# Gray Media, Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Gray Media, Inc](/companies/gtn.md) (CIK 43196)
- Form: 10-Q
- Filed: 2024-11-08
- Accepted by EDGAR: Nov 8, 2024, 17:34 ET
- Period: 2024-09-30
- Accession: 0001437749-24-034144
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/43196/000143774924034144/gtn20240930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/43196/000143774924034144/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $950.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $2.60bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $250.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $526.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $32.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $70.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $96.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $206.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.86 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.74 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.87 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.76 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 97,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 96,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $383.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $103.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $24.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-09-30 | $69.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $576.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $10.63bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $508.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $7.85bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $5.87bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $23.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $2.13bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,451 characters.

### 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 Media,” “Gray,” the “Company,” “we,” “us” or “our”) 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, 2023 (the “2023 Form 10-K”) filed with the SEC.

*Business Overview*. We are a multimedia company headquartered in Atlanta, Georgia. We are the nation’s largest owner of top-rated local television stations and digital assets serving 113 television markets that collectively reach approximately 36 percent of US television households. The portfolio includes 77 markets with the top-rated television station and 100 markets with the first and/or second highest rated television station, as well as the largest Telemundo Affiliate group with 43 markets totaling nearly 1.5 million Hispanic TV Households. We also own Gray Digital Media, a full-service digital agency offering national and local clients digital marketing strategies with the most advanced digital products and services. Our additional media properties include video production companies Raycom Sports, Tupelo Media Group, and PowerNation Studios, and studio production facilities Assembly Atlanta and Third Rail Studios. Gray also owns a majority interest in Swirl Films.

Our operating 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, 2024 and 2023, we generated revenue of $2.6 billion and $2.4 billion, respectively.

*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;
- Core advertising revenue on our NBC-affiliated stations increases in certain years as a result of broadcasts of the Olympic Games; and
- 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.

We derived a material portion of our non-political broadcast advertising revenue from advertisers in a limited number of industries, particularly the services sector, comprising financial, legal and medical advertisers, and the automotive industry. The services sector has become an increasingly important source of advertising revenue over the past few years. During the nine-months ended September 30, 2024 and 2023, approximately 24% and 26%, respectively, of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to the services sector. During the nine-months ended September 30, 2024 and 2023 approximately 19% and 20%, respectively, of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to automotive customers. Revenue from these industries may represent a lower percentage of total revenue in even-numbered years due to, among other things, the decreased availability of advertising time, as a result of such years being the “on-year” of the two-year election cycle.

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.

*2024 Refinancing Activities*. During 2024, we have undertaken several steps to implement our strategy to reduce our debt and extend the maturity of portions of our debt obligations that were scheduled to mature in the near future. Collectively, these actions are intended to resolve concerns over upcoming maturities, and to take advantage of other opportunities in the markets. Please refer to Note 4. “Long-Term Debt” for further information. During the nine-months ended September 30, 2024, we have:

- Amended our Senior Credit Facility to:
- Increase lender commitments under our Revolving Credit Facility to $680 million and extend the maturity date to December 31, 2027;
- Fully repay the $1.15 billion 2019 Term Loan that was scheduled to mature on January 2, 2026;
- Issue the $500 million 2024 Term Loan that will mature on June 4, 2029;
- Pre-paid through a tender offer, $690 million of the $700 million in outstanding 2026 Notes that was scheduled to mature on July 15, 2026; and
- Issued $1.25 billion of our 2029 Notes, that are secured pari passu with our Senior Credit Facility and that will mature on July 15, 2029.

In addition, during 2024 we used $72 million of cash to repurchase and retire $79 million of our outstanding 2027 Notes on the open market and we have used $14 million of cash to repurchase and retire $15 million of our outstanding 2021 Term Loans on the open market.

We project, including actions taken to date, a reduction of our Adjusted Total Indebtedness (also referred to as “Net Debt”) during the full-year 2024 of $500 million.

