UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2021 or |
For the quarterly period ended September 30, 2020or
☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from _________ to _________ .
Commission file numbernumber: 1-13796
Gray Television, Inc. |
(Exact name of registrant as specified in its charter) |
Georgia | 58-0285030 | |
(State or other jurisdiction of |
| |
incorporation or organization) | (I.R.S. Employer 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.) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class | Trading Symbol(s) | Name of each exchange on which registered |
Class A common stock (no par value) | GTN.A | New York Stock Exchange |
common stock (no par value) | GTN | New York Stock Exchange |
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Common Stock (No Par Value) | Class A Common Stock (No Par Value) | |
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INDEX
GRAY TELEVISION, INC.
PART I. | FINANCIAL INFORMATION | PAGE | ||
Item 1. | Financial Statements | |||
Condensed consolidated balance sheets (Unaudited) - September 30, | 3 | |||
Condensed consolidated statements of operations (Unaudited) - three-months and nine-months ended September 30, | 5 | |||
Condensed consolidated | 6 | |||
Condensed consolidated statements of cash flows (Unaudited) - nine-months ended September 30, | 8 | |||
Notes to condensed consolidated financial statements (Unaudited) | 9 | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
| ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
| ||
Item 4. | Controls and Procedures |
| ||
PART II. | OTHER INFORMATION | |||
Item 1A. | Risk Factors |
| ||
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|
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Item 6. | Exhibits |
| ||
SIGNATURES |
|
PART I. | FINANCIAL INFORMATION |
PART I.FINANCIAL INFORMATION
Item 1. |
|
GRAY TELEVISION, INC. | |||
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | |||
(in millions) |
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Assets: | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash | $ | 467 | $ | 212 | $ | 322 | $ | 773 | ||||||||
Accounts receivable, less allowance for credit losses of $11 and $11, respectively | 384 | 411 | ||||||||||||||
Current portion of program broadcast rights, net | 33 | 25 | ||||||||||||||
Accounts receivable, less allowance for credit losses of $11 and $10, respectively | 440 | 425 | ||||||||||||||
Program broadcast rights, net | 32 | 24 | ||||||||||||||
Income tax refund receivable | 21 | 21 | ||||||||||||||
Prepaid income taxes | 13 | 0 | 28 | 0 | ||||||||||||
Prepaid and other current assets | 21 | 24 | 29 | 61 | ||||||||||||
Total current assets | 918 | 672 | 872 | 1,304 | ||||||||||||
Property and equipment, net | 726 | 725 | 908 | 737 | ||||||||||||
Operating leases right of use asset | 58 | 50 | 56 | 57 | ||||||||||||
Broadcast licenses | 3,577 | 3,573 | 3,784 | 3,579 | ||||||||||||
Goodwill | 1,448 | 1,446 | 1,633 | 1,460 | ||||||||||||
Other intangible assets, net | 391 | 460 | 407 | 395 | ||||||||||||
Investments in broadcasting, production and technology companies | 65 | 31 | 105 | 72 | ||||||||||||
Other | 41 | 15 | 14 | 39 | ||||||||||||
Total assets | $ | 7,224 | $ | 6,972 | $ | 7,779 | $ | 7,643 |
See notes to condensed consolidated financial statements.
GRAY TELEVISION, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
(in millions, except for share data) |
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Liabilities and stockholders’ equity: | ||||||||||||||||
Liabilities and stockholders’ equity: | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 79 | $ | 11 | $ | 34 | $ | 10 | ||||||||
Employee compensation and benefits | 59 | 67 | 70 | 53 | ||||||||||||
Accrued interest | 45 | 37 | 50 | 37 | ||||||||||||
Accrued network programming fees | 38 | 30 | 35 | 39 | ||||||||||||
Other accrued expenses | 22 | 32 | 26 | 29 | ||||||||||||
Federal and state income taxes | 2 | 13 | 0 | 20 | ||||||||||||
Current portion of program broadcast obligations | 34 | 28 | ||||||||||||||
Program broadcast obligations | 33 | 25 | ||||||||||||||
Deferred revenue | 45 | 9 | 11 | 22 | ||||||||||||
Dividends payable | 13 | 13 | 13 | 13 | ||||||||||||
Current portion of operating lease liabilities | 7 | 6 | ||||||||||||||
Operating lease liabilities | 8 | 7 | ||||||||||||||
Total current liabilities | 344 | 246 | 280 | 255 | ||||||||||||
Long-term debt, less current portion and deferred financing costs | 3,706 | 3,697 | ||||||||||||||
Program broadcast obligations, less current portion | 5 | 7 | ||||||||||||||
Long-term debt, less deferred financing costs | 3,981 | 3,974 | ||||||||||||||
Program broadcast obligations | 3 | 5 | ||||||||||||||
Deferred income taxes | 852 | 810 | 994 | 885 | ||||||||||||
Accrued pension costs | 34 | 38 | 39 | 43 | ||||||||||||
Operating lease liabilities, less current portion | 54 | 45 | ||||||||||||||
Operating lease liabilities | 51 | 51 | ||||||||||||||
Other | 17 | 15 | 19 | 27 | ||||||||||||
Total liabilities | 5,012 | 4,858 | 5,367 | 5,240 | ||||||||||||
Commitments and contingencies (Note 10) | ||||||||||||||||
Series A Perpetual Preferred Stock, no par value; cumulative; redeemable; designated 1,500,000 shares, issued and outstanding 650,000 shares, at each date and $650 aggregate liquidation value, at each date | 650 | 650 | 650 | 650 | ||||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock, no par value; authorized 200,000,000 shares, issued 103,100,856 shares and 101,746,860 shares, outstanding 89,112,965 shares and 92,658,362 shares, respectively | 1,109 | 1,093 | ||||||||||||||
Class A common stock, no par value; authorized 25,000,000 shares, issued 8,935,773 shares and 8,768,959 shares, outstanding 7,048,006 shares and 6,881,192 shares, respectively | 31 | 31 | ||||||||||||||
Common stock, no par value; authorized 200,000,000 shares, issued 103,898,352 shares and 103,100,856 shares, respectively outstanding 88,652,172 shares and 88,140,259 shares, respectively | 1,124 | 1,110 | ||||||||||||||
Class A common stock, no par value; authorized 25,000,000 shares, issued 9,169,198 shares and 8,935,773 shares, respectively outstanding 7,171,019 shares and 7,048,006 shares, respectively | 37 | 34 | ||||||||||||||
Retained earnings | 651 | 504 | 861 | 862 | ||||||||||||
Accumulated other comprehensive loss, net of income tax benefit | (31 | ) | (31 | ) | (39 | ) | (39 | ) | ||||||||
1,760 | 1,597 | 1,983 | 1,967 | |||||||||||||
Treasury stock at cost, common stock, 13,987,891 shares and 9,088,498 shares, respectively | (172 | ) | (107 | ) | ||||||||||||
Treasury stock at cost, class A common stock, 1,887,767 shares and 1,887,767 shares, respectively | (26 | ) | (26 | ) | ||||||||||||
Treasury stock at cost, common stock, 15,246,180 shares and 14,960,597 shares, respectively | (193 | ) | (188 | ) | ||||||||||||
Treasury stock at cost, class A common stock, 1,998,179 shares and 1,887,767 shares, respectively | (28 | ) | (26 | ) | ||||||||||||
Total stockholders’ equity | 1,562 | 1,464 | 1,762 | 1,753 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 7,224 | $ | 6,972 | $ | 7,779 | $ | 7,643 |
See notes to condensed consolidated financial statements.
GRAY TELEVISION, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
(in millions, except for per share data) |
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
Revenue (less agency commissions): | ||||||||||||||||||||||||||||||||
Broadcasting | $ | 593 | $ | 501 | $ | 1,557 | $ | 1,481 | $ | 581 | $ | 593 | $ | 1,648 | $ | 1,557 | ||||||||||||||||
Production companies | 11 | 16 | 32 | 62 | 20 | 11 | 44 | 32 | ||||||||||||||||||||||||
Total revenue (less agency commissions) | 604 | 517 | 1,589 | 1,543 | 601 | 604 | 1,692 | 1,589 | ||||||||||||||||||||||||
Operating expenses before depreciation, amortization and gain on disposal of fixed assets, net: | ||||||||||||||||||||||||||||||||
Broadcast | 326 | 316 | 985 | 986 | ||||||||||||||||||||||||||||
Operating expenses before depreciation, amortization and loss (gain) on disposal of assets, net: | ||||||||||||||||||||||||||||||||
Broadcasting | 384 | 326 | 1,099 | 985 | ||||||||||||||||||||||||||||
Production companies | 8 | 13 | 32 | 57 | 13 | 8 | 39 | 32 | ||||||||||||||||||||||||
Corporate and administrative | 15 | 14 | 47 | 83 | 32 | 15 | 75 | 47 | ||||||||||||||||||||||||
Depreciation | 27 | 20 | 69 | 60 | 26 | 27 | 76 | 69 | ||||||||||||||||||||||||
Amortization of intangible assets | 26 | 29 | 78 | 86 | 28 | 26 | 81 | 78 | ||||||||||||||||||||||||
Gain on disposal of fixed assets, net | (10 | ) | (14 | ) | (23 | ) | (27 | ) | ||||||||||||||||||||||||
Loss (gain) on disposal of assets, net | 51 | (10 | ) | 46 | (23 | ) | ||||||||||||||||||||||||||
Operating expenses | 392 | 378 | 1,188 | 1,245 | 534 | 392 | 1,416 | 1,188 | ||||||||||||||||||||||||
Operating income | 212 | 139 | 401 | 298 | 67 | 212 | 276 | 401 | ||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Miscellaneous (expense) income, net | (2 | ) | 0 | (5 | ) | 4 | ||||||||||||||||||||||||||
Other (expense) income: | ||||||||||||||||||||||||||||||||
Miscellaneous (expense), net | (1 | ) | (2 | ) | (7 | ) | (5 | ) | ||||||||||||||||||||||||
Interest expense | (45 | ) | (57 | ) | (143 | ) | (173 | ) | (48 | ) | (45 | ) | (143 | ) | (143 | ) | ||||||||||||||||
Income before income taxes | 165 | 82 | 253 | 129 | 18 | 165 | 126 | 253 | ||||||||||||||||||||||||
Income tax expense | 43 | 23 | 67 | 44 | 35 | 43 | 65 | 67 | ||||||||||||||||||||||||
Net income | 122 | 59 | 186 | 85 | ||||||||||||||||||||||||||||
Net (loss) income | (17 | ) | 122 | 61 | 186 | |||||||||||||||||||||||||||
Preferred stock dividends | 13 | 13 | 39 | 39 | 13 | 13 | 39 | 39 | ||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 109 | $ | 46 | $ | 147 | $ | 46 | ||||||||||||||||||||||||
Net (loss) income attributable to common stockholders | $ | (30 | ) | $ | 109 | $ | 22 | $ | 147 | |||||||||||||||||||||||
Basic per share information: | ||||||||||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 1.15 | $ | 0.46 | $ | 1.52 | $ | 0.46 | ||||||||||||||||||||||||
Net (loss) income attributable to common stockholders | $ | (0.32 | ) | $ | 1.15 | $ | 0.23 | $ | 1.52 | |||||||||||||||||||||||
Weighted-average shares outstanding | 95 | 100 | 97 | 100 | 95 | 95 | 94 | 97 | ||||||||||||||||||||||||
Diluted per share information: | ||||||||||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 1.14 | $ | 0.46 | $ | 1.52 | $ | 0.46 | ||||||||||||||||||||||||
Net (loss) income attributable to common stockholders | $ | (0.32 | ) | $ | 1.14 | $ | 0.23 | $ | 1.52 | |||||||||||||||||||||||
Weighted-average shares outstanding | 96 | 101 | 97 | 100 | 95 | 96 | 95 | 97 | ||||||||||||||||||||||||
. | . | |||||||||||||||||||||||||||||||
Dividends declared per common share | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0.08 | $ | 0 | $ | 0.24 | $ | 0 |
See notes to condensed consolidated financial statements.
GRAY TELEVISION, INC. | |||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) | |||||||||||||||||||||
(in millions, except for number of shares) |
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Class A | Class A | Common | Other | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | Retained | Treasury Stock | Treasury Stock | Comprehensive | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Earnings | Shares | Amount | Shares | Amount | Loss | Total | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 8,768,959 | $ | 31 | 101,746,860 | $ | 1,093 | $ | 504 | (1,887,767 | ) | $ | (26 | ) | (9,088,498 | ) | $ | (107 | ) | $ | (31 | ) | $ | 1,464 | |||||||||||||||||||||
Net income | - | 0 | - | 0 | 53 | - | 0 | - | 0 | 0 | 53 | |||||||||||||||||||||||||||||||||
Preferred stock dividends | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | |||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||||||
401(k) Plan | 0 | 0 | 430,899 | 4 | 0 | 0 | 0 | 0 | 0 | 0 | 4 | |||||||||||||||||||||||||||||||||
2007 Long Term Incentive Plan - stock options exercised | 0 | 0 | 274,746 | 0 | 0 | 0 | 0 | (154,935 | ) | (2 | ) | 0 | (2 | ) | ||||||||||||||||||||||||||||||
2017 Equity and Incentive Compensation Plan: | ||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards | 166,814 | 0 | 248,543 | 0 | 0 | 0 | 0 | (118,550 | ) | (2 | ) | 0 | (2 | ) | ||||||||||||||||||||||||||||||
Forfeiture of restricted stock awards | 0 | 0 | (85,630 | ) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||
Repurchase of common stock | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (500,923 | ) | (6 | ) | 0 | (6 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation | - | 0 | - | 4 | 0 | - | 0 | - | 0 | 0 | 4 | |||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | 8,935,773 | $ | 31 | 102,615,418 | $ | 1,101 | $ | 544 | (1,887,767 | ) | $ | (26 | ) | (9,862,906 | ) | $ | (117 | ) | $ | (31 | ) | $ | 1,502 | |||||||||||||||||||||
Net income | - | 0 | - | 0 | 11 | - | 0 | - | 0 | 0 | 11 | |||||||||||||||||||||||||||||||||
Preferred stock dividends | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | |||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||||||
2017 Equity and Incentive Compensation Plan: | ||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards | 0 | 0 | 78,722 | 0 | 0 | 0 | 0 | (17,296 | ) | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||
Vesting of restricted stock units | 0 | 0 | 374,500 | 0 | 0 | 0 | 0 | (112,564 | ) | (2 | ) | 0 | (2 | ) | ||||||||||||||||||||||||||||||
Repurchase of common stock | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (3,335,255 | ) | (43 | ) | 0 | (43 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation | - | 0 | - | 3 | 0 | - | 0 | - | 0 | 0 | 3 | |||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 8,935,773 | $ | 31 | 103,068,640 | $ | 1,104 | $ | 542 | (1,887,767 | ) | $ | (26 | ) | (13,328,021 | ) | $ | (162 | ) | $ | (31 | ) | $ | 1,458 | |||||||||||||||||||||
Net income | - | 0 | - | 0 | 122 | - | 0 | - | 0 | 0 | 122 | |||||||||||||||||||||||||||||||||
Preferred stock dividends | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | |||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||||||
2017 Equity and Incentive Compensation Plan: | ||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards | 0 | 0 | 32,216 | 0 | 0 | 0 | 0 | (10,870 | ) | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||
Repurchase of common stock | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (649,000 | ) | (10 | ) | 0 | (10 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation | - | 0 | - | 5 | 0 | - | 0 | - | 0 | 0 | 5 | |||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | 8,935,773 | $ | 31 | 103,100,856 | $ | 1,109 | $ | 651 | (1,887,767 | ) | $ | (26 | ) | (13,987,891 | ) | $ | (172 | ) | $ | (31 | ) | $ | 1,562 |
See notes to condensed consolidated financial statements.
