Gray Television, Inc. (GTN)

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Gray Television (GTN)

Q3 2011 Earnings Call

November 04, 2011 11:00 am ET

Executives

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

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

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

Analysts

Barry L. Lucas - Gabelli & Company, Inc.

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Good day, everyone, and welcome to the Gray Television Third Quarter 2011 Earnings Release Conference Call. As a reminder, today's call is being recorded. For opening remarks and introductions, I would now like to turn the call over to CEO and Co-Chairman, Mr. Hilton Howell. Please go ahead, sir.

Hilton H. Howell

Thank you, operator. I thank all of you for joining us for this teleconference this morning. I will begin as usual with the brief overview of our results followed by Bob Prather, our President and Chief Operating Officer, who will add his thoughts concerning our performance so far this year; and then our Chief Financial Officer, Jim Ryan will follow with a brief discussion of our income statement, balance sheet and more detailed financial data. And as usual, we will have questions at the conclusion of our comments.

We are pleased with our results this quarter. As expected, we have come up against tough comparables due to large amount of political advertising we received a year ago. Political advertising, which in 2010 set a record for our company in a non-presidential election cycle.

For the quarter, our total revenue decreased by 10% to $76.5 million from $85.3 million this quarter last year. This decrease is entirely due to the expected drop in political advertising of $10.8 million in quarter-to-quarter comparisons.

Significantly, of our 5 largest advertising categories: Automotive, restaurants, medical, communications and furniture and appliances, all increased this quarter. Automotive increased by 5%; restaurants increased by 3%; medical increased by 7% communications increased by 7% and furniture and appliances increased by 9%. Last quarter, our automobile-related category decreased by about 1% which at that time we attributed it to the effects of the Japanese tsunami. And as we expected, it has reversed itself this quarter.

For the 9 months, total revenue decreased by 4% or $9 million to $222.5 million from $231.4 million year-to-date 2010.

Once again, the main issue here is the political revenue declining, as I have mentioned before. But we also suffer in comparison from collecting no Olympic-related advertising this year. Whereas in 2010, we received approximately $2.8 million Olympic advertising revenue from our NBC-affiliated stations. Additionally, the Super Bowl was broadcast on FOX this year and our one primary FOX affiliate station and 4 FOX-affiliated secondary digital channels generated only $200,000 of revenue this year compared to 2010, when the Super Bowl was broadcast on CBS and our 17 CBS-affiliated primary stations generated close to $1 million of Super Bowl revenue.

All of the issues that can account for our decreases in advertising were expected and planned for. We are very happy with the resiliency and vigor of our local TV properties and expect them to bring 2011 to be a very successful close.

On a final note, this quarter, the company has continued to purchase in more shares of its outstanding preferred stock. We purchased in the shares in private transactions from internally generated funds. We consider these purchases to be part of our broader effort to deleverage the company. With that, I will bring my comments to a close and hand it over to Bob Prather for his thoughts. Bob?

Robert S. Prather

Thanks, Hilton. I want to welcome everybody. As Hilton mentioned, we feel good about the quarter. I think the TV business in general has been a better year than most people thought for most of the well-run broadcasters out there.

Political has been stronger this year than we thought. Wisconsin union and recall we have a $3 million come in there. Ohio is getting some of the same thing now and we've got a strong Governor's race in West Virginia that we didn't anticipate. So we think there's going to be some, rose very well for next year on political especially.

The main thing we're working on right now I mention every time we are fast getting all our stations up with local HD news and automation. I think we basically are -- at the end of the year have 3/4 of our stations up and running with local HD views. And we just got most of our small markets are left to finish up next year. But I think this is critical for our competition. I think we'd like to be the leader. We'd like to be the first in the markets to do go-local. We haven't been that in every case, but I think most of the cases we have. So it's something that we want to continue our leadership and continue to use our tradition of owning strong number one stations in our markets.

We also are very busy right now negotiating our retransfer our cable operators. We've got 45% of our subs up this year. Most of the big operators we're negotiating with currently, except for Comcast and they're not up this year. But we feel very good about the negotiations in early stages, but we think we're going to get some good increases and some well-deserved increases.

I think TV has long been undervalued by cable operators and I think they're now realizing the value of, especially TV stations with strong local news franchises like we have. So this is something we hope we'll have these negotiations concluded by the end of the year and going into next year with new round of retransmission revenues coming in.

Read the rest of this transcript for free on seekingalpha.com