*Cost Containment Initiatives*. Starting in August 2024, we began identifying and implementing various measures throughout the company that we expect will further reduce operating expenses by at least $60 million on an annualized basis. As part of our routine budgeting process, we are carefully evaluating our capital expenditure needs for 2025.

We have taken several steps to reduce personnel expenses in 2025. These steps include streamlining workflows at our television stations and other business units, eliminating over 150 unfilled positions for which we were recruiting, eliminating certain positions which will not be filled following expected normal attrition throughout the second half of this year, and, for the first time in many years, eliminating certain positions across our television stations and certain business units. Importantly, despite these staffing changes, we will continue to employ journalists and meteorologists and continue to produce local newscasts in all of our existing local news markets, including small markets.

As a result of, and to account properly for, the costs to achieve these and certain additional cost containment measures, we currently anticipate recording a one-time charge of approximately $2 million in the fourth quarter of 2024.

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):

| Revenue: | Three Months Ended September 30, 2024 Amount | Percent of Total | 2023 Amount | Percent of Total | Nine Months Ended September 30, 2024 Amount | Percent of Total | 2023 Amount | Percent of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Core advertising | $365 | 38% | $363 | 45% | $1,110 | 43% | $1,099 | 45% |
| Political | 173 | 18% | 26 | 3% | 247 | 10% | 46 | 2% |
| Retransmission consent | 369 | 39% | 378 | 47% | 1,121 | 43% | 1,167 | 48% |
| Production companies | 26 | 3% | 20 | 3% | 68 | 3% | 54 | 3% |
| Other | 17 | 2% | 16 | 2% | 53 | 1% | 51 | 2% |
| Total | $950 | 100% | $803 | 100% | $2,599 | 100% | $2,417 | 100% |

27

### Results of Operations

***Three-Months Ended September 30, 2024 (“the 2024 three-month period”) Compared to Three-Months Ended September 30, 2023 (“the 2023 three-month period”)***

*Revenue.* Total revenue increased $147 million, or 18% in the 2024 three-month period. During the 2024 three-month period:

- Core advertising revenue increased by $2 million or 1%, due in part to $20 million of advertising revenue on our 53 NBC channels from the broadcast of the 2024 Olympic Games;
- Consistent with 2024 being the “on-year” of the two-year election cycle, political advertising revenue increased by $147 million, or 565%;
- Retransmission consent revenue decreased by $9 million or 2%, due to a decrease in subscribers, offset, in part, by an increase in rates; and
- Production company revenue increased by $6 million, or 30%, in the 2024 three-month period due to the start-up of our operations at Assembly Atlanta.

*Broadcasting Expenses*. Broadcasting expenses (before depreciation, amortization and gain or loss on disposal of assets) increased $14 million, or 3%, to $571 million in the 2024 three-month period. During the 2024 three-month period:

- Broadcasting payroll expenses increased by $12 million as a result of routine increases in compensation and the filling of vacant positions.
- Broadcasting non-payroll expenses increased by $1 million due to a combination of factors, none of which were individually significant.
- Broadcasting non-cash stock-based compensation expense was approximately $1 million in each of the 2024 and 2023 three-month periods.

*Production Company Expenses*. Production company operating expenses (before depreciation, amortization and gain or loss on disposal of assets) increased $4 million or 22% in the 2024 three-month period compared to the 2023 three-month period due primarily to increases in utilities, maintenance and property taxes at Assembly Atlanta is operational.

*Corporate and Administrative Expenses*. Corporate and administrative expenses (before depreciation, amortization and gain or loss on disposal of assets) increased by $1 million, or 4%, to $24 million. During the 2024 three-month period compensation expense increased by $2 million and professional services decreased by $1 million. Non-cash stock-based compensation expenses were $4 million in each of the 2024 and 2023 three-month periods.

*Depreciation.* Depreciation of property and equipment totaled $36 million in each of the 2024 and 2023 three-month periods.