GRAY TELEVISION, INC. | |||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) | |||||||||||||||||||||
(in millions, except for number of shares) |
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | Class A | Common | Other | Class A | Class A | Common | Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | Retained | Treasury Stock | Treasury Stock | Comprehensive | Common Stock | Common Stock | Retained | Treasury Stock | Treasury Stock | Comprehensive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Earnings | Shares | Amount | Shares | Amount | Loss | Total | Shares | Amount | Shares | Amount | Earnings | Shares | Amount | Shares | Amount | Loss | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | 8,569,149 | $ | 27 | 89,298,943 | $ | 907 | $ | 372 | (1,840,114 | ) | $ | (26 | ) | (7,276,443 | ) | $ | (72 | ) | $ | (21 | ) | $ | 1,187 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | 8,935,773 | $ | 34 | 103,100,856 | $ | 1,110 | $ | 862 | (1,887,767 | ) | $ | (26 | ) | (14,960,597 | ) | $ | (188 | ) | $ | (39 | ) | $ | 1,753 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | 0 | - | 0 | 39 | - | 0 | - | 0 | 0 | 39 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends | - | 0 | - | 0 | (8 | ) | - | 0 | - | 0 | 0 | (8 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
401(k) Plan | 0 | 0 | 390,389 | 7 | 0 | 0 | 0 | 0 | 0 | 0 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 Equity and Incentive Compensation Plan: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards | 233,425 | 0 | 296,042 | 0 | 0 | (110,412 | ) | (2 | ) | (239,597 | ) | (4 | ) | 0 | (6 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock unit awards | 0 | 0 | 60,050 | 0 | 0 | 0 | 0 | (18,275 | ) | (1 | ) | 0 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | 1 | - | 2 | 0 | - | 0 | - | 0 | 0 | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | 9,169,198 | $ | 35 | 103,847,337 | $ | 1,119 | $ | 880 | (1,998,179 | ) | $ | (28 | ) | (15,218,469 | ) | $ | (193 | ) | $ | (39 | ) | $ | 1,774 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | 0 | - | 0 | 39 | - | 0 | - | 0 | 0 | 39 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends | - | 0 | - | 0 | (7 | ) | - | 0 | - | 0 | 0 | (7 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
401(k) Plan | 0 | 0 | 3,655 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 Equity and Incentive Compensation Plan: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards | 0 | 0 | 47,360 | 0 | 0 | 0 | 0 | (16,991 | ) | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | 1 | - | 3 | 0 | - | 0 | - | 0 | 0 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 9,169,198 | $ | 36 | 103,898,352 | $ | 1,122 | $ | 899 | (1,998,179 | ) | $ | (28 | ) | (15,235,460 | ) | $ | (193 | ) | $ | (39 | ) | $ | 1,797 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | 0 | - | 0 | (18 | ) | - | 0 | - | 0 | 0 | (18 | ) | - | 0 | - | 0 | (17 | ) | - | 0 | - | 0 | 0 | (17 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends | - | 0 | - | 0 | (8 | ) | - | 0 | - | 0 | 0 | (8 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions of television businesses and licenses | 0 | 0 | 11,499,945 | 170 | 0 | 0 | 0 | 0 | 0 | 0 | 170 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
401(k) Plan | 0 | 0 | 196,509 | 4 | 0 | 0 | 0 | 0 | 0 | 0 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 Equity and Incentive Compensation Plan - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 Equity and Incentive Compensation Plan: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards | 199,810 | 0 | 677,602 | 0 | 0 | (47,653 | ) | 0 | (123,167 | ) | (3 | ) | 0 | (3 | ) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (10,720 | ) | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | 0 | - | 2 | 0 | - | 0 | - | 0 | 0 | 2 | - | 1 | - | 2 | 0 | - | 0 | - | 0 | 0 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adoption of ASU 2018-02 | - | 0 | - | 0 | 2 | - | 0 | - | 0 | (2 | ) | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | 8,768,959 | $ | 27 | 101,672,999 | $ | 1,083 | $ | 343 | (1,887,767 | ) | $ | (26 | ) | (7,399,610 | ) | $ | (75 | ) | $ | (23 | ) | $ | 1,329 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | 0 | - | 0 | 44 | - | 0 | - | 0 | 0 | 44 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 Equity and Incentive Compensation Plan - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards | 0 | 0 | 41,181 | 0 | 0 | 0 | 0 | (29,204 | ) | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | 0 | - | 3 | 0 | - | 0 | - | 0 | 0 | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adoption of ASU 2018-02 | - | 0 | - | 0 | 3 | - | 0 | - | 0 | (3 | ) | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | 8,768,959 | $ | 27 | 101,714,180 | $ | 1,086 | $ | 377 | (1,887,767 | ) | $ | (26 | ) | (7,428,814 | ) | $ | (75 | ) | $ | (26 | ) | $ | 1,363 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | 0 | - | 0 | 59 | - | 0 | - | 0 | 0 | 59 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | - | 0 | - | 0 | (13 | ) | - | 0 | - | 0 | 0 | (13 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (651,593 | ) | (11 | ) | 0 | (11 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | 2 | - | 3 | 0 | - | 0 | - | 0 | 0 | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | 8,768,959 | $ | 29 | 101,714,180 | $ | 1,089 | $ | 423 | (1,887,767 | ) | $ | (26 | ) | (8,080,407 | ) | $ | (86 | ) | $ | (26 | ) | $ | 1,403 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | 9,169,198 | $ | 37 | 103,898,352 | $ | 1,124 | $ | 861 | (1,998,179 | ) | $ | (28 | ) | (15,246,180 | ) | $ | (193 | ) | $ | (39 | ) | $ | 1,762 |
See notes to condensed consolidated financial statements.
GRAY TELEVISION, INC. | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||
|
Nine Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Operating activities | ||||||||||||||||
Operating activities: | ||||||||||||||||
Net income | $ | 186 | $ | 85 | $ | 61 | $ | 186 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation | 69 | 60 | 76 | 69 | ||||||||||||
Amortization of intangible assets | 78 | 86 | 81 | 78 | ||||||||||||
Amortization of deferred loan costs | 9 | 9 | 9 | 9 | ||||||||||||
Amortization of restricted stock awards | 12 | 10 | 11 | 12 | ||||||||||||
Amortization of program broadcast rights | 28 | 30 | 26 | 28 | ||||||||||||
Payments on program broadcast obligations | (29 | ) | (33 | ) | (27 | ) | (29 | ) | ||||||||
Common stock contributed to 401(k) | 5 | 4 | 1 | 5 | ||||||||||||
Deferred income taxes | 41 | 34 | (18 | ) | 41 | |||||||||||
Gain on disposals of fixed assets, net | (23 | ) | (27 | ) | ||||||||||||
Loss (gain) on disposals of assets, net | 46 | (23 | ) | |||||||||||||
Other | 6 | (6 | ) | (7 | ) | 6 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 28 | 29 | 6 | 28 | ||||||||||||
Prepaid income taxes | (13 | ) | 0 | (28 | ) | (13 | ) | |||||||||
Other current assets | 2 | (7 | ) | 33 | 2 | |||||||||||
Accounts payable | 68 | 2 | 23 | 68 | ||||||||||||
Employee compensation, benefits and pension cost | (9 | ) | (6 | ) | 19 | (9 | ) | |||||||||
Accrued network fees and other expenses | (1 | ) | (42 | ) | (13 | ) | (1 | ) | ||||||||
Accrued interest | 7 | 30 | 13 | 7 | ||||||||||||
Income taxes payable | (11 | ) | (9 | ) | (17 | ) | (11 | ) | ||||||||
Deferred revenue | 35 | 6 | (12 | ) | 35 | |||||||||||
Net cash provided by operating activities | 488 | 255 | 283 | 488 | ||||||||||||
Investing activities | ||||||||||||||||
Acquisitions of television businesses and licenses, net of cash acquired | (21 | ) | (2,823 | ) | ||||||||||||
Proceeds from sale of television station | 0 | 231 | ||||||||||||||
Investing activities: | ||||||||||||||||
Acquisitions of businesses and licenses, net of cash acquired | (956 | ) | (47 | ) | ||||||||||||
Proceeds from sale of television stations | 470 | 0 | ||||||||||||||
Purchases of property and equipment | (70 | ) | (73 | ) | (154 | ) | (70 | ) | ||||||||
Proceeds from FCC Repack (Note 1) | 19 | 32 | ||||||||||||||
Proceeds from Repack reimbursement (Note 1) | 10 | 19 | ||||||||||||||
Proceeds from asset sales | 8 | 3 | 3 | 8 | ||||||||||||
Acquisition prepayments | (26 | ) | (12 | ) | ||||||||||||
Investments in broadcast, production and technology companies | (38 | ) | (2 | ) | (37 | ) | (38 | ) | ||||||||
Other | (1 | ) | (2 | ) | 0 | (1 | ) | |||||||||
Net cash used in investing activities | (129 | ) | (2,646 | ) | (664 | ) | (129 | ) | ||||||||
Financing activities | ||||||||||||||||
Proceeds from borrowings on long-term debt | 0 | 1,400 | ||||||||||||||
Repayments of borrowings on long-term debt | 0 | (11 | ) | |||||||||||||
Payments for the repurchase of common stock | (59 | ) | (11 | ) | ||||||||||||
Payment of preferred stock dividends | (39 | ) | (26 | ) | ||||||||||||
Financing activities: | ||||||||||||||||
Borrowings of long-term debt | 250 | 0 | ||||||||||||||
Repayments of long-term debt | (250 | ) | 0 | |||||||||||||
Repurchase of common stock | 0 | (59 | ) | |||||||||||||
Common stock dividends | (23 | ) | 0 | |||||||||||||
Preferred stock dividends | (39 | ) | (39 | ) | ||||||||||||
Deferred and other loan costs | 0 | (50 | ) | (1 | ) | 0 | ||||||||||
Payments for taxes related to net share settlement of equity awards | (6 | ) | (4 | ) | ||||||||||||
Net cash provided by (used in) financing activities | (104 | ) | 1,298 | |||||||||||||
Net increase (decrease) in cash | 255 | (1,093 | ) | |||||||||||||
Cash and restricted cash at beginning of period | 212 | 1,419 | ||||||||||||||
Taxes related to net share settlement of equity awards | (7 | ) | (6 | ) | ||||||||||||
Net cash used in financing activities | (70 | ) | (104 | ) | ||||||||||||
Net (decrease) increase in cash | (451 | ) | 255 | |||||||||||||
Cash at beginning of period | 773 | 212 | ||||||||||||||
Cash at end of period | $ | 467 | $ | 326 | $ | 322 | $ | 467 |
See notes to condensed consolidated financial statements.
GRAY TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. | Basis of Presentation |
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, 2019,2020, which was derived from the Company’s audited financial statements as of December 31, 2019,2020, and our accompanying unaudited condensed consolidated financial statements as of September 30, 20202021 and for the periods ended September 30, 20202021 and 2019,2020, 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-Q and Article 10 of Regulation 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 presentation have been included. We manage our business on the basis of 2two 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-K for the year ended December 31, 20192020 (the “20192020 Form 10-K”). Our financial condition as of, and operating results for the three and nine-months ended September 30, 2020,2021, 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, 2020.2021.
Overview. We are a television broadcastbroadcasting company headquartered in Atlanta, Georgia, that is the largest owner of top-rated local television (“television” or “TV”) stations and digital assets in the United States. Gray currently owns and/or operatesUpon the completion of our anticipated acquisition of the Local Media Group of Meredith Corporation (the “Meredith Transaction” as defined herein), we will become the nation’s second largest television broadcaster, with television stations and leading digital properties inserving 94113 television markets that collectively reach approximately 24%36 percent of U.S.US television households. Over calendar yearThe portfolio will include 2019, Gray’s stations were ranked first in 6979 markets with the top-rated television station and101 markets with the first and/or second in 87 markets, as calculated byhighest rated television station according to Comscore’s audience measurement service.data. We also own video program production, marketing, and digital businesses including Raycom Sports, Tupelo-Raycom,Tupelo Honey, and RTM Studios, the producer of PowerNation programs and content, and is the majority owner of Swirl Films, which we refer to collectively as our “production companies.”
Investments in Broadcasting, Production and Technology 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 condensed 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.
Investments 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 carried at cost less impairments, if any, plus or minus changes in observable prices for those investments. Gains or losses resulting from changes in the carrying value of these investments are included as miscellaneous (expense) income, net in our condensed consolidated statements of operations. These investments are reported together as a non-current asset on our condensed consolidated balance sheets.
Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The business and economic uncertainty resulting from the novel coronavirus and its related disease (collectively, “COVID-19”) has made such estimates and assumptions more difficult to calculate. Our actual results could differ materially from these estimated amounts. Our most significant estimates are our allowance for credit losses in receivables, valuation of goodwill and intangible assets, amortization of program rights and intangible assets, pension costs, income taxes, employee medical insurance claims, useful lives of property and equipment and contingencies.
Investments in Broadcasting, Production and Technology Companies. We have investments in several television, production and technology companies. None of these equity investments have readily determinable fair values. We have applied the measurement alternative as defined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 825-10, Recognition and Measurement of Financial Assets and Financial Liabilities. These investments are reported together as a non-current asset on our balance sheets.
Earnings Per Share. We compute basic earnings per share by dividing net income available 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 diluted weighted-average shares outstanding calculation, unless their inclusion would be antidilutive.
The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding for the three and nine-month periods ended September 30, 20202021 and 2019,2020, respectively (in millions):
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
Weighted-average shares outstanding-basic | 95 | 100 | 97 | 100 | 95 | 95 | 94 | 97 | ||||||||||||||||||||||||
Common stock equivalents for stock options and restricted stock | 1 | 1 | 0 | 0 | 0 | 1 | 1 | 0 | ||||||||||||||||||||||||
Weighted-average shares outstanding-diluted | 96 | 101 | 97 | 100 | 95 | 96 | 95 | 97 |
Accumulated Other Comprehensive Loss.Loss. Our accumulated other comprehensive loss balances as of September 30, 20202021 and December 31, 2019,2020, consistedconsist of adjustments to our pension liability and the related income tax effect. Our comprehensive income for the nine-month periods ended September 30, 2021 and 2020 consisted solely of our net income. As of September 30, 20202021 and December 31, 20192020 the balances were as follows (in millions):
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Accumulated balances of items included in accumulated other comprehensive loss: | ||||||||||||||||
Items included in accumulated other comprehensive loss: | ||||||||||||||||
Increase in pension liability | $ | (42 | ) | $ | (42 | ) | $ | (52 | ) | $ | (52 | ) | ||||
Income tax benefit | (11 | ) | (11 | ) | (13 | ) | (13 | ) | ||||||||
Accumulated other comprehensive loss | $ | (31 | ) | $ | (31 | ) | $ | (39 | ) | $ | (39 | ) |
Property and Equipment. Property and equipment are carried at cost. Depreciation is computed principally by the straight-line method. The following table lists the components of property and equipment by major category (dollars in millions):
Estimated | |||||||||||||
September 30, | December 31, | Useful Lives | |||||||||||
2020 | 2019 | (in years) | |||||||||||
Property and equipment: | |||||||||||||
Land | $ | 119 | $ | 119 | |||||||||
Buildings and improvements | 305 | 291 | 7 | to | 40 | ||||||||
Equipment | 814 | 776 | 3 | to | 20 | ||||||||
1,238 | 1,186 | ||||||||||||
Accumulated depreciation | (512 | ) | (461 | ) | |||||||||
Total property and equipment, net | $ | 726 | $ | 725 |
Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. The cost of any assets divested, sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting profit or loss is reflected in income or expense for the period.
In April 2017, the Federal Communications Commission (the “FCC”) began a process of reallocating the broadcast spectrum (the “Repack”). Specifically, the FCC is requiring certain television stations to change channels and/or modify their transmission facilities. The U.S. Congress passed legislation which provides the FCC with a $1.7 billion fund to reimburse all reasonable costs incurred by stations operating under a full power license and a portion of the costs incurred by stations operating under a low power license that are reassigned to new channels. Subsequent legislation in March 2018 appropriated an additional $1.0 billion for the Repack fund, of which up to $750 million may be made available to reimburse the Repack costs of full power, Class A television stations and multichannel video programming distributors. Other funds are earmarked to assist low power television stations and for other transition costs. The sufficiency of the FCC’s fund to reimburse for Repack costs is dependent upon a number of factors including the amounts to be reimbursed to other industry participants for Repack costs. Therefore, we cannot predict whether the fund will be sufficient to reimburse our Repack costs to the extent authorized under the legislation. Forty-seven of our current full power stations and thirty-seven of our current low power stations are affected by the Repack. The Repack process began in the summer of 2017 and we expect that it will conclude for nearly all of our stations by the end of 2020. The majority of our costs associated with the Repack qualify for capitalization, rather than expense. Upon receipt of funds reimbursing us for our Repack costs, we record those proceeds as a component of our (gain) loss on disposal of assets, net.
