10-Q 1 gtn20240331_10q.htm FORM 10-Q gtn20240331_10q.htm
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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 March 31, 2024 or

 

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _________ to _________ .

 

Commission file number: 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 definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one).

 

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 Act). Yes No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

 

Common Stock (No Par Value)

 

Class A Common Stock (No Par Value)

90,294,783 shares outstanding as of May 3, 2024

 

8,842,764 shares outstanding as of May 3, 2024

 

1

 

 

INDEX

 

GRAY TELEVISION, INC.

 

PART I.

FINANCIAL INFORMATION

PAGE

     

Item 1.

Financial Statements

 
     
 

Condensed consolidated balance sheets (Unaudited) – March 31, 2024 and December 31, 2023

3

     
 

Condensed consolidated statements of operations (Unaudited) – three-months ended March 31, 2024 and 2023

5

     
 

Condensed consolidated statements of comprehensive income (loss) (Unaudited) –  three-months ended March 31, 2024 and 2023

6

     
 

Condensed consolidated statement of stockholders' equity (Unaudited) –  three-months ended March 31, 2024 and 2023

7

     
 

Condensed consolidated statements of cash flows (Unaudited) – three-months ended March 31, 2024 and 2023

8

     
 

Notes to condensed consolidated financial statements (Unaudited)

9

     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

     

Item 4.

Controls and Procedures

29

     

PART II.

OTHER INFORMATION

 
     
Item 1. Legal Proceedings 30
     

Item 1A.

Risk Factors

30

     
Item 5. Other Information 30
     

Item 6.

Exhibits

30

     

SIGNATURES

31

 

2

 
 

 

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions)

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

Assets:

        

Current assets:

        

Cash

 $134  $21 

Accounts receivable, less allowance for credit losses of $16 and $17, respectively

  362   342 

Current portion of program broadcast rights, net

  12   18 

Income tax refunds receivable

  21   21 

Prepaid income taxes

  14   18 

Prepaid and other current assets

  58   48 

Total current assets

  601   468 
         

Property and equipment, net

  1,590   1,601 

Operating lease right of use asset

  71   75 

Broadcast licenses

  5,320   5,320 

Goodwill

  2,643   2,643 

Other intangible assets, net

  384   415 

Investment in broadcasting, production and technology companies

  86   85 

Deferred pension assets

  18   17 

Other

  22   16 

Total assets

 $10,735  $10,640 

 

See notes to condensed consolidated financial statements.

 

3

 

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions except for share data)

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

Liabilities and stockholders equity:

        

Current liabilities:

        

Accounts payable

 $36  $23 

Employee compensation and benefits

  77   110 

Accrued interest

  93   63 

Accrued network programming fees

  39   37 

Other accrued expenses

  50   57 

Federal and state income taxes

  56   22 

Current portion of program broadcast obligations

  12   20 

Deferred revenue

  22   23 

Dividends payable

  14   14 

Current portion of operating lease liabilities

  10   11 

Current portion of long-term debt

  15   15 

Total current liabilities

  424   395 
         

Long-term debt, less current portion and less deferred financing costs

  6,139   6,145 

Program broadcast obligations, less current portion

  1   1 

Deferred income taxes

  1,353   1,359 

Operating lease liabilities, less current portion

  65   69 

Other

  53   50 

Total liabilities

  8,035   8,019 
         

Commitments and contingencies (Note 9)

          
         

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 
         

Stockholders’ equity:

        

Common stock, no par value; authorized 200,000,000 shares, issued 110,636,360 shares and 107,179,827 shares, respectively, and outstanding 90,349,144 shares and 87,227,481 shares, respectively

  1,187   1,174 

Class A common stock, no par value; authorized 25,000,000 shares, issued 11,237,386 shares and 10,413,993 shares, respectively, and outstanding 8,842,764 shares and 8,162,266 shares, respectively

  52   50 

Retained earnings

  1,151   1,084 

Accumulated other comprehensive loss

  (23)  (23)
   2,367   2,285 

Treasury stock at cost, common stock, 20,287,216 shares and 19,952,346 shares, respectively

  (284)  (282)

Treasury stock at cost, Class A common stock, 2,394,622 shares and 2,251,727 shares, respectively

  (33)  (32)

Total stockholders’ equity

  2,050   1,971 

Total liabilities and stockholders’ equity

 $10,735  $10,640 

 

See notes to condensed consolidated financial statements.