*Amortization*. Amortization of intangible assets totaled $31 million and $48 million in the 2024 three-month period and the 2023 three-month period, respectively. The decrease in amortization expense was the result of finite-lived intangible assets becoming fully amortized and the impairment of certain finite-lived intangible assets in 2023.

*Impairment of Goodwill and Other Intangible Assets*. During the 2023 three-month period, we recognized a loss of $43 million for impairment of goodwill and other intangible assets related to the bankruptcy of Diamond Sports Group, LLC (“Diamond”)

*Loss (Gain) on Disposal of Assets, Net*. Loss on disposal of assets was $16 million in the 2024 three-month period primarily resulting from the acquisition of a construction permit to build Television station KCBU in exchange for the divestiture of television stations KCWY and KGWN that resulted in a loss of $14 million. In the 2023 three-month period, we reported a gain of $6 million.

*Miscellaneous Income (Expense), Net*. Miscellaneous income, net totaled $2 million in the 2024 three-month period and miscellaneous expense, net totaled $10 million in the 2023 three-month period, primarily due the write-off of an investment in the 2023 three-month period.

*Interest Expense*. Interest expense increased $19 million, or 17%, to $130 million for the 2024 three-month period compared to the 2023 three-month period. This increase was primarily attributable to increases in interest rates on our floating rate Senior Credit Agreement to 8.9% in the 2024 three-month period compared to 8.1% in the 2023 three-month period. Our average outstanding total long-term debt balance was $6.1 billion and $6.3 billion during the 2024 and 2023 three-month periods, respectively. Interest expense in the 2024 and 2023 three-month periods also included $3 million in each period, related to the non-cash amortization of fees for our interest rate cap agreement. Interest expense in each of the 2024 and 2023 three-month periods included $5 million, related to the amount outstanding under the Securitization Facility representing the amount outstanding under the facility at the one-month SOFR rate plus 1%.

*Gain (Loss) from Early Extinguishment of Debt.* During the 2024 three-month period, we have recorded a gain of $6 million primarily as a result of purchases of our 2027 Notes and 2021 Term Loans on the open market at a discount to their face value.

*Income Tax Expense.* We recognized income tax expense of $32 million and $3 million in the 2024 and 2023 three-month periods, respectively. Our effective income tax rates were 25% and (8%) in the 2024 and 2023 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 2024 three-month period, these estimates increased our statutory federal income tax rate of 21% to our effective income tax rate of 25% as follows: state income taxes added 5%, permanent differences between our U.S. GAAP income and taxable income added 1% and changes to our reserve accounts reduced our rate by 2%.

***Nine-Months Ended September 30, 2024 (“the 2024 nine-month period”) Compared to Nine-Months Ended September 30, 2023 (“the 2023 nine-month period”)***

*Revenue.* Total revenue increased $182 million, or 8%, in the 2024 nine-month period from the 2023 nine-month period. During the 2024 nine-month period:

- Core advertising revenue increased by $11 million or 1%, due in part to advertising revenue of $18 million from the broadcast of the Super Bowl on our 54 CBS channels in the 2024 nine-month period, compared to $6 million of revenue relating to the broadcast of the Super Bowl on our 27 FOX channels during the 2023 nine-month period, and $20 million of advertising revenue on our 53 NBC channels from the broadcast of the 2024 Olympic Games;
- Consistent with 2024 being the “on-year” of the two-year election cycle, political advertising revenue increased by $201 million, or 437%;
- Retransmission consent revenue decreased by $46 million or 4%, due to a decrease in subscribers, offset, in part, by an increase in rates; and
- Production company revenue increased by $14 million, or 26%, in the 2024 nine-month period due to the start-up of our operations at Assembly Atlanta.