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 included in our condensed consolidated statements of cash flows (in millions):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Gain (loss) on disposal of fixed assets, net: | ||||||||||||||||
Proceeds from sale of assets | $ | 7 | $ | 0 | $ | 8 | $ | 3 | ||||||||
Proceeds from FCC - Repack | 5 | 15 | 19 | 32 | ||||||||||||
Net book value of assets disposed | (2 | ) | (1 | ) | (4 | ) | (5 | ) | ||||||||
Other | 0 | 0 | 0 | (3 | ) | |||||||||||
Total | $ | 10 | $ | 14 | $ | 23 | $ | 27 | ||||||||
Purchase of property and equipment: | ||||||||||||||||
Recurring purchases - operations | $ | 51 | $ | 38 | ||||||||||||
Repack | 19 | 34 | ||||||||||||||
Repack related | 0 | 1 | ||||||||||||||
Total | $ | 70 | $ | 73 |
Accounts Receivable and Allowance for Credit 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 credit losses is an estimate of expected losses over the remaining contractual life of our 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 also apply additional allowance when warranted by specific facts and circumstances. We generally write off accounts receivable balances when the customer files for bankruptcy or when all commonly used methods of collection have been exhausted.
We are closely monitoring the potential impact from COVID-19 on our business. The extent to which the COVID-19 pandemic impacts the collectability of our receivables will depend on numerous evolving factors. As such, we did not adjust our allowance for credit loss as of September 30, 2020. For further discussion of the potential impact of the COVID-19 pandemic see “Impact of COVID-19 and Related Government Restrictions on our Markets and Operations.” and Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q.
The following table provides a rollforwardroll-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):
Nine Months Ended | ||||
September 30, 2021 | ||||
Beginning balance | $ | 10 | ||
Provision for credit losses | 2 | |||
Amounts written off | (1 | ) | ||
Amounts recovered from previous write-offs | 0 | |||
Ending balance | $ | 11 |
Property and Equipment, Net. Property and equipment are carried at cost, or in the case of acquired businesses, at their initial fair value. Depreciation is computed principally by the straight-line method. The following table lists the components of property and equipment by major category (dollars in millions):
Nine Months Ended | ||||
September 30, 2020 | ||||
Beginning balance | $ | 11 | ||
Provision for credit losses | 2 | |||
Amounts written off | (2 | ) | ||
Amounts recovered from previous write-offs | 0 | |||
Ending balance | $ | 11 |
Estimated | ||||||||||||||
September 30, | December 31, | Useful Lives | ||||||||||||
2021 | 2020 | (in years) | ||||||||||||
Property and equipment, net: | ||||||||||||||
Land | $ | 217 | $ | 123 | ||||||||||
Buildings and improvements | 332 | 305 | 7 | to | 40 | |||||||||
Equipment | 927 | 834 | 3 | to | 20 | |||||||||
1,476 | 1,262 | |||||||||||||
Accumulated depreciation | (568 | ) | (525 | ) | ||||||||||
Total property and equipment, net | $ | 908 | $ | 737 |
Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. The cost of any assets divested, sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is reflected in income or expense for the period.
In April 2017, the Federal Communications Commission (the “FCC”) began a process of reallocating the broadcast spectrum (the “Repack”). Specifically, the FCC is requiring certain television stations to change channels and/or modify their transmission facilities. The U.S. Congress passed legislation which provides the FCC with funds to reimburse certain costs incurred by stations operating under a full power license and a portion of the costs incurred by stations operating under a low power license that are reassigned to new channels. A significant number of our current full power and low power stations are affected by the Repack. The Repack process began in the summer of 2017 and we expect that it will conclude for nearly all of our stations before the end of 2021. The majority of our costs associated with the Repack qualify for capitalization, rather than expense. Upon receipt of funds reimbursing us for our Repack costs, we record those proceeds as a component of our loss (gain) on disposal of assets, net.
The following tables provide additional information related to (loss) gain on disposal of assets, net included in our condensed consolidated statements of operations and purchases of property and equipment included in our condensed consolidated statements of cash flows (in millions):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(Loss) gain on disposal of assets, net: | ||||||||||||||||
Proceeds from sale of assets | $ | 0 | $ | 7 | $ | 3 | $ | 8 | ||||||||
Proceeds from FCC - Repack | 4 | 5 | 10 | 19 | ||||||||||||
Net book value of assets disposed | (2 | ) | (2 | ) | (6 | ) | (4 | ) | ||||||||
Non-cash loss on divestitures | (53 | ) | 0 | (53 | ) | 0 | ||||||||||
Total | $ | (51 | ) | $ | 10 | $ | (46 | ) | $ | 23 | ||||||
Purchase of property and equipment: | ||||||||||||||||
Recurring purchases - operations | $ | 57 | $ | 51 | ||||||||||||
Doraville land purchase | 91 | 0 | ||||||||||||||
Repack | 6 | 19 | ||||||||||||||
Total | $ | 154 | $ | 70 |
Recent Accounting Pronouncements. In JanuaryMarch 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-01,04, Investments—Equity SecuritiesReference Rate Reform (Topic 321848), Investments—Equity Method and Joint Ventures (Topic.In 323January 2021, ), and Derivatives and Hedging (Topic 815) (the FASB issued an amendment to ASU 2020-0104,). ASU 20202021-01, clarifiesReference Rate Reform (Topic 848), in response to concerns about structural risks of interbank offered rates, and, particularly, the interactionrisk of cessation of the accounting for equity securities under Topic 321,London Interbank Offered Rate (“LIBOR”). The amendments in this ASU apply to all entities that elect to apply the accounting for equity method investmentsoptional guidance in Topic 323,848. andAn entity may elect to apply the accounting for certain forward contracts and purchased optionsamendments in Topicthis ASU on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to 815.March 12, 2020, ASU 2020-01or on a prospective basis to new modifications from any date within an interim period that includes or is effective for us beginning insubsequent to the first quarterdate of fiscal 2022, and earlier adoption is permitted.the issuance of a final standard, up to the date that financial statements are available to be issued. We are currently evaluating the impactapplicability of our pending adoption of ASU 2020-01 on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12,Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify various areas related to the accounting for income taxes and improve consistent application of Topic 740. ASU 2019-12 is effective for us beginning in the first quarter of fiscal 2022, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2019-12 on our consolidated financial statements.
Adoption of Accounting Standard. On January 1, 2020, we adopted the amendments in ASU 2016-13,Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on a modified-retrospective basis with comparative periods reported in accordance with previousthis guidance. These amendments require the measurement of credit losses using historical experience, current conditions and reasonable and supportable forecasts. Prior to this adoption, our allowance for doubtful accounts was equal to a portion of our receivable balances that were 120 days old or older. We generally provided allowances for certain receivable balances that were less than 120 days old when warranted by specific facts and circumstances. The adoption of the amendments in ASU 2016-13 did not have a material effect on our financial statements.
In addition to the accounting standards described above, certain amounts in the condensed consolidated balance sheets and condensed consolidated statements of cash flows have also been reclassified to conform to the current presentation.
2. | Revenue |
Revenue Recognition.Recognition. We recognize revenue when we have completed a specified service and effectively transferred the control of that service to a customer in return for an amount of consideration we expect to be entitled to receive. The amount of revenue recognized is determined by the amount of consideration specified in a contract with our customers. We have elected to exclude taxes assessed by a governmental authority on transactions with our customers from our revenue. Any unremitted balance is included in current liabilities on our condensed consolidated balance sheet.sheets.
We record a deposit liability for cash deposits received from our customers that are to be applied as payment once the performance obligation arises and is satisfied in the manner stated above.satisfied. These deposits are recorded as deposit liabilities on our condensed consolidated balance sheet.sheets. When we invoice our customers for completed performance obligations, we are unconditionally entitled to receive payment of the invoiced amounts. Therefore, we record invoiced amounts in accounts receivable on our condensed consolidated balance sheet.sheets. We generally require amounts payable under advertising contracts with our political advertising customers to be paid for in advance. We record the receipt of this cash as a deposit liability. Once the advertisement has been broadcast, the revenue is earned, and we record the revenue and reduce the balance in this deposit liability account. We recorded $9$21 million of revenue in the nine months ended September 30, 20202021 that was included in the deposit liability balance as of December 31, 2019.2020. The deposit liability balance is included in deferred revenue on our condensed consolidated balance sheets. The deposit liability balance was $43$8 million and $9$21 million as of September 30, 20202021 and December 31, 2019,2020, respectively.
Disaggregation of Revenue.Revenue. Revenue from our production companies segment is generated through our direct sales channel. Revenue from our broadcastbroadcasting and other segment is generated through both our direct and advertising agency intermediary sales channels. The following table presents our revenue from contracts with customers disaggregated by type of service and sales channel (in millions):
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
Market and service type: | ||||||||||||||||||||||||||||||||
Advertising: | ||||||||||||||||||||||||||||||||
Local | $ | 188 | $ | 218 | $ | 549 | $ | 655 | $ | 232 | $ | 188 | $ | 657 | $ | 549 | ||||||||||||||||
National | 49 | 56 | 136 | 162 | 60 | 49 | 174 | 136 | ||||||||||||||||||||||||
Political | 128 | 22 | 185 | 30 | 9 | 128 | 24 | 185 | ||||||||||||||||||||||||
Total advertising | 365 | 296 | 870 | 847 | 301 | 365 | 855 | 870 | ||||||||||||||||||||||||
Retransmission consent | 217 | 196 | 650 | 601 | 266 | 217 | 755 | 650 | ||||||||||||||||||||||||
Production companies | 11 | 16 | 32 | 62 | 20 | 11 | 44 | 32 | ||||||||||||||||||||||||
Other | 11 | 9 | 37 | 33 | 14 | 11 | 38 | 37 | ||||||||||||||||||||||||
Total revenue | $ | 604 | $ | 517 | $ | 1,589 | $ | 1,543 | $ | 601 | $ | 604 | $ | 1,692 | $ | 1,589 | ||||||||||||||||
Sales channel: | ||||||||||||||||||||||||||||||||
Direct | $ | 316 | $ | 306 | $ | 948 | $ | 946 | $ | 402 | $ | 316 | $ | 1,117 | $ | 948 | ||||||||||||||||
Advertising agency intermediary | 288 | 211 | 641 | 597 | 199 | 288 | 575 | 641 | ||||||||||||||||||||||||
Total revenue | $ | 604 | $ | 517 | $ | 1,589 | $ | 1,543 | $ | 601 | $ | 604 | $ | 1,692 | $ | 1,589 |
3. | Acquisitions and Divestitures |
Quincy Transaction.On July 31, 2020,August 2, 2021, we completed the acquisition of all the equity interests of Quincy Media, Inc. (“Quincy”) for an adjusted purchase price of $930 million, which amount includes an additional $5 million for working capital. Quincy owned and operated television stations in 16 markets. Also on August 2, 2021, and concurrently with the acquisition of Quincy, we completed the divestiture to Allen Media (“Allen”) of television stations in seven markets previously owned by Quincy and located in our existing television markets, for an adjusted divestiture price of $398 million, which amount includes $18 million for working capital (the “Quincy Divestiture”). The Quincy Divestiture resulted in a non-cash loss of $48 million. We refer to the acquisition of Quincy and the Quincy Divestiture collectively as the “Quincy Transaction.”
The following table lists the stations acquired and retained, net of divestitures:
Current DMA Rank | Designated Market Area ("DMA") | Station Call Letters | Network Affiliations | |||
104 | Fort Wayne, IN | WPTA/WISE | ABC/NBC/CW | |||
118 | Peoria, IL | WEEK | NBC/ABC/CW | |||
136 | Duluth, MN, Superior, WI | KBJR/KDLH | NBC/CBS/CW | |||
147 | Sioux City, IA | KTIV | NBC/CW | |||
156 | Rochester, MN - Mason City, IA | KTTC | NBC/CW | |||
158 | Binghamton, NY | WBNG | CBS/CW | |||
162 | Bluefield-Beckley, WV | WVVA | NBC/CW | |||
172 | Quincy, IL | WGEM | NBC/FOX/CW |
The following stations were acquired and divested in the Quincy Transaction:
Current DMA Rank | DMA | Station Call Letters | Network Affiliations | |||
75 | Tucson, AZ | KVOA | NBC | |||
80 | Madison, WI | WKOW | ABC | |||
91 | Paducah, KY - Harrisburg, IL | WSIL | ABC | |||
92 | Cedar Rapids, IA | KWWL | NBC | |||
123 | La Crosse-Eau Claire, WI | WXOW | ABC | |||
132 | Rockford, IL | WREX | NBC | |||
134 | Wausau-Stevens Point, WI | WAOW | ABC |
The following table summarizes the allocation of consideration paid in the Quincy Transaction (in millions):
Adjusted purchase price | $ | 930 | ||
Less - consideration allocated to assets acquired and liabilities assumed for the Quincy overlap markets that were divested on August 2, 2021 | 383 | |||
Purchase consideration for assets acquired and liabilities assumed, net of divestitures | $ | 547 |
Third Rail Acquisition. On September 13, 2021, we acquired the studio, production and office facilities as well as the related production and administrative assets and liabilities of Third Rail Studios (“Third Rail”) from Third Rail Studios, LLC and Studio Sixty, LLC for an adjusted purchase price of $27 million of cash. We refer to this transaction as the “Third Rail Acquisition”. This transaction represents an initial step in the broader development of our planned studio production facilities.
Purchase Price Allocations. The following table summarizes the values of the assets acquired, liabilities assumed and resulting goodwill of the Quincy Transaction and the Third Rail Acquisition (together, the “2021 Acquisitions”), in millions:
Quincy | Third Rail | Total | ||||||||||
Cash | $ | 4 | $ | 0 | $ | 4 | ||||||
Accounts receivable, net | 23 | 0 | 23 | |||||||||
Other current assets | 5 | 0 | 5 | |||||||||
Property and equipment | 73 | 24 | 97 | |||||||||
Operating lease right of use asset | 1 | 0 | 1 | |||||||||
Goodwill | 184 | 4 | 188 | |||||||||
Broadcast licenses | 245 | 0 | 245 | |||||||||
Other intangible assets | 86 | 0 | 86 | |||||||||
Other current liabilities | (7 | ) | (1 | ) | (8 | ) | ||||||
Deferred income taxes | (66 | ) | 0 | (66 | ) | |||||||
Operating lease liabilities | (1 | ) | 0 | (1 | ) | |||||||
Total | $ | 547 | $ | 27 | $ | 574 |
Due to the proximity of the acquisition date to the date of the filing of this quarterly report, these amounts are based upon management’s preliminary estimate of the fair values using valuation techniques including income, cost and market approaches. In determining the preliminary fair value of the acquired assets and assumed liabilities, the fair values were estimated based on, among other factors, expected future revenue and cash flows, expected future growth rates, and estimated discount rates.
Property and equipment are recorded at their fair value and are being depreciated over their estimated useful lives ranging from three years to 40 years.
Amounts related to other intangible assets are being amortized over their estimated useful lives of approximately 1 to 4 years.
Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, as well as future synergies that we expect to generate from each acquisition. The goodwill recognized related to these acquisitions is deductible for income tax purposes.
Flint Divestiture. To facilitate regulatory approvals for the pending Meredith Transaction, on September 23, 2021, we divested our existing television station operationsWJRT (ABC) in the Anchorage and Juneau, Alaska television designatedFlint-Saginaw, Michigan market areas or “DMA” (DMA 15164), to Allen for an adjusted purchase price of $72 million in cash, including working capital (the “Flint Divestiture”). The Flint Divestiture resulted in a non-cash loss of $5 million.
The Company’s consolidated results of operations for the nine-months ended September 30, 2021 includes the results of the Quincy Transaction beginning on August 2, 2020 and the Third Rail Acquisition beginning on September 13, 2021. Revenues attributable to the 2021 Acquisitions and included in our condensed consolidated statements of operations for the three and DMA 207,nine-months ended September 30, 2021 was $25 million, in each period.
