Nov. 9, 2009 (PR Newswire) --
ATLANTA, Nov. 9 /PRNewswire-FirstCall/ -- Gray Television, Inc. ("Gray," "we" or "us") (NYSE: GTN) today announced results from operations for the three-month period (the "third quarter") and nine-month period ended September 30, 2009 as compared to the three-month and nine-month periods ended September 30, 2008.
Highlights:
Three Months Ended
September 30,
--------------------------
2009 2008 % Change
---- ---- --------
(in thousands, except
for percentages)
Revenues (less agency commissions) $66,446 $82,631 (20)%
Broadcast expenses (before depreciation,
amortization and gain on disposal of assets) $46,173 $49,907 (7)%
Corporate expenses (before depreciation,
amortization and gain on disposal of assets) $3,308 $3,754 (12)%
Our stations and the television broadcast industry as a whole continued to deal with the challenges of the current economic recession and increased competition from internet advertising through the nine-month period ended September 30, 2009. We remain committed to operating our stations in a manner that generates maximum revenue while minimizing operating expenses during these difficult times.
Our results for the third quarter were positively impacted by our entry into an agreement with Young Broadcasting Inc. This agreement was effective August 10, 2009. Under its terms we will provide consulting services and receive an annual payment of $2.2 million. We expect to provide these consulting services through December 31, 2012.
Earlier this year we renegotiated many of our cable distribution contracts, which has resulted in increased retransmission consent revenue through the nine-month period ended September 30, 2009. We continue to integrate new strategies into our stations' websites to generate revenue. We continue to experiment with new technologies such as mobile television in order to lay the ground work for new revenue streams in the future. Although our operating results are down compared to the prior year, we believe that our recent operating results compare favorably to other television broadcast companies.
Comments on Results of Operations for the Three-Month Period Ended September 30, 2009:
Revenue.
Total net revenue decreased $16.2 million, or 20%, to $66.4 million due primarily to decreased local, national and political advertising revenue and decreased production and other revenue. These decreases were partially offset by increased retransmission consent revenue and increased consulting revenue in the third quarter. Retransmission consent revenue reflects the more profitable terms of our recently renewed contracts. Consulting revenue increased to $0.3 million due to the agreement with Young Broadcasting Inc. Local and national advertising revenue decreased due to reduced spending by advertisers as a result of the current economic recession. Historically, our industry's largest advertiser category has been the automotive industry. The recession has significantly reduced the automotive industry's advertising expenditures. Our third quarter automotive advertising revenue decreased approximately 33% compared to the prior year. In addition, during the 2008 three-month period we earned a total of $3.4 million of net revenue from local and national advertisers during the broadcast of the 2008 Summer Olympics on our ten NBC stations. There are no Olympic Game broadcasts during 2009. Political advertising revenue decreased, reflecting decreased advertising from political candidates during the "off year" of the two-year political advertising cycle.
Local advertising revenue decreased $5.1 million, or 11%, to $41.1 million.
National advertising revenue decreased $4.8 million, or 27%, to $12.8 million.
Internet advertising revenue remained relatively stable at $2.9 million.
Political advertising revenue decreased $10.0 million, or 76%, to $3.1 million.
Retransmission consent revenue increased $3.6 million, or 466%, to $4.3 million.
Production and other revenue decreased $0.1 million, or 6%, to $1.7 million.
Consulting revenue resulting from the Young Broadcasting, Inc. agreement was $0.3 million in the third quarter.
Operating expenses.
Broadcast expenses (before depreciation, amortization and gain on disposal of assets) decreased $3.7 million, or 7%, to $46.2 million due primarily to a reduction in compensation expense of $1.3 million, professional service expenses of $1.1 million, facility fees of $0.4 million and syndicated programming of $0.3 million. Payroll expense decreased primarily due to a reduction in the number of employees. As of September 30, 2009 and 2008, we employed 2,202 and 2,313 full and part-time employees, respectively, in our broadcast operations. Professional service expenses decreased primarily due to lower national representation fees, which are paid based upon a percentage of our national revenue. Facility fees decreased primarily due to lower electricity expense resulting from the discontinuance of our analog broadcasts.