*Broadcasting Expenses*. Broadcasting expenses (before depreciation, amortization and gain or loss on disposal of assets) increased $55 million or 3%, to $1.7 billion. During the 2024 nine-month period:

- Broadcasting payroll expenses increased by $47 million as a result of routine increases in compensation, accruals for incentive compensation and the filling of vacant positions.
- Broadcasting non-payroll expenses increased by $8 million primarily due to an increase in sports programming expenses, partially offset by reductions in retransmission expense.
- Broadcast non-cash stock-based compensation expense was $4 million in each of the 2024 and 2023 nine-month periods.

*Production Company Expenses*. Production company expenses (before depreciation, amortization, impairment and gain or loss on disposal of assets) decreased by approximately $31 million in the 2024 nine-month period to $57 million, compared to $88 million in the 2023 nine-month period. Production company operating expenses in the 2023 nine-month period included a $17 million allowance for credit losses related to the bankruptcy of Diamond, a counterparty in contracts with us and $18 million to settle litigation related to Assembly Atlanta.

*Corporate and Administrative Expenses*. Corporate and administrative expenses (before depreciation, amortization and gain or loss on disposal of assets) increased by $1 million, to $80 million in the 2024 nine-month period compared to the 2023 nine-month period. Non-cash stock-based compensation expenses increased to $13 million in the 2024 nine-month period compared to $11 million in the 2023 nine-month period.

*Depreciation.* Depreciation of property and equipment totaled $108 million and $106 million in the 2024 nine-month period and the 2023 nine-month period, respectively. Depreciation increased primarily due to the addition of depreciable assets.

*Amortization*. Amortization of intangible assets totaled $94 million and $147 million in the 2024 nine-month period and the 2023 nine-month period, respectively. Amortization decreased primarily due to finite-lived intangible assets becoming fully amortized.

*Impairment of Goodwill and Other Intangible Assets*. During the 2023 nine-month period we recognized a loss of $43 million for impairment of goodwill and other intangible assets related to the bankruptcy of Diamond.

*Loss (Gain) on Disposals of Assets, Net.* We recognized a loss on disposal of assets of $15 million in the 2024 nine-month period compared to a loss on disposal of assets of $20 million in the 2023 nine-month period. The loss in the 2024 nine-month period was primarily related to the acquisition of a construction permit to build television station KCBU in exchange for the divestiture of television stations KCWY and KGWN in which we recognized a loss of $14 million in the 2024 nine-month period. The loss in the 2023 nine-month period primarily related to the sale of television station KNIN, in which we recognized a loss of $14 million in the 2023 nine-month period.

*Miscellaneous Income (Expense), Net*. Miscellaneous income, net totaled $114 million in the 2024 nine-month period and $13 million of miscellaneous expense, net in the 2023 nine-month period. Miscellaneous income, net in the 2024 nine-month period was due primarily to a gain of $110 million from the sale of our investment in BMI. Miscellaneous expense, net in the 2023 nine-month period was due to the write-off of an investment.

*Interest Expense*. Interest expense increased $39 million, or 12%, to $363 million for the 2024 nine-month period compared to the 2023 nine-month period. This increase was primarily attributable to increases in interest rates on our floating rate Senior Credit Agreement to 8.5% in the 2024 nine-month period compared to 7.8% in the 2023 nine-month period. Our average outstanding total long-term debt balance was $6.2 billion and $6.3 billion during the 2024 and 2023 nine-month periods, respectively. Interest expense in the 2024 and 2023 nine-month periods also included $9 million and $7 million, respectively, related to the non-cash amortization of fees for our interest rate cap agreement. Interest expense in the 2024 and 2023 nine-month periods included $15 million and $11 million, respectively, related to the amount outstanding under the Securitization Facility representing the amount outstanding under the facility at the one-month SOFR rate plus 1%.