The following table summarizes the approximate “Transaction Related Expenses” incurred in connection with the 2021 respectively)Acquisitions and the Flint Divestiture, during the three and nine-months ended September 30, 2021, by type and by financial statement line item (in millions):
September 30, 2021 | ||||||||
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
Transaction Related Expenses by type: | ||||||||
Legal, consulting and other professional fees | $ | 11 | $ | 19 | ||||
Incentive compensation and other severance costs | 0 | 0 | ||||||
Termination of financing agreement | 0 | 7 | ||||||
Total Transaction Related Expenses | $ | 11 | $ | 26 | ||||
Transaction Related Expenses by financial statement line item: | ||||||||
Operating expenses before depreciation, amortization and loss (gain) on disposal of assets, net: | ||||||||
Broadcasting | $ | 0 | $ | 0 | ||||
Corporate and administrative | 11 | 19 | ||||||
Miscellaneous (income) expense, net | 0 | 7 | ||||||
Total Transaction Related Expenses | $ | 11 | $ | 26 |
Unaudited Pro Forma Financial Information –2021 Acquisitions. The following table sets forth certain unaudited pro forma information for the nine-months ended September 30, 2021 and 2020, assuming that the 2021 Acquisitions and the Flint Divestiture occurred on January 1,2020 (in millions, except per share data):
Nine Months Ended | ||||||||
September 30, | ||||||||
2021 | 2020 | |||||||
Revenue (less agency commissions) | $ | 1,751 | $ | 1,678 | ||||
Net income | $ | 126 | $ | 153 | ||||
Net income attributable to common stockholders | $ | 87 | $ | 114 | ||||
Basic net income attributable to common stockholders, per share | $ | 0.93 | $ | 1.18 | ||||
Diluted net income attributable to common stockholders, per share | $ | 0.92 | $ | 1.18 |
This pro forma financial information is based on Gray’s historical results of operations and the historical results of operations of the businesses acquired, net of divestitures, included in the 2021 Acquisitions and the Flint Divestiture, adjusted for the effects of fair value estimates and other acquisition accounting adjustments, and is not necessarily indicative of what our results would have been had we completed the 2021 Acquisitions and the Flint Divestiture, on January 1,2020, or on any other historical date, nor is it reflective of our expected results of operations for any future period. The pro forma adjustments for the nine-months ended September 30, 2021 and 2020 reflect depreciation expense and amortization of finite-lived intangible assets related to the fair value of the assets acquired, Transaction Related Expenses and related tax effects of the adjustments. This pro forma financial information has been prepared based on estimates and assumptions that we believe are reasonable as of the date hereof, and are subject to change based on, among other things, changes in the fair value estimates or underlying assumptions.
Lubbock Transactions. On December 31, 2020, we acquired television station KLCW-TV (CW) and certain low power television stations in the Lubbock, Texas market (DMA 142), as well as certain non-license assets of KJTV-TV (FOX) and two additional low power stations and certain real estate, for $19a combined purchase price of $24 million, using cash on hand. On that date, we also entered into a shared services agreement with SagamoreHill to provide news and back-office services to KJTV-TV and its associated low power stations using cash on hand (the “Alaska“Lubbock Transactions”).
The following table summarizes the preliminary values of the assets acquired and resulting goodwill of the AlaskaLubbock Transactions (in millions):
Amount | ||||||||
Accounts receivable and other current assets | $ | 1 | ||||||
Property and equipment | 5 | $ | 6 | |||||
Operating lease right of use asset | 1 | |||||||
Goodwill | 2 | 6 | ||||||
Broadcast licenses | 2 | 5 | ||||||
Other intangible assets | 9 | 7 | ||||||
Other liabilities | (1 | ) | ||||||
Total | $ | 19 | $ | 24 |
These amounts are based upon management’s preliminary estimate of the fair values using valuation techniques including income, cost and market approaches. In determining the preliminary fair value of the acquired assets and assumed liabilities, the fair values were determined based on, among other factors, expected future revenue and cash flows, expected future growth rates, and estimated discount rates.
Property and equipment are recorded at their fair value and are being depreciated over their estimated useful lives ranging from three years to 40 years.
Amounts related to other intangible assets are being amortized over their estimated useful lives of approximately 1 to 4 years.
Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, as well as future synergies that we expect to generate from each acquisition. The goodwill recognized related to this acquisition is deductible for income tax purposes.
The Company’s consolidated results of operations for three and nine-months ended September 30, 2020 include the results of the Alaska Transactions beginning on August 1, 2020, but these amounts were not significant.
“Transaction Related Expenses” incurred in connection with the Alaska Transactions, during the three and nine-months ended September 30, 2020, were less than $1 million.Pending Acquisition
ColumbusAcquisition of Meredith Acquisition. On May 3, 2021, we entered into the Meredith Transaction, in which we agreed to acquire all outstanding shares of Meredith Corporation (“Meredith”), subject to and immediately after the spinoff of Meredith’s National Media Group to the current Meredith shareholders. The agreement was amended on June 2, 2021 and October 6, 2021, to revise the purchase consideration to $16.99 per share in cash, or $2.8 billion in total enterprise value and to modify certain terms of the agreement. The parties expect to close the transaction in the fourth quarter of 2021. At the closing, Gray will acquire Meredith’s remaining operating division, known as the Local Media Group, which owns 17 television stations in 12 local markets, adding 11 new markets to our operations.
On September 1, 2020, we acquiredThe transaction is subject to approval of Meredith’s shareholders and customary closing conditions and regulatory approvals, including certain non-license assetsconsents necessary to effectuate the spinoff of WLTZ-TV (NBC), in the Columbus, Georgia market (DMA 129) and entered into shared services and other related agreements with SagamoreHill of Columbus GA, LLC (“SagamoreHill”) to provide news and back-office services to WLTZ-TV (the “Columbus Transactions”). We paid $22 million to SagmoreHill, using cash on hand. DueMeredith’s National Media Group immediately prior to the proximityclosing of our acquisition of Meredith.
Refer to Note 4. “Long-Term Debt” for a description of the closing date of the Columbus Transactionsdebt financing arrangements related to the balance sheet date of September 30, 2020 and the filing date of this quarterly report, we were unable to present a preliminary purchase price allocation for the acquired business. The payment of the purchase price is included in our other non-current assets at September 30, 2020, and was included in acquisition prepayments in our statement of cash flows. The fair value estimates of assets acquired, liabilities assumed and resulting goodwill will be based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches. In estimating the fair value of the acquired assets and liabilities assumed, the fair value estimates will be based on, among other factors, expected future revenue and cash flows, expected future growth rates, and estimated discount rates.transaction.
4
4. | Long-term Debt |
As of September 30, 20202021 and December 31, 2019,2020, long-term debt consisted of obligations under our senior credit facility (the “2019 Senior Credit Facility”), our 5.125% Senior Notes due 2024 (the “2024 Notes”), our 5.875% Senior Notessenior notes due 2026 (the “2026 Notes”) and, our 7.0% Senior Notessenior notes due 2027 (the “2027 Notes”) and our 4.75% senior notes due 2030 (the “2030 Notes”) as follows (in millions):
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Long-term debt including current portion: | ||||||||||||||||
Long-term debt: | ||||||||||||||||
2019 Senior Credit Facility: | ||||||||||||||||
2017 Term Loan | $ | 595 | $ | 595 | $ | 595 | $ | 595 | ||||||||
2019 Term Loan | 1,190 | 1,190 | 1,190 | 1,190 | ||||||||||||
2024 Notes | 525 | 525 | ||||||||||||||
2026 Notes | 700 | 700 | 700 | 700 | ||||||||||||
2027 Notes | 750 | 750 | 750 | 750 | ||||||||||||
Total outstanding principal | 3,760 | 3,760 | ||||||||||||||
Unamortized deferred loan costs - 2019 Term Loan | (37 | ) | (44 | ) | ||||||||||||
Unamortized deferred loan costs - 2024 Notes | (4 | ) | (5 | ) | ||||||||||||
2030 Notes | 800 | 800 | ||||||||||||||
Total outstanding principal, including current portion | 4,035 | 4,035 | ||||||||||||||
Unamortized deferred loan costs - 2019 Senior Credit Facility | (30 | ) | (34 | ) | ||||||||||||
Unamortized deferred loan costs - 2026 Notes | (6 | ) | (7 | ) | (5 | ) | (6 | ) | ||||||||
Unamortized deferred loan costs - 2027 Notes | (10 | ) | (11 | ) | (9 | ) | (10 | ) | ||||||||
Unamortized deferred loan costs - 2030 Notes | (13 | ) | (14 | ) | ||||||||||||
Unamortized premium - 2026 Notes | 3 | 4 | 3 | 3 | ||||||||||||
Long-term debt, less deferred financing costs | 3,706 | 3,697 | 3,981 | 3,974 | ||||||||||||
Less current portion | 0 | 0 | ||||||||||||||
Net carrying value | $ | 3,706 | $ | 3,697 | ||||||||||||
Borrowing availability under Revolving Credit Facility | $ | 200 | $ | 200 | $ | 299 | $ | 200 |
Borrowings under the 2019 Term Loan and the 2017 Term Loan bear interest, at our option, at either the London Interbank Offered Rate (“LIBOR”)LIBOR or the Base Rate, in each case, plus an applicable margin. As of September 30, 2020,2021, the interest rate on the balance outstanding under the 2019 Term Loan and the 2017 Term Loan were 2.7%2.6% and 2.4%2.3%, respectively. The 2019 Term Loan and the 2017 Term Loan mature on January 2, 2026 and February 7, 2024, respectively.
As of September 30, 2020,2021, the aggregate minimum principal maturities of our long term debt for the remainder of 20202021 and the succeeding 5 years were as follows (in millions):
Minimum Principal Maturities | Minimum Principal Maturities | |||||||||||||||||||||||||||||||||||||||
Year | 2019 Senior Credit Facility | 2024 Notes | 2026 Notes | 2027 Notes | Total | 2019 Senior Credit Facility | 2026 Notes | 2027 Notes | 2030 Notes | Total | ||||||||||||||||||||||||||||||
Remainder of 2020 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||||||
2021 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Remainder of 2021 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||||||
2022 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
2023 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
2024 | 595 | 525 | 0 | 0 | 1,120 | 595 | 0 | 0 | 0 | 595 | ||||||||||||||||||||||||||||||
2025 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
2026 | 1,190 | 700 | 0 | 0 | 1,890 | |||||||||||||||||||||||||||||||||||
Thereafter | 1,190 | 0 | 700 | 750 | 2,640 | 0 | 0 | 750 | 800 | 1,550 | ||||||||||||||||||||||||||||||
Total | $ | 1,785 | $ | 525 | $ | 700 | $ | 750 | $ | 3,760 | $ | 1,785 | $ | 700 | $ | 750 | $ | 800 | $ | 4,035 |
As of September 30, 2020,2021, there were no significant restrictions on the ability of Gray Television, Inc.'sour subsidiaries to distribute cash to Grayus or to the guarantor subsidiaries. The 2019 Senior Credit Facility contains affirmative and restrictive covenants with which we must comply. The 20242026 Notes, the 20262027 Notes and the 20272030 Notes include covenants with which we must comply. As of September 30, 20202021 and December 31, 2019,2020, we were in compliance with all required covenants under all our debt obligations.
For all our interest bearing obligations, we made interest payments of approximately $127$121 million and $134$127 million during the nine-months ended September 30, 20202021 and 2019,2020, respectively. We did not capitalize any interest payments during the nine-months ended September 30, 20202021 and 2019.2020.
On October 19, 2020, Meredith Transaction Financing. In connection with, and contingent upon the completion of the Meredith Transaction, we issued $800have agreed to complete certain financing transactions. Related to our Senior Credit Facility, we (1) agreed to incur a $1.5 billion incremental term loan under our senior credit facility, subject to market conditions at the time of financing and (2) agreed to amend and restate our existing revolving credit facility to increase our borrowing capacity under the facility from up to $300 million to up to $500 million, which will consist of (i) a $425 million five year revolving credit facility and (ii) a $75 million revolving credit facility with commitments expiring January 2, 2026. In addition, Gray Escrow II, Inc. (“Escrow Issuer”), a special purpose wholly-owned subsidiary, has agreed to issue $1.3 billion in aggregate principal amount of 4.750% Senior Notes5.375% senior unsecured notes due 20302031 (the "2030“2031 Notes"Notes”), and used at par, which we intend to assume upon completion of the netMeredith Transaction. The proceeds therefrom,of the transactions mentioned above, after deducting transaction fees and estimated expenses, will be used to redeem allpay a portion of the consideration for the Meredith Transaction. The amendment of our outstandingSenior Credit Facility is likely to result in a gain or loss on early extinguishment of debt that is 2024not Notes and to pay all fees and expenses in connection with the offering, including the redemption premium applicable to the 2024 Notes. We intend to use the remaining net proceeds for general corporate purposes, which could include the repayment of outstanding debt from time to time. For additional information on this transaction, see Note 14 "Subsequent Events."yet determinable.
5. | Fair Value Measurement |
We measure certain assets and liabilities at fair value, which are classified by the FASB Codification within the fair value hierarchy as level 51,. Fair Value Measurement2, or 3, on the basis of whether the measurement employs observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions and consider information about readily available market participant assumptions.
● | Level 1: Quoted prices for identical instruments in active markets |
● | Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets |
● | Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable |
For purposes of determining a fair
Fair value measurement, we utilize market data or assumptionsis defined as the price that market participants would use in pricingbe received to sell an asset, or paid to transfer a liability, including assumptions about risk andin an orderly transaction between market participants at the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized into a hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1”) and the lowest priority to unobservable inputs that require assumptions to measure fair value (“Level 3”). Level 2 inputs are those that are other than quoted prices on national exchanges included within Level 1 that are observable for the asset or liability either directly or indirectly (“Level 2”).
Fair Value of Other Financial Instrument. The estimated fair value of other financial instruments is determined using market information and appropriate valuation methodologies. Interpreting market data to develop fair value estimates involves considerable judgment.measurement date. The use of different market assumptions or methodologies could have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange, or the value that ultimately will be realized upon maturity or disposition.measurement.
The carrying amounts of the following instruments approximate fair value due to their short term to maturity: (i) accounts receivable, (ii) prepaid and other current assets, (iii) accounts payable, (iv) accrued employee compensation and benefits, (v) accrued interest, (vi) other accrued expenses, (vii) acquisition-related liabilities and (viii) deferred revenue.revenue approximate fair value at both September 30, 2021 and December 31, 2020.
TheAs of September 30, 2021 and December 31, 2020, the carrying amount and the fair value of our long-term debt was approximately $4$4.0 billion, as of September 30, 2020 and December 31, 2019. Fairthe fair value was $4.1 billion. The fair value of our long-term debt is based on observable estimates provided by third-party party financial professionals as of September 30, 2020 and December 31, 2019 each date, and as such is classified within Level 2 of the fair value hierarchy.
6. | Stockholders’ |
We wereare authorized to issue 245 million shares in total of all classes of stock consisting of 25 million shares of Classclass A common stock, 200 million shares of common stock, and 20 million shares of “blank check” preferred stock for which our Board of Directors has the authority to determine the rights, powers, limitations and restrictions. The rights of our Class A common stock and ourclass A common stock are identical, except that our Classclass A common stock has 10 votes per share and our common stock has 1one vote per share.
Our common stock and Classclass A common stock are entitled to receive cash dividends if declared, on an equal per-share basis. ForOn February 24, 2021, the Board of Directors initiated a quarterly cash dividend of $0.08 per share on our common stock and class A common stock. The total dividends declared and paid during the nine-months ended September 30, 2021 was approximately $23 million. During the nine-months ending September 30, 2020, and 2019,we did not declare or pay any Class Adividends on our common stock or common stock dividends.
On January 2, 2019, we issued 11.5 million shares of our common stock at a price of $14.74 per share, the closing price for our common stock on the last trading day preceding the transaction, to certain former shareholders of Raycom as part of the total consideration paid for the Raycom Merger. We incurred transaction fees and expenses of approximately $0.1 million related to the issuance of these shares that were recorded as a reduction of the balance outstanding of our common stock in our balance sheets.