Corporate and administrative expenses (before depreciation, amortization and gain on disposal of assets) decreased $0.4 million, or 12%, to $3.3 million due primarily to a decrease in market research consulting of $0.4 million. We recorded non-cash stock-based compensation expense during the three-month periods ended September 30, 2009 and 2008 of $0.3 million and $0.4 million, respectively.
Comments on Results of Operations for the Nine-Month Period Ended September 30, 2009:
Revenue.
Total net revenue decreased $39.5 million, or 17%, to $192.9 million due primarily to decreased local, national, political and internet advertising revenue, decreased network compensation revenue and decreased production and other revenue. These decreases were partially offset by increased retransmission consent revenue and consulting revenue in the 2009 nine-month period. Retransmission consent revenue reflects the more profitable terms of our recently renewed contracts. Consulting revenue increased to $0.3 million for the 2009 nine-month period due to a new agreement for consulting services with Young Broadcasting, Inc. Local and national advertising revenue for the 2009 nine-month period decreased due to reduced spending by advertisers in the current economic recession. Historically, our industry's largest advertiser category has been the automotive industry. The current recession has significantly reduced the automotive industry's advertising expenditures. Our automotive advertising revenue decreased approximately 41% compared to the prior year. In addition, during the 2008 nine-month period we earned a total of $3.4 million of net revenue from local and national advertisers during the broadcast of the 2008 Summer Olympics on our ten NBC stations. There are no Olympic Game broadcasts during 2009. The negative effects of the recession were partially offset by increased advertising during the 2009 Super Bowl. Net advertising revenue associated with the broadcast of the 2009 Super Bowl on our ten NBC affiliated stations approximated $750,000, which was an increase from the approximate $130,000 of Super Bowl revenue earned in 2008 on our then six Fox affiliated channels. Internet advertising revenue decreased during the 2009 nine-month period due to the same factors that affected our local and national advertising revenue but to a lesser extent. Political advertising revenue decreased in this period due to reduced advertising from political candidates during the "off year" of the two-year political advertising cycle.
Local advertising revenue decreased $17.8 million, or 13%, to $123.7 million.
National advertising revenue decreased $14.3 million, or 27%, to $38.0 million.
Internet advertising revenue decreased $0.4 million, or 5%, to $8.2 million.
Political advertising revenue decreased $16.1 million, or 76%, to $5.0 million.
Retransmission consent revenue increased $9.7 million, or 439%, to $11.9 million.
Production and other revenue decreased $0.8 million, or 14%, to $5.2 million.
Consulting revenue resulting from the Young Broadcasting agreement was $0.3 million for the 2009 nine-month period.
Operating expenses.
Broadcast expenses (before depreciation, amortization and gain on disposal of assets) decreased $11.4 million, or 8%, to $137.0 million due primarily to a reduction in compensation expense of $5.8 million, professional services expense of $1.8 million, facility fees of $0.7 million, supply fees of $0.6 million and syndicated programming expense of $0.4 million. Compensation expense decreased primarily due to a reduction in the number of employees. As of September 30, 2009 and 2008, we employed 2,202 and 2,313 full and part-time employees, respectively, in our broadcast operations. Professional services expense decreased primarily due to lower national representation fees which are paid based upon a percentage of our national revenue. Facility fees decreased primarily due to lower electricity expense resulting from the discontinuance of our analog broadcasts. Supply fees decreased due to lower gasoline costs and improved controls on supply purchases.
Corporate and administrative expenses (before depreciation, amortization and gain on disposal of assets) increased $0.9 million, or 9%, to $10.9 million during the 2009 nine-month period. The increase was due primarily to an increase in relocation expense of $0.6 million, an increase in legal expense of $0.5 million and an increase in severance expense of $0.1 million. We currently believe the relocation cost incurred in 2009 will not recur in future years to the same extent as 2009. Also, approximately $0.4 million of the increased legal costs were attributable to the negotiation and documentation of our new retransmission consent agreements, and such costs are currently not anticipated to recur in future periods to the same extent. These increases were partially offset by a decrease in market research of $0.4 million. We recorded non-cash stock-based compensation expense during the nine-month periods ended September 30, 2009 and 2008 of $1.0 million and $1.1 million, respectively.