*Loss from Early Extinguishment of Debt.* The actions taken in our 2024 refinancing activities have resulted in a total net loss on early extinguishment of debt of $1 million in the 2024 nine-month period. The components of this net loss include:

- A gain of $6 million from the repurchase of our 2027 Notes in the open market at a discount;
- A gain of $1 million from the repurchase of our 2021 Term Loans in the open market at a discount; and
- A loss of $8 million from the write-off of unamortized deferred financing costs related to the loans that were pre-paid in the 2024 refinancing activities.

*Income Tax (Benefit) Expense.* We recognized an income tax expense of $70 million and an income tax benefit of $3 million in the 2024 and 2023 nine-month periods, respectively. Our effective income tax rates were 25% and 4% in the 2024 and 2023 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 2024 nine-month period, these estimates increased our statutory federal income tax rate of 21% to our effective income tax rate of 25% as follows: state income taxes added 5%, permanent differences between our U.S. GAAP income and taxable income added 1% and changes to our reserve accounts reduced our rate by 2%.

### 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, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $383 | $565 |
| Net cash provided by (used in) investing activities | 10 | (259) |
| Net cash used in financing activities | (345) | (346) |
| Net (decrease) increase in cash | $48 | $(40) |

|  | As of September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Cash | $69 | $21 |
| Long-term debt, including current portion, less deferred financing costs | $5,893 | $6,160 |
| Series A Perpetual Preferred Stock | $650 | $650 |
| Borrowing availability under Revolving Credit Facility | $674 | $494 |

*Net Cash Provided By (Used In) Operating, Investing and Financing Activities.* Net cash provided by operating activities was $383 million in the 2024 nine-month period compared to $565 million in the 2023 nine-month period. The decrease in net cash provided by operating activities in the 2024 nine-month period compared to the 2023 nine-month period was due primarily to an increase in net income, a decrease in impairment of goodwill and intangible assets, an increase in gain on sale of investments and a decrease in working capital.

Net cash provided by investing activities was $10 million in the 2024 nine-month period compared to net cash used in investing activities of $259 million for the 2023 nine-month period. The increase in the net amount provided was primarily due to a decrease in cash used for purchases of property and equipment and an increase in proceeds received from the sale of investments and other assets.

Net cash used in financing activities was $345 million in the 2024 nine-month period compared to net cash used in financing activities of $346 million in the 2023 nine-month period. Excluding temporary borrowings and re-payments of amounts under our Revolving Credit Facility, in the 2024 nine-month period, we issued $1.25 billion in of our 2029 Notes and $500 million of the 2024 Term Loan to pre-pay our $1.2 billion 2019 Term Loan all under the Senior Credit Facility. In addition, we repurchased in a tender offer, $690 million of face value of our outstanding 2026 Notes. In connection with these transactions, we paid $47 million in fees and expenses. Furthermore, in the 2024 nine-month period, we used $72 million, to repurchase a portion of our 2027 Notes, and $14 million, to repurchase a portion of our 2021 Term Loan on the open market. During each period, we used $39 million of cash to pay dividends to holders of our preferred stock. During 2024 and 2023 nine-month periods, we used $24 million and $22 million, respectively, to pay dividends to holders of our common stock.

*Liquidity.* Based on our debt outstanding as of September 30, 2024, we estimate that we will make approximately $487 million in debt interest payments over the twelve months immediately following September 30, 2024. Although our cash flows from operations are subject to a number of risks and uncertainties, we anticipate that our cash on hand, future cash expected to be generated from operations, borrowings from time to time under the 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 for the next twelve months and the forseeable future. 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 Senior Credit Facility (or any such other credit facility) will be sufficient to fund our future capital expenditures and long-term debt service obligations for the next twelve months and the forseeable future.