On November 5, 2019, our Board of Directors authorized the repurchase of up to $150 million of our outstanding common stock or our Classclass A common stock prior to December 31, 2022 (the “2019 Repurchase Authorization”). The 2019 Repurchase Authorization superseded all prior repurchase authorizations. The 2019 Repurchase Authorization also prohibits the Company from purchasing shares directly from the Company’s officers, directors, or the Gray Television, Inc. Capital Accumulation Plan (the “401k Plan”).
On December 15, 2019, we entered into an Issuer Repurchase Plan (the “2019 IRP”), under Rules 10b-18 and 10b5-1 of the Securities Exchange Act of 1934. The purpose of the 2019 IRP is to facilitate the orderly repurchase of our common stock through the establishment of the parameters for repurchases of our shares. During 2020, we purchased 905,836 shares of our common stock at an average purchase price of $11.02 per share, excluding commissions, under the 2019 IRP, for a total cost of approximately $10 million, after which the 2019 IRP was terminated early in the second quarter of 2020.
Subsequent to the termination of the 2019 IRP we repurchased an additional 3,579,342 shares of our common stock, for a total cost of approximately $49 million at an average purchase price of $13.75 per share, excluding commissions. As of September 30, 2020, approximately $70 million was available to repurchase shares of our common stock and/or Class A common stock under the 2019 Repurchase Authorization.stock.
Under our various employee benefit plans, we may, at our discretion, issue authorized and unissued shares, or previously issued shares held in treasury, of our class A common stock or Class A common stock. As of September 30, 2021, we had reserved 3,209,452 shares and 1,103,015 shares of our common stock and class A common stock, respectively, for future issuance under various employee benefit plans. As of December 31, 2020, we had reserved 4,776,9484,006,948 shares and 1,336,440 shares of our common stock and Classclass A common stock, respectively, for future issuance under various employee benefit plans.
During the nine-months ended September 30, 2021, we have not repurchased any shares of our common stock or class A common stock under our share repurchase programs. As of September 30, 2021, approximately $204 million was available to repurchase shares of our common stock and/or class A common stock under these programs.
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7. | Retirement Plans |
The components of our net periodic pension benefit are included in miscellaneous (expense) income, net in our income statement.condensed consolidated statements of operations. During the nine-months ended September 30, 2020,2021, the amount recorded as a benefit was not material. During the nine-months ended September 30, 2020,2021, we contributed $3$4 million to this plan.
During the three and nine-month periodsperiod ended September 30, 2020,2021, we contributed $3$11 million and $10 million, respectively, in matching cash contributions, and shares of our common stock valued at approximately $7 million for our 2020 discretionary profit-sharing contributions, to ourthe 401(k) Plan. Duringplan. The discretionary profit-sharing contribution was recorded as an expense in 2020 and accrued as of December 31, 2020. Based upon our staffing and employee participation as of September 30, 2021, during the remainder of 2020,2021, we estimate that ourexpect to contribute approximately $2 million of matching cash contributions will be approximately $3 million to this plan, excluding discretionary profit-sharing contributions.plan. This estimate will increase upon the completion of the Meredith Transaction.
8. | Stock-based Compensation |
We recognize compensation expense for stock-based payment awards made to our employees, consultants and directors. Our current stock-based compensation plans include our 2017 Equity and Incentive Compensation Plan (the “2017 EICP”) and our Directors’ Restricted Stock Plan.. The following table provides our stock-based compensation expense and related income tax benefit for the three and nine-month periods ended September 30, 20202021 and 20192020 (in millions):
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
Stock-based compensation expense, gross | $ | 5 | $ | 5 | $ | 12 | $ | 10 | $ | 3 | $ | 5 | $ | 10 | $ | 12 | ||||||||||||||||
Forfeitures | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Income tax benefit at our statutory rate associated with share-based compensation | (1 | ) | (1 | ) | (3 | ) | (3 | ) | (1 | ) | (1 | ) | (3 | ) | (3 | ) | ||||||||||||||||
Stock-based compensation expense, net | $ | 4 | $ | 4 | $ | 9 | $ | 7 | $ | 2 | $ | 4 | $ | 7 | $ | 9 |
All shares of class A common stock and common stock underlying outstanding options, restricted stock units and performance awards are counted as issued at target levels under the 2017 EICP and the Directors’ Restricted Stock Plan for purposes of determining the number of shares available for future issuance.
During the nine-months ended September 30, 2021, we granted under the 2017 EICP:
● | 47,360 shares of restricted common stock with a grant date fair value of $21.96 to our non-employee directors that will vest on April 30, 2022; |
● | 96,355 shares of restricted Class A common stock with a grant date fair value per share of $17.20 to an employee, of which 32,118 shares will vest on each of January 31, 2022 and 2023 and 32,119 shares will vest on January 31, 2024; |
● | 96,355 shares of restricted Class A common stock with a grant date fair value per share of $17.20 to an employee, subject to the achievement of certain performance measures, which will vest on February 29,2024; |
● | 247,497 shares of restricted common stock with a grant date fair value per share of $18.21 to certain employees, of which 82,499 shares will vest on each of January 31, 2022, 2023 and 2024; |
● | 48,545 shares of restricted common stock with a grant date fair value per share of $18.21 to an employee, subject to the achievement of certain performance measures, which will vest on February 29,2024; |
● | restricted stock units representing 95,115 shares of our common stock, to certain employees, which will vest on March 1, 2022; and |
● | 40,715 vested shares of our Class A common stock with a grant date fair value per share of $19.87 to an employee, upon the achievement of certain performance measures. |
During the nine-months ended September 30, 2020, we granted under the 2017 EICP:
● | 78,722 shares of restricted common stock with a grant date fair value of $11.56 to our non-employee directors that |
● | 83,407 shares of restricted Class A common stock with a grant date fair value per share of $19.87 to an employee, of which 27,802 shares |
● | 83,407 shares of restricted Class A common stock with a grant date fair value per share of $19.87 to an employee, subject to the achievement of certain performance measures, which will vest on January 31, 2023; |
● | 207,787 shares of restricted common stock with a grant date fair value per share of $21.69 to certain employees, of which 69,262 shares vested on January 31, 2021, 69,262 shares will vest on |
● | 40,756 shares of restricted common stock with a grant date fair value per share of $21.69 to an employee, subject to the achievement of certain performance measures, which will vest on January 31, 2023; |
● | Restricted stock units representing 90,184 shares of our common stock, to certain employees, of which 60,052 shares |
● | Restricted stock units representing 3,000 shares of our common stock to an employee, |
● | 32,216 shares of restricted common stock with a grant date fair value per share of $15.52 to an employee that |
During the nine-months ended September 30, 2019, we granted under the 2017 EICP:
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A summary of restricted class A common stock, common stock and restricted stock units activity for the nine-month periods ended September 30, 20202021 and 20192020 is as follows:
Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2021 | September 30, 2020 | |||||||||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||||||||||
average | average | average | average | |||||||||||||||||||||||||||||
Grant Date | Grant Date | Grant Date | Grant Date | |||||||||||||||||||||||||||||
Number of | Fair Value | Number of | Fair Value | Number of | Fair Value | Number of | Fair Value | |||||||||||||||||||||||||
Shares | Per Share | Shares | Per Share | Shares | Per Share | Shares | Per Share | |||||||||||||||||||||||||
Restricted stock - class A common: | ||||||||||||||||||||||||||||||||
Outstanding - beginning of period | 449,284 | $ | 13.55 | 407,786 | $ | 11.82 | 480,042 | $ | 16.10 | 449,284 | $ | 13.55 | ||||||||||||||||||||
Granted(1) | 166,814 | $ | 19.87 | 199,810 | $ | 15.36 | 233,425 | $ | 17.67 | 166,814 | $ | 19.87 | ||||||||||||||||||||
Vested | (136,056 | ) | $ | 12.32 | (158,312 | ) | $ | 11.38 | (248,539 | ) | $ | 15.00 | (136,056 | ) | $ | 12.32 | ||||||||||||||||
Forfeited | 0 | $ | 0 | 0 | $ | 0 | ||||||||||||||||||||||||||
Outstanding - end of period | 480,042 | $ | 16.10 | 449,284 | $ | 13.55 | 464,928 | $ | 17.47 | 480,042 | $ | 16.10 | ||||||||||||||||||||
Restricted stock - common: | ||||||||||||||||||||||||||||||||
Outstanding - beginning of period | 977,547 | $ | 15.45 | 578,894 | $ | 13.14 | 917,533 | $ | 16.84 | 977,547 | $ | 15.45 | ||||||||||||||||||||
Granted | 359,481 | $ | 18.92 | 718,783 | $ | 16.08 | ||||||||||||||||||||||||||
Granted(1) | 343,402 | $ | 18.73 | 359,481 | $ | 18.92 | ||||||||||||||||||||||||||
Vested | (333,865 | ) | $ | 15.35 | 0 | $ | 0 | (613,179 | ) | $ | 15.48 | (333,865 | ) | $ | 15.35 | |||||||||||||||||
Forfeited | (85,630 | ) | $ | 15.53 | (352,810 | ) | $ | 12.98 | 0 | $ | 0 | (85,630 | ) | $ | 15.53 | |||||||||||||||||
Outstanding - end of period | 917,533 | $ | 16.84 | 944,867 | $ | 15.44 | 647,756 | $ | 19.13 | 917,533 | $ | 16.84 | ||||||||||||||||||||
Restricted stock units - common stock: | ||||||||||||||||||||||||||||||||
Outstanding - beginning of period | 398,000 | $ | 18.21 | 0 | $ | 0 | 90,184 | $ | 18.92 | 398,000 | $ | 18.21 | ||||||||||||||||||||
Granted | 93,184 | $ | 18.77 | 398,000 | $ | 18.21 | 95,115 | $ | 19.05 | 93,184 | $ | 18.77 | ||||||||||||||||||||
Vested | (374,500 | ) | $ | 18.18 | 0 | $ | 0 | (60,052 | ) | $ | 18.92 | (374,500 | ) | $ | 18.18 | |||||||||||||||||
Forfeited | (26,500 | ) | $ | 18.21 | 0 | $ | 0 | 0 | $ | 0 | (26,500 | ) | $ | 18.21 | ||||||||||||||||||
Outstanding - end of period | 90,184 | $ | 18.92 | 398,000 | $ | 18.21 | 125,247 | $ | 19.02 | 90,184 | $ | 18.92 |
(1)
| For awards subject to future performance conditions, amounts assume target performance. |
9. | Leases |
We determine if an arrangement is a lease at its inception. Operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments, because the implicit rate of the lease is generally not known. Right-of-use (“ROU”) assets related to our operating lease liabilities are measured at lease inceptioncommencement based on the initial measurement of the lease liability, plus any prepaid lease payments and less any lease incentives. Our lease terms that are used in determining our operating lease liabilities at lease inceptioncommencement may include options to extend or terminate the leases when it is reasonably certain that we will exercise such options. We amortize our ROU assets as operating lease expense generally on a straight-line basis over the lease term and classify both the lease amortization and imputed interest as operating expenses. We have lease agreements with lease and non-lease components, and in such cases, we generally account for the components separately with only the lease component included in the calculation of the right-of-useROU asset and lease liability.
We have operating leases that primarily relate to certain of our facilities, data centers and vehicles. As of September 30, 2020,2021, our operating leases substantially have remaining terms of one year to 99 years, some of which include options to extend and/or terminate the leases. We do not recognize lease assets and lease liabilities for any lease with an original lease term of less than one year.
Cash flow movements related to our lease activities are included in other assets and accounts payable and other liabilities as presented in net cash provided by operating activities in our condensed consolidated statement of cash flows for the nine-months ended September 30, 2020.2021.
