(Topic 606): Deferral, in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of the Effective DateLondon Interbank Offered Rate (“LIBOR”). The amendments in this ASU 2015-14 deferredapply to all entities that elect to apply the effectiveoptional guidance in Topic 848. An entity may elect to apply the amendments in this ASU on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of ASU 2014-09 by one yearthe issuance of a final standard, up to interim and annual reporting periods beginning after December 15, 2017, and permitted early adoption of the standard, but not beforedate that financial statements are available to be issued. We are currently evaluating the original effective date of December 15, 2016. The standard permits the use of either a retrospective to each reporting period presented method, or a retrospective with the cumulative effect method to adopt the standard. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. This ASU amends the guidance of ASU 2014-09 to clarify the identification of performance obligations and to provide additional licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients. This ASU was issued to provide guidance in assessing collectibility, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition, in order to reduce the potential for diversity in practice at initial application, and to reduce the cost and complexity of applying the standard. In December 2016, the FASB issued ASU 2016-20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements. This ASU was issued to clarify the standard and to correct unintended application of guidance. We have completed our internal evaluation of the standard and determined that the adoptionapplicability of this standard will not have a material effect on our balance sheets and statements of operations. We have determined that we will utilize the modified retrospective method to implement the standard. We are evaluating our footnote disclosures and expect that this standard’s most significant impact will be expanded disclosures related to deferred revenue from customer pre-payments. We will continue to develop these disclosures and the related tasks of gathering data to be disclosed, assessing our internal controls and availing ourselves of broadcasting industry related guidance.