Gray Television, Inc. (GTN)

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Gray Television (GTN)

Q4 2012 Earnings Call

February 20, 2013 10:30 am ET

Executives

Hilton H. Howell - Vice Chairman, Chief Executive Officer and Member of Executive Committee

Robert S. Prather - President, Chief Operating Officer, Director and Member of Executive Committee

James C. Ryan - Chief Financial Officer and Senior Vice President

Analysts

Aaron Watts - Deutsche Bank AG, Research Division

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Barry L. Lucas - Gabelli & Company, Inc.

Andrew Finkelstein - Barclays Capital, Research Division

Presentation

Operator

Good day, everyone, and welcome to the Gray Television's Fourth Quarter and Year-End 2012 Earnings Release Conference Call. Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call to Hilton Howell. Please go ahead, sir.

Hilton H. Howell

Thank you very much, operator. Good morning, everyone, and welcome to the Fourth Quarter and 2012 year-to-date Gray Television earnings call. I will begin with a brief overview of our results followed by Bob Prather, our President and Chief Operating Officer, who will offer his comments on our results; and then Jim Ryan, our Chief Financial Officer, will follow with additional thoughts on our financial results. Questions will, as always, be answered at the conclusion of our comments.

As you no doubt saw from this morning's press release, for both the quarter and year-to-date 2012, Gray reported record total revenue, record broadcast cash flow and record political revenue. Total revenue for the quarter increased by 50% to $126.6 million from $84.6 million a year ago, an increase of $41.9 million. For the year, total revenue increased by 32% to $404.8 million from $307.1 million in 2011, an increase of $97.7 million. Broadcast cash flow less corporate expenses for the quarter was a record $64.5 million against our previous record of $58.2 million set in the first quarter of 2010. For the year, broadcast cash flow less corporate expenses was $176.1 million against a previous record of $135.7 million also set in the fourth quarter of 2010. Obviously, political revenue drove this and set records as well. For the fourth quarter 2012, political revenue was $43.4 million against the previous record of $33.1 million in the fourth quarter of 2010. Year-to-date, our political revenue was $86 million against 2010's previous record of $57.6 million. Of our 5 largest nonpolitical advertising categories, for the quarter, automotive increased by 10%, restaurants decreased by 5%, medical decreased by 7%, communications decreased by 7% and furniture and appliances increased by 10%. For the full year, automotive increased by 16%, restaurants decreased by 4%, medical increased by 7%, communications increased by 2% and furniture and appliances increased by 8%. These record results were coupled with a complete [indiscernible] an improvement in our balance sheet set in the fourth quarter. We repurchased all of our remaining Series D preferred stock, sold $300 million in 7.5% senior notes due in 2020 and tendered for all of our outstanding $365 million 10.5% senior secured lien notes due in 2015. And we repaid all amounts due under our existing senior credit facility and extended -- and entered into a new facility. Our weighted average interest rate on our new debt stands at 5.7%, which represents an annual interest carry cost of roughly $50 million. With these new facilities in place, we expect to be able to significantly delever our balance sheet in the next several years. In sum, we candidly couldn't have been any more happy with the results that we've had in 2012 and look forward to 2013 with a great deal of optimism.

I would also like to take this moment to recognize Ray Deaver, who retired from our board at the end of 2012. He was an important and integral part of our company and its governance, and he will be sorely missed. Thank you, Ray, for your service.

Bob, with that, I'll turn it over to you.

Robert S. Prather

Thanks, Hilton. Welcome, everybody. I think Hilton summed it up pretty good. We had an all-time record year, which we're really proud of. It was obviously a very good year for the TV industry in general. '13 is another relative run in but it's not going to be as robust a year for a lot of reasons. Obviously, the political factor's a major factor that's not there. And also we had NBC, we had a record Olympics last year. So we got some pretty tough comps. But our stations are all doing good. Every station we have is profitable. We're proud of the fact that we still have more #1 stations than any group in the country. We want to keep it that way and all our stations that aren't #1, that are #2, their mantra everyday is just try to get to #1. Sometimes that -- is not possible because the #1 station is also very well run and do a good job in the community but we're certainly trying every day and it's a never-say-never-type attitude.

We got our NBC deal done with our NBC affiliates for last year. It's a 4-year deal ending in 2015. We're overall happy with it. I think we're -- all the groups are learning to live with these networks better. We've become a very important customer to all of them now, which I think makes them -- makes us more important to them, and I think that will depend on the future. We've got our ABC stations coming up at the end of this year, and then CBS coming up at the end of '14. Our 3 CBS digital stations we put on the air are all gone up and running, doing very well. We've got a couple of more digital properties in motion right now. We hope to be able to announce soon that we'll add some more major networks to us. And I think it's been a great strategy for us. Our -- we've got 42 digital stations on the air right now. They're profitable, they're growing. I think they give us a lot of local presence that we can use in the future and we want to continue this thing.

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