As of September 30, 2020,2021, the weighted-average remaining term of our operating leases was approximately 10.510.25 years. The weighted-average discount rate used to calculate the values associated with our operating leases was 6.76%6.74%. The table below describes the nature of lease expense and classification of operating lease expense recognized in the three and nine-months ended September 30, 20202021 and 2019,2020, respectively (in millions):
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
September 30, 2020 | September 30, 2020 | September 30, | September 30, | |||||||||||||||||||||
Lease expense: | ||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
Lease expense | ||||||||||||||||||||||||
Operating lease expense | $ | 3 | $ | 9 | $ | 3 | $ | 3 | $ | 9 | $ | 9 | ||||||||||||
Short-term lease expense | 0 | 1 | 1 | 0 | 2 | 1 | ||||||||||||||||||
Total lease expense | $ | 3 | $ | 10 | $ | 4 | $ | 3 | $ | 11 | $ | 10 |
The maturities of operating lease liabilities as of September 30, 2020,2021, for the remainder of 20202021 and the succeeding years were as follows (in millions):
Year ending December 31, | Amount | Operating Leases | ||||||
2020 | $ | 3 | ||||||
2021 | 10 | |||||||
Remainder of 2021 | $ | 3 | ||||||
2022 | 9 | 11 | ||||||
2023 | 8 | 9 | ||||||
2024 | 7 | 9 | ||||||
2025 | 8 | |||||||
Thereafter | 48 | 43 | ||||||
Total lease payments | 85 | 83 | ||||||
Less: Imputed interest | (24 | ) | (24 | ) | ||||
Present value of lease liabilties | $ | 61 | ||||||
Present value of lease liabilities | $ | 59 |
10. Commitments and Contingencies Legal Proceedings and Claims. We are and expect to continue to be subject to legal actions, proceedings and claims that arise in the normal course of our business. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions, proceedings and claims will not materially affect our financial position, results of operations or cash flows, although legal proceedings are subject to inherent uncertainties, and unfavorable rulings or events could have a material adverse impact on our financial position, results of operations or cash flows. 11. Goodwill and Intangible Assets During the nine-months ended September 30, Net Balance at Acquisitions Net Balance at Net Balance at Acquisitions Net Balance at December 31, And September 30, December 31, And September 30, 2019 Adjustments, Net Impairments Amortization 2020 2020 Adjustments, Net Impairments Amortization 2021 Goodwill Broadcast licenses Definite lived intangible assets Finite-lived intangible assets Total intangible assets net of accumulated amortization A summary of the changes in our goodwill, on a gross basis, for the nine-months ended September 30, As of As of As of As of December 31, Net September 30, December 31, Net September 30, 2019 Additions Impairments 2020 2020 Additions Impairments 2021 Goodwill, gross Accumulated goodwill impairmant Accumulated goodwill impairment Goodwill, net As of September 30, As of September 30, 2020 As of December 31, 2019 As of September 30, 2021 As of December 31, 2020 Accumulated Accumulated Accumulated Accumulated Gross Amortization Net Gross Amortization Net Gross Amortization Net Gross Amortization Net Intangible assets not currently subject to amortization: Broadcast licenses Goodwill Intangible assets subject to amortization: Network affiliation agreements Other definite lived intangible assets Total intangibles Amortization expense for the nine-month periods ended September 30, 12. Income Taxes For the three and nine-month periods ended September 30, Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2020 2019 2020 2019 2021 2020 2021 2020 Income tax expense Effective income tax rate We estimate our differences between taxable income or loss and recorded income or loss on an annual basis. Our tax provision for each quarter is based upon these full year projections, which are revised each reporting period. These projections incorporate estimates of permanent differences between U.S. GAAP income or loss and taxable income or loss, state income taxes and adjustments to our liability for unrecognized tax benefits to adjust our statutory Federal income tax rate of 21% to our effective income tax rate. For the nine-month period ended September 30, 2021, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 52% as follows: state income taxes added 5%, permanent differences between our U.S. GAAP income and taxable income added 3% and divestiture of component 2 goodwill resulted in an increase of 23%. For the nine-month period ended September 30, 2020, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 26% as follows: state income taxes added 4% We have approximately On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020, and permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. 13. Segment information The Company operates in Production Production As of and for the Nine months ended September 30, 2020: Broadcast Companies Other Consolidated As of and for the nine-months ended September 30, 2021: Broadcasting Companies Other Consolidated Revenue (less agency commissions) Operating expenses before depreciation, amortization and loss on disposal of assets, net: Depreciation and amortization Loss on disposal of assets, net Operating expenses Operating income (loss) Interest expense Capital expenditures (excluding business combinations) Goodwill Total assets For the nine-months ended September 30, 2020: Revenue (less agency commissions) Operating expenses before depreciation, amortization and (gain) loss on disposal of assets, net: Depreciation and amortization (Gain) loss on disposal of assets, net Operating expenses Operating income Interest expense Capital expenditures (excluding business combinations) Goodwill Total Assets For the Nine months ended September 30, 2019: Revenue (less agency commissions) Operating expenses before depreciation, amortization and (gain) loss on disposal of assets, net: Depreciation and amortization (Gain) loss on disposal of assets, net Operating expenses Operating income Operating income (loss) Interest expense Capital expenditures (excluding business combinations) As of December 31, 2019: As of December 31, 2020: Goodwill Total Assets Total assets Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Overview Introduction. The following discussion and analysis of the financial condition and results of operations of Gray Television, Inc. and its consolidated subsidiaries (except as the context otherwise provides, “Gray,” the “Company,” “we,” “us” or “our”) is prepared from the perspective of the Company’s management, and should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere herein, as well as with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, Business Our revenues are derived primarily from broadcasting and internet advertising, retransmission consent fees and, to a lesser extent, other sources such as production of television and event programming, television commercials, tower rentals and management fees. For the nine-months ended September 30, 2021 and 2020, we generated revenue of $1.7 billion and $1.6 billion, respectively. Impact of the COVID-19 Global Pandemic and Related Government Restrictions on our Markets and Operations. The impact of the COVID-19 global pandemic and measures to prevent We have continued to actively monitor the global outbreak and spread of COVID-19 and continue to take steps to mitigate the potential risks to us posed by its spread and related circumstances and impacts. We are focused on navigating these Acquisition of Meredith. On May 3, 2021, we entered into a merger agreement, as amended on June 2, 2021, and In connection with, and The transaction is subject to Meredith shareholder approval customary closing conditions and regulatory approvals, including certain consents necessary to effectuate the spinoff of Meredith’s National Media Group immediately prior to the closing of our acquisition of Meredith. Acquisition of Studio Production Facilities. On April 7, 2021, we Please see Note 3. “Acquisitions and Divestitures” in our unaudited condensed consolidated financial Revenues, Operations, Cyclicality and Seasonality. Broadcast advertising is sold for placement generally preceding or following a television station’s network programming and within local and syndicated programming. Broadcast advertising is sold in time increments and is priced primarily on the basis of a program’s popularity among the specific audience an advertiser desires to reach. In addition, broadcast advertising rates are affected by the number of advertisers competing for the available time, the size and demographic makeup of the market served by the station and the availability of alternative advertising media in the market area. Broadcast advertising rates are generally the highest during the most desirable viewing hours, with corresponding reductions during other hours. The ratings of a local station affiliated with a major network can be affected by ratings of network programming. Most advertising contracts are short-term, and generally run only for a few weeks. We also sell internet advertising on our stations’ websites and mobile apps. These advertisements may be sold as banner advertisements, video advertisements and other types of advertisements or sponsorships. Our broadcast and internet advertising revenues are affected by several factors that we consider to be seasonal in nature. These factors include: ● Spending by political candidates, political parties and special interest groups increases during the even-numbered “on-year” of the two-year election cycle. This political spending typically is heaviest during the fourth quarter of such years; ● Broadcast advertising revenue is generally highest in the second and fourth quarters each year. This seasonality results partly from increases in advertising in the spring and in the period leading up to and including the holiday season; ● Local and national advertising revenue on our NBC-affiliated stations ● Because our stations and markets are not evenly divided among the Big Four broadcast networks, our local and national advertising revenue can fluctuate between years related to which network broadcasts the Super Bowl. Automotive advertisers have traditionally accounted for a significant portion of our revenue. During the nine-months ended September 30, Our primary broadcasting operating expenses are employee compensation, related benefits and programming costs. In addition, the broadcasting operations incur overhead expenses, such as maintenance, supplies, insurance, rent and utilities. A large portion of the operating expenses of our broadcasting operations is fixed. We continue to monitor our operating expenses and seek opportunities to reduce them where possible. Please see our “Results of Operations” and “Liquidity and Capital Resources” sections below for further discussion of our operating results. Revenue Set forth below are the principal types of revenue, less agency commissions, earned by us for the periods indicated and the percentage contribution of each type of revenue to our total revenue (dollars in millions): Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 2021 2020 2021 2020 Percent Percent Percent Percent Percent Percent Percent Percent Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total Revenue: Local (including internet/digital/mobile) National Political Retransmission consent Production companies Other Total Results of Operations Revenue. Total revenue Production company expenses. Production company operating expenses (before depreciation, amortization and gain or loss on disposal of assets), related to the production companies, were $13 million in the 2021 three-month period, compared to approximately $8 million in the 2020 Corporate and Administrative Expenses. Corporate and administrative expenses (before depreciation, amortization and gain or loss on disposal of assets) increased by Depreciation. Depreciation of property and equipment totaled $26 million and $27 million in the 2021 three-month period and Amortization. Amortization of intangible assets totaled $28 million and $26 million in the 2021 three-month period and Interest Expense. Interest expense Income Tax Expense. We recognized income tax expense of Revenue. Total revenue increased Production Company Expenses. Production company expenses (before depreciation, amortization and gain or loss Corporate and Administrative Expenses. Corporate and administrative expenses (before depreciation, amortization and gain or loss on disposal of assets) Depreciation. Depreciation of property and equipment totaled Amortization. Amortization of intangible assets totaled Interest Expense. Interest expense Income Tax Expense. We recognized income tax expense of Liquidity and Capital Resources General The following table presents data that we believe is helpful in evaluating our liquidity and capital resources (in millions): Nine Months Ended September 30, Nine Months Ended September 30, 2020 2019 2021 2020 Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities Net cash used in financing activities Net (decrease) increase in cash As of As of September 30, 2020 December 31, 2019 September 30, 2021 December 31, 2020 Cash Long-term debt, including current portion Series A perpetual preferred stock Borrowing availability under Revolving Credit Facility Series A Perpetual Preferred Stock Net Cash Provided By (Used In) Operating, Investing and Financing Activities Net cash provided by operating activities was $283 million in the 2021 nine-month period compared to $488 million in the 2020 nine-month Net cash used in investing activities was Net cash used in financing activities was approximately $70 million in the 2021 nine-month period compared to net cash used in financing activities of $104 million in the 2020 nine-month Liquidity Although our cash flows from operations are subject to a number of risks and uncertainties, including Capital Expenditures. In April 2017, the In connection with, and contingent upon the completion of the Meredith Transaction, we have agreed to complete certain financing transactions. Related to our Senior Credit Facility, we (1) agreed to incur a $1.5 billion incremental term loan under our senior credit facility, subject to market conditions at the time of financing and (2) agreed to amend and restate our existing revolving credit facility to increase our borrowing capacity under the facility from up to $300 million to up to $500 million, which will consist of (i) a $425 million five year revolving credit facility and (ii) a $75 million revolving credit facility with commitments expiring January 2, 2026. In addition, Gray Escrow II, Inc., a special purpose wholly-owned subsidiary, has agreed to issue $1.3 billion in aggregate principal amount of 5.375% senior unsecured notes due 2031 at par, which we intend to assume upon completion of the Meredith Transaction. The proceeds of the transcations mentioned above, after deducting transaction fees and estimated expenses, will be used to pay a portion of the consideration for the Meredith Transaction. The completion of the Meredith Transaction will materially affect our operations, liquidity and capital expenditures. In addition to the effects on our balance sheet from the financing transactions described above, we expect that our results of operations and cash flows will increase. Other We file a consolidated federal income tax return and such state and local tax returns as are required. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020, and permits NOL carryforwards and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. During 2020, we carried back certain NOLs resulting in a refund of $21 million. During the Off-Balance Sheet Arrangements. There have been no material changes with respect to our off-balance sheet arrangements from those presented in our 2020 Form 10-K. Critical The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments and estimations that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. We consider our accounting policies relating to intangible assets and income taxes to be critical policies that require judgments or estimations in their application where variances in those judgments or estimations could make a significant difference to future reported results. These critical accounting policies and estimates are more fully discussed in our Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements are all statements other than those of historical fact. When used in this Quarterly Report, the words “believes,” “expects,” “anticipates,” “estimates,” “will,” “may,” “should” and similar words and expressions are generally intended to identify forward-looking statements. Among other things, statements that describe our expectations regarding the evolving and uncertain nature of the COVID-19 pandemic and its impact on the Company, the media industry, and the economy in general, our results of operations, general and industry-specific economic conditions, future pension plan contributions, income tax payments, our ability to complete our pending acquisition of Meredith on the terms and within the timeframe, and on the financing terms, currently contemplated, any material regulatory or other unexpected requirements in connection therewith, or the inability to achieve expected synergies therefrom on a timely basis or at all, the expected impact of acquisitions, divestitures and capital expenditures are forward-looking statements. Readers of this Quarterly Report are cautioned that any forward-looking statements, including those regarding the intent, belief or current expectations of our management, are not guarantees of future performance, results or events and involve risks and uncertainties, and that actual results and events may differ materially from those contained in the forward-looking statements as a result of various factors including, but not limited to, those listed under the heading “Risk Factors” in our Item 3. Quantitative and Qualitative Disclosure About Market Risk We believe that the market risk of our financial instruments as of September 30, Item 4. Controls and Procedures As of the end of the period covered by this Quarterly Report, an evaluation was carried out under the supervision and with the participation of management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or furnish under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and to ensure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosures. No system of controls, no matter how well designed and implemented, can provide absolute assurance that the objectives of the system of controls are met and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Item 1A. Risk Factors In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that affect our business and financial results that are discussed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, Period Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (3) July 1, 2020 through July 31, 2020: August 1, 2020 through August 31, 2020: September 1, 2020 through September 30, 2020: Total Item 6. Exhibits The following exhibits are filed as part of this Quarterly Report: Exhibit Number Description of Document 31.1 31.2 32.1 32.2 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 The cover page from Gray Television, Inc.’s Quarterly Report on Form 10-Q for the fiscal period ended September 30, SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GRAY TELEVISION, INC. Date: November By: /s/ James C. Ryan James C. Ryan Executive Vice President and Chief Financial Officer 10. Commitments and ContingenciesOur strategy includesPending Acquisitions. Please refer to Note 3. “Acquisitions and Divestitures” and Note 4. “Long-Term Debt”, for a discussion of our commitments related to the pursuit of accretive acquisition and/or investment opportunities. Currently we have commitments to acquire television stations and to make investments in broadcasting, production, technology companies and other assets that total approximately $80 million. These transactions are expected to close in the fourth quarter of 2020 or early in 2021.pending Meredith Transaction.202311. Goodwill and Intangible Assets2020,2021, we completed the Alaska Transactions2021 Acquisitions and the Flint Divestiture that included the acquisition and divestiture of goodwill, broadcast licenses and definite-lived intangible assets. See Note 3 “Acquisitions”“Acquisitions and Divestitures” for more information regarding this transaction.these transactions. Also, during the nine-months ended September 30, 2020,2021, we completed the acquisition of other television station operations, including, in some cases, broadcast licenses that were not material. A summary of changes in our goodwill and other intangible assets, on a net basis, for the nine-months ended September 30, 20202021 is as follows (in millions): $ 1,446 $ 2 $ - $ - $ 1,448 $ 1,460 $ 173 $ - $ - $ 1,633 3,573 4 - - 3,577 3,579 205 - - 3,784 460 9 - (78 ) 391 395 93 - (81 ) 407 $ 5,479 $ 15 $ - $ (78 ) $ 5,416 $ 5,434 $ 471 $ - $ (81 ) $ 5,824 2020,2021, is as follows (in millions): $ 1,545 $ 2 $ 0 $ 1,547 $ 1,559 $ 173 $ 0 $ 1,732 (99 ) - - (99 ) (99 ) - - (99 ) $ 1,446 $ 2 $ 0 $ 1,448 $ 1,460 $ 173 $ 0 $ 1,633 