*Collateral, Covenants and Restrictions of our credit agreements.* Our obligations under the Senior Credit Agreement and the 2029 Notes are secured by substantially all of our consolidated assets, excluding real estate. In addition, substantially all of our subsidiaries are joint and several guarantors of, and our ownership interests in those subsidiaries are pledged to collateralize, our obligations under the Senior Credit Agreement. Gray Television, Inc. is a holding company, and has no material independent assets or operations. For all applicable periods, the 2026 Notes, 2027 Notes, 2030 Notes and 2031 Notes have been fully and unconditionally guaranteed, on a joint and several, senior unsecured basis, by substantially all of Gray Television, Inc.’s subsidiaries. Any subsidiaries of Gray Television, Inc. that do not guarantee the 2026 Notes, 2027 Notes, 2030 Notes and 2031 Notes are not material or are designated as unrestricted under the Senior Credit Agreement. As of September 30, 2024, June 30, 2024 and March 31, 2024, there were no significant restrictions on the ability of Gray Television, Inc.’s subsidiaries to distribute cash to Gray or to the guarantor subsidiaries.

The Senior Credit Agreement contains affirmative and restrictive covenants with which we must comply, including: (a) limitations on additional indebtedness, (b) limitations on liens, (c) limitations on the sale of assets, (d) limitations on guarantees, (e) limitations on investments and acquisitions, (f) limitations on the payment of dividends and share repurchases, (g) limitations on mergers and (h) maintenance of the First Lien Leverage Ratio while any amount is outstanding under the revolving credit facility, as well as other customary covenants for credit facilities of this type. The 2026 Notes, 2027 Notes, 2029 Notes, 2030 Notes and 2031 Notes include covenants with which we must comply which are typical for financing transactions of their nature. As of September 30, 2024, June 30, 2024 and March 31, 2024, we were in compliance with all required covenants under all of our debt obligations.

In addition to results prepared in accordance with U.S. GAAP, “Leverage Ratio Denominator” is a metric that management uses to calculate our compliance with our financial covenants in our indebtedness agreements. This metric is calculated as specified in our Senior Credit Agreement and is a significant measure that represents the denominator of a formula used to calculate compliance with material financial covenants within the Senior Credit Agreement that govern our ability to incur indebtedness, incur liens, make investments and make restricted payments, among other limitations usual and customary for credit agreements of this type. Accordingly, management believes this metric is a very material metric to our debt and equity investors.

Leverage Ratio Denominator gives effect to the revenue and broadcast expenses of all completed acquisitions and divestitures as if they had been acquired or divested, respectively, on October 1, 2022. It also gives effect to certain operating synergies expected from the acquisitions and related financings, and adds back professional fees incurred in completing the acquisitions. Certain of the financial information related to the acquisitions, if applicable, has been derived from, and adjusted based on, unaudited, un-reviewed financial information prepared by other entities, which Gray cannot independently verify. We cannot assure you that such financial information would not be materially different if such information were audited or reviewed and no assurances can be provided as to the accuracy of such information, or that our actual results would not differ materially from this financial information if the acquisitions had been completed on the stated date. In addition, the presentation of Leverage Ratio Denominator as determined in the Senior Credit Agreement and the adjustments to such information, including expected synergies, if applicable, resulting from such transactions, may not comply with U.S. GAAP or the requirements for pro forma financial information under Regulation S-X under the Securities Act of 1933. Leverage Ratio Denominator, as determined in the Senior Credit Agreement, represents an average amount for the preceding eight quarters then ended.

Our “Adjusted Total Indebtedness”, “First Lien Adjusted Total Indebtedness” and “Secured Adjusted Total Indebtedness”, in each case “Net of All Cash”, represents the amount of outstanding principal of our long-term debt, plus certain other obligations as defined in our Senior Credit Agreement, less all cash (excluding restricted cash) for the applicable amount of indebtedness.