20202021 and December 31, 2019,2020, our intangible assets and related accumulated amortization consisted of the following (in millions): $ 3,631 $ (54 ) $ 3,577 $ 3,627 $ (54 ) $ 3,573 $ 3,838 $ (54 ) $ 3,784 $ 3,633 $ (54 ) $ 3,579 1,448 0 1,448 1,446 0 1,446 1,633 0 1,633 1,460 0 1,460 $ 5,079 $ (54 ) $ 5,025 $ 5,073 $ (54 ) $ 5,019 $ 5,471 $ (54 ) $ 5,417 $ 5,093 $ (54 ) $ 5,039 $ 62 $ (25 ) $ 37 $ 56 $ (17 ) $ 39 $ 83 $ (38 ) $ 45 $ 67 $ (28 ) $ 39 618 (264 ) 354 615 (194 ) 421 717 (355 ) 362 644 (288 ) 356 $ 680 $ (289 ) $ 391 $ 671 $ (211 ) $ 460 $ 800 $ (393 ) $ 407 $ 711 $ (316 ) $ 395 $ 5,759 $ (343 ) $ 5,416 $ 5,744 $ (265 ) $ 5,479 $ 6,271 $ (447 ) $ 5,824 $ 5,804 $ (370 ) $ 5,434 20202021 and 20192020 was $78$81 million and $86$78 million, respectively. Based on the intangible assets subject to amortization as of September 30, 2020,2021, we expect that amortization expense for the remainder of 20202021 would be approximately $26$29 million, and, for the succeeding five years, amortization expense will be approximately as follows: 2021, $100 million; 2022, $96$112 million; 2023, $90$105 million; 2024, $25$40 million; 2025, $30 million; and 2025,2026, $15$28 million. If and when acquisitions and dispositions occur in the future, actual amounts may vary materially from these estimates.212412. Income Taxes20202021 and 2019,2020, our income tax expense and effective income tax rates were as follows (dollars in millions): $ 43 $ 23 $ 67 $ 44 $ 35 $ 43 $ 65 $ 67 26 % 28 % 26 % 34 % 194 % 26 % 52 % 26 % and, permanent differences between our U.S. GAAP income and taxable income added 1%. For the nine-month period ended September 30, 2019, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 34% as follows: state income taxes added 5%, permanent differences between our U.S. GAAP income and taxable income added 2% and divestiture of component 2 goodwill resulted in an increase of 6%.We made income tax payments (net of refunds) of approximately $50 million and $12 million duringDuring the nine-months ended September 30, 20202021, we made $129 million of federal and state income tax payments, net of refunds, including $72 million related to the Quincy Divestiture. During the remainder of 2019,2021, respectively.we anticipate making income tax payments (excluding pending refunds) of approximately $18 million, including $17 million related to the Flint Divestiture. $438$204 million of federal operating loss carryforwards, thatwhich expire during the years 2023 through 2037. We expect to have federal taxable income in the carryforward periods,periods. We therefore we believe that these federal operating loss carryforwards will be fully utilized. Additionally, we have an aggregate of approximately $677$567 million of various state operating loss carryforwards, of which we expect that approximately half will be utilized.We will continue to monitor and assess the impact the CARES ActDuring may have on our business and financial results. We do not2020, currently expect the CARES Act to havewe carried back certain NOLs resulting in a material impact on our annual estimated effective tax rate.refund of $21 million.222513. Segment information2two business segments: broadcasting and production companies. The broadcasting segment operates television stations located across 94 local markets in the United States.U.S. The production companies segment includes the production of television and event content. Costs identified as other are primarily corporate and administrative expenses. The following tables present certain financial information concerning the Company’s operating segments (in millions): $ 1,648 $ 44 $ 0 $ 1,692 1,099 39 75 1,213 146 9 2 157 46 0 0 46 1,291 48 77 1,416 $ 357 $ (4 ) $ (77 ) $ 276 $ 0 $ 0 $ 143 $ 143 $ 63 $ 88 $ 3 $ 154 $ 1,588 $ 45 $ 0 $ 1,633 $ 7,229 $ 134 $ 416 $ 7,779 $ 1,557 $ 32 $ 0 $ 1,589 $ 1,557 $ 32 $ 0 $ 1,589 985 32 47 1,064 985 32 47 1,064 136 9 2 147 136 9 2 147 (21 ) (2 ) 0 (23 ) (21 ) (2 ) 0 (23 ) 1,100 39 49 1,188 1,100 39 49 1,188 $ 457 $ (7 ) $ (49 ) $ 401 $ 0 $ 0 $ 143 $ 143 $ 69 $ 1 $ 0 $ 70 $ 1,408 $ 40 $ 0 $ 1,448 $ 6,508 $ 139 $ 577 $ 7,224 $ 1,481 $ 62 $ 0 $ 1,543 986 57 83 1,126 135 9 2 146 (27 ) 0 0 (27 ) 1,094 66 85 1,245 $ 387 $ (4 ) $ (85 ) $ 298 $ 457 $ (7 ) $ (49 ) $ 401 $ 0 $ 0 $ 173 $ 173 $ 0 $ 0 $ 143 $ 143 $ 69 $ 0 $ 4 $ 73 $ 69 $ 1 $ 0 $ 70 $ 1,405 $ 41 $ 0 $ 1,446 $ 1,419 $ 41 $ 0 $ 1,460 $ 6,530 $ 153 $ 289 $ 6,972 $ 6,631 $ 141 $ 871 $ 7,643 14. Subsequent EventsStock Repurchase Authorization. On November 4, 2020, the Board of Directors authorized the Company to repurchase up to an additional $150 million of outstanding common stock (GTN) and/or Class A common stock (GTN.A) through December 31, 2023. The Company has not yet repurchased any shares under this expanded authorization. This additional authorization increases the total capacity under Gray's share repurchase program to $220 million when combined with the approximately $70 million remaining under its previous authorization. Share repurchases would be implemented through purchases made from time to time in either the open market or private transactions in accordance with applicable securities law requirements, including Rule 10b5-1. The extent to which the we repurchase any of our shares, the number of shares and the timing of any repurchases will depend on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. We are not required to repurchase a minimum number of shares, and the repurchase authorizations may be modified, suspended or terminated at any time without prior notice.Issuance of and Redemption of Notes. On October 19, 2020, we issued $800 million of our 2030 Notes and used the net proceeds therefrom, after deducting transaction fees and estimated expenses, to redeem all of our outstanding 2024 Notes and to pay all fees and expenses in connection with the offering, including the redemption premium applicable to the 2024 Notes. We intend to use the remaining net proceeds for general corporate purposes, which could include the repayment of outstanding debt from time to time.The interest rate and yield on the 2030 Notes is 4.75%. The 2030 Notes rank equally with the 2027 Notes and the 2026 Notes and the 2030 Notes mature on October 15, 2030. Interest is payable semiannually, on April 15 and October 15 of each year.Lubbock Transactions. On October 18, 2020, Gray entered into agreements with Ramar Communications, Inc. (“Ramar”) and SagamoreHill through which Gray will acquire KLCW-TV (CW) and two low power stations in the Lubbock, Texas market (DMA 142), as well as certain non-license assets of Ramar’s KJTV-TV (FOX) and two additional low power stations, for a combined purchase price of $20 million. At the closing of these transactions, Gray will enter into a shared services agreement with SagamoreHill to provide news and back-office services to KJTV-TV and its associated low power stations. Subject to receipt of regulatory and other approvals, the parties anticipate closing these transactions in the coming months.Sioux Falls Transactions. On November 2, 2020, Gray entered into a new network affiliation agreement with the FOX Broadcasting Network for one of its television stations in the Sioux Falls, South Dakota television market (DMA 115) market that utilize certain non-license assets that Gray acquired at the same time from Independent Communications, Inc., the former FOX affiliate for the market. 2326Item 2. Management’s20192020 (the “2019“2020 Form 10-K”) filed with the SEC.Overview. Overview. We are a television broadcastbroadcasting company headquartered in Atlanta, Georgia, that is the largest owner of top-rated local television stations and digital assets in the U.S. We currently own and/or operateUnited States. Upon our anticipated acquisition of the television stations and leading digital properties in 94of Meredith, we will become the nation’s second largest television broadcaster, with television stations serving 113 markets that collectively reach approximately 24%36 percent of U.S.US television households. During calendar year 2019, our stations were ranked first in 69The portfolio will include 79 markets with the top-rated television station and 101 markets with the first and/or second in 87 markets, as calculated byhighest rated television station according to Comscore’s audience measurement service.data. We also own video program production, marketing, and digital businesses including Raycom Sports, Tupelo-Raycom,Tupelo Honey, and RTM Studios, the producer of PowerNation programs and content and is the majority owner of Swirl Films, which we refer to collectively as our “production companies.”theits spread of COVID-19 continue to affect our businesses in a number of ways. We have experienced a disruption in creation of content that we broadcast on our television stations and of events and programs we produce at our production companies, including the cancellation of certain sports events and the shutting down of production of certain television content. The extent to which the COVID-19 global pandemic continues to impactimpacts our business, financial condition, results of operations financial results, and liquiditycash flows will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the ultimate duration and scope of the COVID-19 pandemic,pandemic; the negative impact it has on global and regional economies and economic activity, changes in advertising customers and consumer behavior, impact of governmental regulations that have been or willmight be imposed in response to the pandemic,pandemic; its short and longer-term impact on the levels of consumer confidence; actions governments, businesses and individuals take in response to the pandemic; and how quickly economies recover after the COVID-19 global pandemic subsides. The COVID-19 global pandemic’s impact on the capital markets could impact our cost of borrowing.recent challenges presented by the COVID-19 global pandemic through protecting the safety of our employees, seeking to maintain revenues reduce expenses and delay capital expenditures.reducing expenses. There are certain limitations on our ability to mitigate the adverse financial impact of the pandemic, including the high fixed-cost nature of our businesses. The COVID-19 global pandemic, and the related economic disruptions and uncertainty also makes it more challenging for management to estimate future performance of our businesses, particularly over the near to medium term, and consequently the broader impact that COVID-19it could have on our business, financial condition, and results of operations.operations and cash flows. See “The novel coronavirus disease and its related diseases (“COVID-19”) global pandemic has had and is expected to continue to have an adverse impact on our business.”in Part II,I, Item 1A. Risk Factors of this Quarterly Report onour 2020 Form 10-Q.10-K.SinceIn March 2020, most of our employees have beenbegan working from home, with only certain essential employees working on site. For employees working on site, we have instituted social distancing protocols, increased the level of cleaning and sanitizing in those sites and undertaken other actions to make these sites safer. We have also substantially reduced employee travelrecently begun to only essential business needs.implement plans to reopen our offices through a hybrid format in which our employees work part of each week in our offices and part remotely. We are generally following the requirements and protocols published by the U.S. Centers for Disease Control, and the World Health Organization and state and local governments.governments and we continue to monitor the latest public health and government guidance related to COVID-19, including vaccine availability to our employees. We have recently begun to implement plans to re-open our offices and studios. Many of our employees have continued to work from home. As ofcannot predict when or how these policies will change in the date of this filing,future. Currently, we do not believe those employees who continue toour work from home haveprotocol has adversely impacted our internal controls, financial reporting systems or our operations.ImpactQuincy Transaction. On August 2, 2021, we completed the acquisition of Coronavirus Aid, Relief, all the equity interests of Quincy for an adjusted purchase price of $930 million, which amount includes an additional $5 million for working capital. Quincy owned and Economic Security Act.operated television stations in 16 markets. Also on August 2, 2021, and concurrently with the acquisition of Quincy, we completed the divestiture to Allen of television stations in seven markets previously owned by Quincy and located in our existing television markets, for an adjusted divestiture price of $398 million, which amount includes $18 million for working capital. The Coronavirus Aid, ReliefQuincy Divestiture resulted in a non-cash loss of $48 million. Economic Security Act (the “CARES Act”) was enactedOctober 6, 2021, in March 2020, in responsewhich we agreed to acquire all outstanding shares of Meredith, subject to and immediately after the spinoff of Meredith’s National Media Group to the COVID-19 pandemic.current Meredith shareholders. The CARES Actagreement was amended to revise the purchase consideration to $16.99 per share in cash, or $2.8 billion in total enterprise value and related rulesmodify certain terms of the agreement. The parties expect to close the transaction in the fourth quarter of 2021. At the closing, Gray will acquire Meredith’s remaining operating division, known as the Local Media Group, which owns 17 television stations in 12 local markets, adding 11 new markets to our operations. To facilitate regulatory approvals for the Meredith transaction, on September 23, 2021, we divested our existing television station WJRT (ABC) in the Flint-Saginaw, Michigan market, to Allen for an adjusted purchase price, including working capital of $72 million in cash.guidelines include several significant provisions, including delayingcontingent upon the completion of the Meredith Transaction, we have agreed to complete certain payroll tax payments, mandatory transition tax payments,financing transactions. Related to our Senior Credit Facility, we (1) agreed to incur a $1.5 billion incremental term loan under our senior credit facility, subject to market conditions at the time of financing and (2) agreed to amend and restate our existing revolving credit facility to increase our borrowing capacity under the facility from up to $300 million to up to $500 million, which will consist of (i) a $425 million five year revolving credit facility and (ii) a $75 million revolving credit facility with commitments expiring January 2, 2026. In addition, Gray Escrow II, Inc., a special purpose wholly-owned subsidiary, has agreed to issue $1.3 billion in aggregate principal amount of 5.375% senior unsecured notes due 2031 at par, which we intend to assume upon completion of the Meredith Transaction. The proceeds of the transcations mentioned above, after deducting transaction fees and estimated income tax payments thatexpenses, will be used to pay a portion of the consideration for the Meredith Transaction.are deferringacquired land in the Atlanta suburb of Doraville, Georgia for approximately $80 million of cash. We intend to use this property, in part, for future periods. We do not currently expectstudio production facilities. On September 13, 2021, we completed the CARES Act to have a material impact onThird Rail Acquisition for an adjusted purchase price of $27 million in cash. The transaction represents an initial step in the broader development of our planned studio production facilities.results, including on our annual estimated effective tax rate or on our liquidity. We will continue to monitor and assess the impact the CARES Act may have on our business and financial results.statements contained elsewhere herein for further discussion of these transactions.2428 increaseincreases in certain periods in even numbered years as a result of their broadcasts of the Olympic Games, which to some extent reduces the revenues earned by non-NBC-affiliated stations during those periods (as a result of the COVID-19 pandemic, the 2020 Olympic Games have been postponed until 2021);Games; and 20202021 and 2019,2020, we derived approximately 21%18% and 24%21%, respectively, of our total broadcastbroadcasting advertising revenue (excluding political advertising revenue) from customers in the automotive industry. Strong demand for our advertising inventory from political advertisers can require significant use of available inventory, which in turn can lower our advertising revenue from our non-political advertising revenue categories in the even numbered “on-year” of the two-year election cycle. These temporary declines are expected to reverse in the following “off-year” of the two-year election cycle.OurWhile our total revenues have increased in recent years as a result of our acquisitions, and improvements in general economic conditions. Nevertheless,our revenue remains under pressure from the impact on the advertising market as a result of the COVID-19 global pandemic and from the internet as a competitor for advertising spending. We have been taking steps to mitigate the impacts of COVID-19 and we continue to enhance and market our internet websites in an effort to generate additional revenue. Our aggregate internet revenue is derived from both advertising and sponsorship opportunities directly on our websites.2529 $ 188 31.1 % $ 218 42.2 % $ 549 34.6 % $ 655 42.4 % $ 232 39 % $ 188 31 % $ 657 39 % $ 549 34 % 49 8.1 % 56 10.8 % 136 8.6 % 162 10.5 % 60 10 % 49 8 % 174 10 % 136 9 % 128 21.2 % 22 4.3 % 185 11.6 % 30 1.9 % 9 2 % 128 21 % 24 1 % 185 12 % 217 35.9 % 196 37.9 % 650 40.9 % 601 39.0 % 266 44 % 217 36 % 755 45 % 650 41 % 11 1.8 % 16 3.1 % 32 2.0 % 62 4.0 % 20 3 % 11 2 % 44 3 % 32 2 % 11 1.9 % 9 1.7 % 37 2.3 % 33 2.2 % 14 2 % 11 2 % 38 2 % 37 2 % $ 604 100.0 % $ 517 100.0 % $ 1,589 100.0 % $ 1,543 100.0 % $ 601 100 % $ 604 100 % $ 1,692 100 % $ 1,589 100 % Three-MonthsThree-Months Ended September 30, 2021 (“the 2021 three-month period”) Compared to Three-Months Ended September 30, 2020 (“(“the 2020 three-month period”period”)Compared to Three-Months Ended September 30, 2019(“the 2019 three-month period”)increased $87decreased $3 million, or 17%, to $604$601 million in the 20202021 three-month period from the 20192020 three-month period. Total revenue increaseddecreased primarily due to a increasedecrease of $106$119 million in political advertising revenue as a result of 20202021 being the “on-year”“off-year” of the two-year election cycle, andlargely offset by an increaseincreases in retransmission consent revenue, local advertising revenue and national advertising revenue. RetransmissionIn addition, our broadcasting revenue benefited from our completion of the Quincy Transaction. Combined, local and national revenue increased by $55 million in the 2021 three-month period due to increasing post COVID-19 pandemic consumer demand; the broadcast of the Olympic Games, that contributed approximately $14 million; retransmission consent revenue increased $21$49 million due to increases in rates. Combined, local and national revenue decreased by $37 million in the 2020 three-month period andrates; production company revenue decreasedincreased by $5 million. We attribute the decreases primarily to the effects of the$9 million, reflecting increasing post COVID-19 pandemic that has affected our customers and our sports and event programming.demand for production services.BroadcastBroadcasting Expenses. BroadcastBroadcasting expenses (before depreciation, amortization and gain or loss on disposal of assets) increased $10$58 million, or 3%18%, to $326$384 million in the 20202021 three-month period from the 20192020 three-month period. The differenceincrease was the result of an increase inincreased retransmission expense, consistent with the increased retransmission consent revenue, partially offset by decreasesand increases in stationall operating expenses. Non-cash stock based compensation included inexpenses related to the Quincy Acquisition. We recorded broadcast expenses was less thannon-cash stock-based amortization expense of $1 million in each of the 2021 and 2020 three-month period, but was $2 million in the 2019 three-month period.periods.three-month period, compares to approximately $13 million in the 2019 three month period. The decreaseincrease was primarily due to the effects of theincreasing post COVID-19 pandemic.pandemic demand for production services.$1$17 million, or 7%113%, to $15$32 million. Non-compensation expense increased primarily as a result of professional fees related to acquisition activities. Professional fees related to all of our acquisition activities were approximately $1$11 million in the 20202021 three-month period. Compensation expense decreased $1increased $2 million primarily as a result of decreased incentive compensation costs. We recorded corporate non-cash stock-based amortization expense of $4 million and $3 million in each of the 2021 and 2020 and 2019 three-month periods, respectively.periods. $20 million in the 2020 three-month period, and the 2019 three-month period, respectively. Depreciation increased primarily due to the addition of depreciable assets acquired in the normal course of business. $29 million in the 2020 three-month period, and the 2019 three-month period, respectively. Amortization decreased primarily due to the definite-lived intangible assets becoming fully amortized.26GainLoss (Gain) on Disposals of Assets, Net. We reported gainsloss on disposals of assets of $51 million in the 2021 three-month period and a gain of $10 million in the 2020 three-month period. In the 2021 three-month period, we reported a non-cash loss of $48 million on the Quincy Divestiture transaction and $14a non-cash loss of $5 million inon the 2019 three-month period.Flint Divestiture. These gainslosses were primarilypartially offset by gains related to assets disposals from the FCC Repack process.process and in the normal course of business.decreased $12increased $3 million, or 21%7%, to $45$48 million for the 20202021 three-month period compared to the 20192020 three-month period. This decreaseincrease in interest expense is due to both a decreasean increase in principal, and interest rates.including a temporary draw on our Revolving Credit Facility. The average interest rate, excluding amortization of deferred financing costs, on our total outstanding debt balance was 4.4% and 5.4% during each of the 2021 and 2020 three-month period and 2019 three-month period, respectively.periods. Our average outstanding debt principal balance was $3.8$4.0 billion and $4.0$3.8 billion during the 20202021 and 20192020 three-month periods, respectively.$43$35 million and $23$43 million in the 20202021 and 20192020 three-month periods, respectively. Our effective income tax rates were 26%194% and 28%26% in the 20202021 and 20192020 three-month periods, respectively. We estimate our differences between taxable income or loss and recorded income or loss on an annual basis. Our tax provision for each interim period is based upon these full year projections that are revised each reporting period. These projections incorporate estimates of permanent differences between U.S. GAAP income or loss and taxable income or loss, state income taxes and adjustments to our liability for unrecognized tax benefits. For the 20202021 three-month period, these estimates increased our statutory Federal income tax rate of 21% to our effective income tax rate of 26%194% as follows: state income taxes added 4% and6%, permanent differences between our U.S. GAAP income and taxable income added 1%7% and divestiture of component two goodwill, related to the Quincy Divestiture, and the Flint Divestiture, resulted in an increase of 160%.Nine-MonthsNine-Months Ended September 30, 2021 (“the 2021 nine-month period”) Compared to Nine-Months Ended September 30, 2020 (“(“the 2020 nine-month period”period”)Compared to Nine-Months Ended September 30, 2019(“the 2019 nine-month period”)$46$103 million, or 3%6%, to $1.6$1.7 billion in the 20202021 nine-month period from the 20192020 nine-month period. Political advertising revenue increased by $155 million, resulting primarily from 2020 being the “on-year” of the two-year election cycle. Retransmission consent revenue increased by $49 million as a result of increased rates in 2020. Combined, local and national revenue decreasedincreased by $132$146 million, to $831 million in the 20202021 nine-month period and production company revenue decreasedincreased by $30$12 million. We attribute these decreasesincreases primarily to the effectsreturn of customer demand in the COVID-19post-COVID-19 pandemic period, which hashad affected our customers and our sports and event programming. Retransmission consent revenue increased by $105 million as a result of increased rates in 2021. Political advertising revenue decreased by $161 million, resulting primarily from 2021 being the “off-year” of the two-year election cycle. Local and national revenue also increased due to the broadcast of the Olympic Games, that contributed approximately $14 million, and the broadcast of the 2021 Super Bowl on our CBS-affiliated stations was approximately $6 million, compared to $3 million that we earned from the broadcastbroadcasting of the 2020 Super Bowl on our FOX-affiliated stations was approximately $3 million, compared to $5 million that we earned from the broadcast of the 2019 Super Bowl on our CBS-affiliated stations.BroadcastBroadcasting Expenses. BroadcastBroadcasting expenses (before depreciation, amortization and gain or loss on disposal of assets) decreased $1increased $114 million, to $985 million.$1.1 billion. Compensation expenses decreasedincreased by approximately $14$17 million in the 20202021 nine-month period.period as a result of incentive compensation costs and the addition of personnel related to the Quincy Acquisition. Non-payroll broadcast operating expenses increased by approximately $13$97 million which included retransmission expense that increased by $57$73 million in the 20202021 nine-month period consistent with the increased retransmission consent revenue. Transaction relatedProfessional service expenses decreasedincreased by $38$18 million in the 20202021 nine-month period comparedrelated to the transaction related expenses incurred in 2019 nine-month period.our acquisition activities. We recorded broadcastbroadcasting non-cash stock-based amortization expense of $4$2 million and $3$4 million in the 20202021 and 20192020 nine-month periods, respectively. (gain) on disposal of assets) decreasedincreased by approximately $25$7 million in the 20202021 nine-month period to $32$39 million, compared to $57 million in the 2019 nine-month period. Compensation expenses decreased by $3 million, and non-compensation expenses decreased by $22$32 million in the 2020 nine-month period. These decreases were primarilyThe increase was consistent with increased revenue due to the effects of theincreasing post COVID-19 pandemic.pandemic demand for production services.decreasedincreased by $36$28 million, or 43%60%, to $47$75 million in the 20202021 nine-month period compared to the 20192020 nine-month period. These decreasesincreases were the result of a decrease of $34$19 million of transaction related expenses incurredand increases in 2019 that did not re-occur in the current year.incentive compensation. We recorded corporate non-cash stock-based amortization expense of $8$9 million and $7$8 million in the 20202021 and 20192020 nine-month periods, respectively.$69$76 million and $60$69 million in the 20202021 nine-month period and the 20192020 nine-month period, respectively. Depreciation increased primarily due to business acquisitions and to the addition of depreciable assets acquired in the normal course of business.2731$78$81 million and $86$78 million in the 20202021 nine-month period and the 20192020 nine-month period, respectively. Amortization expense decreasedincreased primarily due to finite-lived intangible assets becoming fully amortized.business acquisitions.GainLoss (Gain) on Disposals of Assets, Net. We reported gainsa loss on disposals of assets of $46 million in the 2021 nine-month period and a gain on disposals of assets of $23 million in the 2020 nine-month periodperiod. We reported a non-cash loss of $48 million on the Quincy Divestiture and $27a non-cash loss of $5 million on the Flint Divestiture in the 20192021 nine-month period. These gainslosses were primarilypartially offset by gains related to assets disposals from the FCC Repack process.process and in the normal course of business.decreased $30 million, or 17%, towas $143 million forin each of the 2021 and 2020 nine-month period compared to the 2019 nine-month period.periods. This decrease was attributable to both a decreasean increase in loan principal andoffset by decreasing interest rates.Therates. The average interest rate, excluding amortization of deferred financing costs, on our total outstanding debt balance was 4.7%4.4% and 5.5%4.7% during the 20202021 and 20192020 nine-month periods, respectively. Our average outstanding debt balance was $3.8$4.1 billion and $4.0$3.8 billion during the 20202021 and 20192020 nine-month periods, respectively.$67$65 million and $44$67 million in the 20202021 and 20192020 nine-month periods, respectively. Our effective income tax rates were 26%52% and 34%26% in the 20202021 and 20192020 nine-month periods, respectively. We estimate our differences between taxable income or loss and recorded income or loss on an annual basis. Our tax provision for each interim period is based upon these full year projections that are revised each reporting period. These projections incorporate estimates of permanent differences between U.S. GAAP income or loss and taxable income or loss, state income taxes and adjustments to our liability for unrecognized tax benefits. For the 20202021 nine-month period, these estimates increased our statutory Federalfederal income tax rate of 21% to our effective income tax rate of 26%52% as follows: state income taxes added 4% and5%, permanent differences between our U.S. GAAP income and taxable income added 1%3% and divestiture of component two goodwill in the Quincy Divestiture and the Flint Divestiture resulted in an increase of 23%. $ 488 $ 255 $ 283 $ 488 (129 ) (2,646 ) (664 ) (129 ) (104 ) 1,298 (70 ) (104 ) $ 255 $ (1,093 ) $ (451 ) $ 255 $ 467 $ 212 $ 322 $ 773 $ 3,706 $ 3,697 $ 3,981 $ 3,974 $ 650 $ 650 $ 200 $ 200 $ 299 $ 200 $ 650 $ 650 period compared to $255period. The decrease of $205 million in the 2019 nine-month period. The increase of $233 million in the 20202021 nine-month period was the result of a $101$125 million increasedecrease in net income, offset by a $29 millionprimarily due to an increase in net non-cash expenses, primarily depreciationloss on disposal of fixed assets and amortization of definite-lived intangible assets.a decrease in political advertising revenue. Approximately $103$82 million of cash was providedused by changes in net working capital.$129$664 million in the 20202021 nine-month period compared to net cash used in investing activities of $2.6 billion$129 million for the 20192020 nine-month period. The decreaseincrease in the amount used was largely due to theour acquisition and divestiture activities, net of divestitures in the 20192021 nine-month period, that did not re-occur incompared to the 2020 nine-month period.28period compared to netperiod. The primary reasons for the decrease in cash provided by financing activities of $1.3 billionused in the 20192021 nine-month period. We used approximately $39 millionperiod, were the use of cash to pay dividends to holderson our two classes of common stock in the 2021 nine-month period. In the 2020 nine month period, we did not pay dividends on either of our preferred stock andtwo classes of common stock. In the 2020 nine-month period, we used approximately $59 million to repurchase shares of our common stock on the open market inmarket. In the 2020 nine-month period. Cash provided by financing activities in the 20192021 nine-month period, was primarily due to the borrowings underwe did not repurchase any shares of our 2019 Term Loan to finance our acquisition activities in the 2019 nine-month period.common stock.On October 19, 2020, we issued $800 millionBased on our debt outstanding as of 4.750% 2030 Notes. We used the net proceeds therefrom, after deducting transaction fees and estimated expenses, to redeem all of our outstanding 2024 Notes and to pay all fees and expenses in connection with the offering, including the redemption premium applicable to the 2024 Notes. We intend to use the remaining net proceeds for general corporate purposes, which could include the repayment of outstanding debt from time to time. Currently,September 30, 2021, we estimate that we will make approximately $167$178 million in debt interest payments over the twelve months immediately following September 30, 2020.2021. This estimate will increase significantly upon the completion of our pending acquisition of Meredith.the recent COVID-19 pandemic and related economic effects,our pending acquisition of Meredith, we anticipate that our cash on hand, future cash expected to be generated from operations, borrowings from time to time under the 2019 Senior Credit Facility (or any such other credit facility as may be in place at the appropriate time) and, potentially, external equity or debt financing, will be sufficient to fund any debt service obligations, estimated capital expenditures and acquisition-related obligations. Any potential equity or debt financing would depend upon, among other things, the costs and availability of such financing at the appropriate time. We also believe that our future cash expected to be generated from operations and borrowing availability under the 2019 Senior Credit Facility (or any such other credit facility) will be sufficient to fund our future capital expenditures and long-term debt service obligations until at least February 7, 2024, which is the maturity date of the 2017 Term Loan under the 2019 Senior Credit Facility.Capital ExpendituresDebt. As of September 30, 2021, long-term debt consisted of obligations under our 2019 Senior Credit Facility, our $700 million in aggregate principal amount of senior notes due 2026, our $750 million in aggregate principal amount of senior notes due 2027 and our $800 million in aggregate principal amount of senior notes due 2030. As of September 30, 2021, the 2019 Senior Credit Facility provided total commitments of $2.1 billion, consisting of a $595 million term loan facility, a $1.2 billion term loan facility and $299 million available under our revolving credit facility. We were in compliance with the covenants in these debt agreements at September 30, 2021. As described above, we have incurred approximately $2.8 billion of new debt obligations in anticipation of completing the Meredith Transaction. We currently expect that the Meredith Transaction will be completed in the fourth quarter of 2021.FCCFederal Communications Commission (“FCC”) began the process of requiring certain television stations to change channels and/or modify their transmission facilities (“Repack”). Capital expenditures, including Repack, for the 20202021 and 20192020 nine-month periods were $70$154 million and $73$70 million, respectively. Excluding Repack, our capital expenditures were $148 million (including approximately $91 million for the Doraville land purchase) and $51 million for the 2021 and $38 million,2020 nine-month periods, respectively. Our capitalized Repack costsassociated reimbursements for the 20202021 and 20192020 nine-month periods were $10 million and $19 million for the 2021 and $34 million,2020 nine-month periods, respectively. As of September 30, 2020,2021, the amount requested from the FCC for Repack, but not yet received, was approximately $6$5 million. Excluding Repack, we expect that our capital expenditures will berange between approximately $24$185 million to $29$190 million during full-year 2021. The full-year 2021 capital expenditure estimates excluding Repack include an estimate of $110 million for the remainderDoraville land purchase project and estimates of 2020.$75 million to $80 million for routine capital expenditures. In addition, capital expenditures for Repack during the remainder of 2020full-year 2021 are expected to range betweenbe approximately $12 million to $19$3 million and we anticipate being reimbursed for the majority of these Repack costs. However, reimbursementReimbursement, however, may be received in periods subsequent to those in which they were expended.OtherOur strategy includes the pursuitPending Acquisition of accretive acquisition and/or investment opportunities. CurrentlyMeredith. On May 3, 2021, we have commitmentsentered into an agreement to acquire television stationsall outstanding shares of Meredith, subject to and immediately after the spinoff of Meredith’s National Media Group to make investmentsthe current Meredith shareholders. The agreement was amended on June 2, 2021 and October 6, 2021 to revise the purchase consideration to $16.99 per share in broadcasting, production, technology companies and other assets thatcash, or $2.8 billion in total approximately $80 million. These transactions are expectedenterprise value. The parties expect to close the transaction in the fourth quarter of 2020 or early2021. At the closing, Gray will acquire Meredith’s remaining operating division, known as the Local Media Group, which owns 17 television stations in 2021.12 local markets, adding 11 new markets to our operations. To facilitate regulatory approvals for the Meredith Transaction, on September 23, 2021, we divested our existing television station WJRT (ABC) in the Flint-Saginaw, Michigan market, to Allen for an adjusted purchase price of $72 million in cash, before taxes.WeDuring the 2021 nine-month period, we made $129 million of federal or state income tax payments, (netincluding $72 million relating to Quincy Divestiture. During the remainder of refunds) of approximately $50 million and $12 million in the 2020 and 2019 nine-month periods, respectively. We2021, we anticipate making income tax payments (net of refunds) of approximately $7$18 million, duringincluding $17 million relating to the remainderFlint Divestiture. As of 2020.29WeSeptember 30, 2021, we have approximately $438$204 million inof federal operating loss carryforwards, thatwhich expire during the years 2023 through 2037. We expect to have federal taxable income in the carryforward periods,periods. We therefore we believe that these federal operating loss carryforwards will be fully utilized. Additionally, we have an aggregate of approximately $677$567 million of various state operating loss carryforwards, of which we expect that approximately half million will be utilized.20192021 nine-month period, we contributed $3$4 million to our defined benefit pension plan.20192020 Form 10-K.20192020 Form 10-K, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and as may be described in subsequently filed quarterly reports on Form 10-Q, as well as the other factors described from time to time in our filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update such forward-looking statements to reflect subsequent events or circumstances.Quantitative and Qualitative Disclosure About Market Risk20202021 has not materially changed since December 31, 2019.2020. Our market risk profile as ofon December 31, 20192020 is disclosed in our 20192020 Form 10-K.Controls and Procedures30During the nine-month period ended September 30, 2020, the effects of the COVID-19 pandemic have caused us to implement changes in our working environment and possibly our internal controls over financial reporting. We are evaluating the impact of these disruptions and are evaluating the impact on our controls.PARTPART II.OTHER INFORMATIONRisk Factors2019 and Part II, Item 1A, of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “First Quarter 2020 10-Q”).2020. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. There have been no material changes to the Company’ssuch risk factors from those disclosed in the 2019 10-K and the First Quarter 2020 10-Q.Item 2. Unregistered Sales of Equity Securities and Use of ProceedsOn November 5, 2019, our Board of Directors authorized the repurchase of up to $150 million of our outstanding common stock and/or our Class A common stock prior to December 31, 2022 (the “2019 Repurchase Authorization”). The 2019 Repurchase Authorization superseded all prior repurchase authorizations. The 2019 Repurchase Authorization prohibits the Company from purchasing shares directly from the Company’s officers, directors, or the Gray Television, Inc. Capital Accumulation Plan (the “401k Plan”).On December 15, 2019, we entered into an Issuer Repurchase Plan (the “2019 IRP”), under Rules 10b-18 and 10b5-1 of the Exchange Act. The 2019 IRP facilitated the orderly repurchase of our common stock through the establishment of the parameters for repurchases of our shares. During the second quarter of 2020, we terminated the 2019 IRP. Later in the second quarter of 2020, we repurchased additional shares of our common stock on the open market under the 2019 Repurchase Authorization.The extent to which the Company repurchases any of its shares, the number of shares and the timing of any repurchases will depend on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. The Company is not required to repurchase a minimum number of shares, and the repurchase authorizations may be modified, suspended or terminated at any time without prior notice.factors.31The following table summarizes repurchases of our common stock in the three-months ended September 30, 2020, all of which were pursuant to the 2019 Repurchase Authorization: - $ 0.00 - $ 79,957,722 649,000 $ 15.64 649,000 $ 69,805,909 - $ 0.00 - $ 69,805,909 649,000 $ 15.64 649,000 (1)All shares purchased were shares of common stock.(2)Amount excludes brokerage commissions.(3)The amounts presented at each respective month-end include the remaining dollar value available to purchase common stock and/or our Class A common stock under the 2019 Repurchase Authorization.32Exhibits 4.12.1 4.2 20202021 has been formatted in Inline XBRL.33(Registrant)(Registrant) 5, 20204, 20213437