Below is a calculation of our “Leverage Ratio”, “First Lien Leverage Ratio” and “Secured Leverage Ratio” as defined in our Senior Credit Agreement as of September 30, 2024:

*(in millions)*

|  | Eight Quarters Ended September 30, 2024 |
| --- | ---: |
| Net income | $316 |
| Adjustments to reconcile from net income to Leverage Ratio Denominator as defined in our Senior Credit Agreement: |  |
| Depreciation | 287 |
| Amortization of intangible assets | 339 |
| Non-cash stock-based compensation | 42 |
| Common stock contributed to 401(k) plan | 19 |
| Loss on disposal of assets, net | 39 |
| Gain on disposal of investment, not in the ordinary course | (110) |
| Interest expense | 903 |
| Loss on early extinguishment of debt | 4 |
| Income tax expense | 122 |
| Impairment of investment | 90 |
| Amortization of program broadcast rights | 69 |
| Payments for program broadcast rights | (71) |
| Pension benefit | (5) |
| Contributions to pension plans | (4) |
| Adjustments for unrestricted subsidiaries | 37 |
| Adjustments for stations acquired or divested, financings and expected synergies during the eight quarter period | (1) |
| Transaction Related Expenses | 3 |
| Other | 3 |
| **Total eight quarters ended September 30, 2024** | **$2,082** |
| Leverage Ratio Denominator (total eight quarters ended September 30, 2024, divided by 2) | **$1,041** |

*(dollars in millions)*

|  | September 30, 2024 |
| --- | ---: |
| Total outstanding principal, including current portion | $5,969 |
| Letters of credit outstanding | 6 |
| Cash | (69) |
| Adjusted Total Indebtedness | **$5,906** |
| Leverage Ratio (maximum permitted incurrence is 7.00 to 1.00) | **5.67** |
| Total outstanding principal secured by a first lien | $3,188 |
| Cash | (69) |
| First Lien Adjusted Total Indebtedness | **$3,119** |
| First Lien Leverage Ratio (maximum permitted incurrence is 3.50 to 1.00) (1) | **3.00** |
| Total outstanding principal secured by a liens | $3,188 |
| Cash | (69) |
| Secured Adjusted Total Indebtedness | **$3,119** |
| Secured Leverage Ratio (maximum permitted incurrence is 5.50 to 1.00) | **3.00** |

(1) At any time any amounts are outstanding under our revolving credit facility, our maximum First Lien Leverage Ratio cannot exceed 4.25 to 1.00.

*Debt.* As of September 30, 2024, long-term debt consisted of obligations under our Senior Credit Facility, the $10 million in aggregate principal amount outstanding under 2026 Notes, the $671 million in aggregate principal amount outstanding of our 2027 Notes, the $1.25 billion in aggregate principal amount of our 2029 Notes, the $800 million in aggregate principal amount outstanding of our 2030 Notes and the $1.3 billion outstanding of our 2031 Notes. As of September 30, 2024, the Senior Credit Facility provided total commitments of $2.6 billion, consisting of a $1.4 billion term loan facility, a $499 million term loan facility, and $674 million available under our revolving credit facility. We were in compliance with the covenants in these debt agreements at September 30, 2024.

*Repurchase of Debt and Subsequent Event*. On May 6, 2024, our Board of Directors authorized us to use up to $250 million of available liquidity to repurchase our outstanding indebtedness through December 31, 2025. On November 7, 2024, our Board of Directors authorized an increase in our debt repurchase authorization to repurchase additional debt in the open market, which replenished the previous authorization, bringing the total current authorization to $250 million. The extent of such repurchases, including the amount and timing of any repurchases, will depend on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. This repurchase program does not require us to repurchase a minimum amount of debt, and it may be modified, suspended or terminated at any time without prior notice. During the nine-months ended September 30, 2024, we used $72 million of cash to repurchase and retire $79 million of the face value of our outstanding 2027 Notes, resulting in a $7 million gain from early extinguishment of debt. In addition, during the nine-months ended September 30, 2024, we used $14 million of cash to repurchase and retire $15 million of the face value of our 2021 Term Loans on the open market, resulting in a $2 million gain from early extinguishment of debt. At September 30, 2024, we were obligated to repurchase and additional $7 million of face value of our 2021 Term Loans on the open market for $6 million and this transaction will be completed later in the fourth quarter of 2024, using cash on hand.

On September 25, 2024, we entered into a forward debt repurchase agreement with a lender to purchase on the open market up to $50 million of our 2021 Term Loans. As a result of this agreement, the lender has repurchased $32 million of the face value of our outstanding 2021 Term Loans for $30 million, under this plan. We plan to repurchase and retire these portions of our 2021 Term Loan in the fourth quarter of 2024 using cash on hand.

*Capital Expenditures.* We currently expect capital expenditures for full-year 2024 of $135 million, which includes approximately $35 million, net of reimbursements, related to Assembly Atlanta. We expect additional reimbursements of approximately $18 million in first quarter of 2025 related to 2024 capital expenditures at Assembly Atlanta.

*Acquisition and Divestitures.* On July 1, 2024, we completed a transaction with Marquee Broadcasting, Inc. (“Marquee”) in which we sold our television stations KCWY (NBC) in the Casper, Wyoming market (DMA 198) and KGWN (CBS) in the Cheyenne, Wyoming market (DMA 194) in exchange for Marquee’s FCC permit authorizing the construction of a new television station, that will be built in the Salt Lake City, Utah market (DMA 27), and will be known as KCBU. No cash or other consideration was exchanged to fulfill the terms of this exchange. The sale of television station KCWY and KGWN resulted in a non-cash loss on disposal of $14 million.

*Other.* We file a consolidated federal income tax return and such state and local tax returns as are required. During the nine-months ended September 30, 2024, we made federal or state income tax payments totaling $130 million, net of refunds. During the fourth quarter of 2024, we anticipate making income tax payments, net of refunds, of approximately $3 million. As of September 30, 2024, we have an aggregate of approximately $282 million of various state operating loss carryforwards, of which we expect that approximately $201 million will not be utilized due to section 382 limitations and those that will expire prior to utilization. After applying our state effective tax rate, this amount is included in our valuation allowance for deferred tax assets.

### Critical Accounting Policies

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 2023 Form 10-K.

### Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains and incorporates by reference “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 Exchange Act. Forward-looking statements are all statements other than those of historical fact. When used in this annual report, the words “believes,” “expects,” “anticipates,” “estimates,” “will,” “may,” “should” and similar words and expressions are generally intended to identify forward-looking statements. These forward-looking statements reflect our then-current expectations and are based upon data available to us at the time the statements are made. Forward-looking statements may relate to, among other things, the economy in general, our strategies, expected results of operations, general and industry-specific economic conditions, future pension plan contributions, future capital expenditures, future proceeds from Assembly Atlanta CID infrastructure related payments and land sales, future income tax payments, future payments of interest and principal on our long-term debt, future interest expenses under our Securitization Facility, future interest expense under our interest rate caps, assumptions underlying various estimates and estimates of future obligations and commitments, and should be considered in context with the various other disclosures made by us about our business. Readers 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 significant 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 in Item 1A. of our Annual Report and the other factors described from time to time in our SEC filings. The forward-looking statements included in this quarterly report are made only as of the date hereof. We undertake no obligation to update such forward-looking statements to reflect subsequent events or circumstances.

## Market risk

As filed, 218 characters.

We believe that the market risk of our financial instruments as of September 30, 2024 has not materially changed since December 31, 2023. Our market risk profile on December 31, 2023 is disclosed in our 2023 Form 10-K.

## Controls and procedures

As filed, 919 characters.

*Evaluation of Disclosure 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 design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e))under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the CEO and CFO have concluded that our controls and procedures were effective as of September 30, 2024.

*Changes in Internal Control Over Financial Reporting.* There have been no changes in the Company’s internal control over financial reporting during the nine-months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 665 characters.

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, 2023. 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 such risk factors.

Filed Nov 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-034144. Last ingested by Listed: Oct 24, 2026, 14:52 ET. No prices; not investment advice.