 

4

 

 

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in millions, except for per share data)

 

   

Three Months Ended

 
   

March 31,

 
   

2024

   

2023

 
                 

Revenue (less agency commissions)

               

Broadcasting

  $ 799     $ 779  

Production companies

    24       22  

Total revenue (less agency commissions)

    823       801  

Operating expenses before depreciation, amortization and loss on disposal of assets, net:

               

Broadcasting

    583       555  

Production companies

    21       59  

Corporate and administrative

    28       26  

Depreciation

    36       35  

Amortization of intangible assets

    31       49  

Loss on disposal of assets, net

    -       10  

Operating expenses

    699       734  

Operating income

    124       67  

Other income (expense):

               

Miscellaneous income (expense), net

    110       (2 )

Interest expense

    (115 )     (104 )

Loss on early extinguishment of debt

    -       (3 )

Income (loss) before income taxes

    119       (42 )

Income tax expense (benefit)

    31       (11 )

Net income (loss)

    88       (31 )

Preferred stock dividends

    13       13  

Net income (loss) attributable to common stockholders

  $ 75     $ (44 )
                 

Basic per share information:

               

Net income (loss) attributable to common stockholders

  $ 0.80     $ (0.48 )

Weighted average common shares outstanding

    94       92  
                 

Diluted per share information:

               

Net income (loss) attributable to common stockholders

  $ 0.79     $ (0.48 )

Weighted average common shares outstanding

    95       92  
                 

Dividends declared per common share

  $ 0.08     $ 0.08  

 

See notes to condensed consolidated financial statements.

 

5

 

 

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(in millions)

 

   

Three Months Ended

 
   

March 31,

 
   

2024

   

2023

 
                 

Net income (loss)

  $ 88     $ (31 )
                 

Other comprehensive loss:

               

Adjustment - fair value of interest rate caps

    -       (15 )

Income tax benefit

    -       (4 )

Other comprehensive loss, net

    -       (11 )
                 

Comprehensive income (loss)

  $ 88     $ (42 )

 

See notes to condensed consolidated financial statements.

 

6

 

 

GRAY TELEVISION, INC.

CONDENSED CONSOLIDATED STATEMENT 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, 2022

    9,675,139     $ 45       105,104,057     $ 1,150     $ 1,242       (2,130,724 )   $ (31 )     (19,636,786 )   $ (278 )   $ (12 )   $ 2,116  
                                                                                         

Net loss

    -       -       -       -       (31 )     -       -       -       -       -       (31 )
                                                                                         

Preferred stock dividends

    -       -       -       -       (13 )     -       -       -       -       -       (13 )
                                                                                         

Common stock dividends

    -       -       -       -       (7 )     -       -       -       -       -       (7 )
                                                                                         

Adjustment to fair value of interest rate cap

    -       -       -       -       -       -       -       -       -       (11 )     (11 )
                                                                                         

Issuance of common stock:

                                                                                       

401(k) Plan

    -       -       819,898       9       -       -       -       -       -       -       9  

2022 Equity and Incentive Compensation Plan:

                                                                                       

Restricted stock awards

    25,022       -       12,227       -       -       (92,196 )     (1 )     (129,636 )     (2 )     -       (3 )

Restricted stock unit awards

    -       -       247,953       -       -       -       -       (80,622 )     (1 )     -       (1 )
                                                                                         

Stock-based compensation

    -       -       -       2       -       -       -       -       -       -       2  
                                                                                         

Balance at March 31, 2023

    9,700,161     $ 45       106,184,135     $ 1,161     $ 1,191       (2,222,920 )   $ (32 )     (19,847,044 )   $ (281 )   $ (23 )   $ 2,061  
                                                                                         

Balance at December 31, 2023

    10,413,993     $ 50       107,179,827     $ 1,174     $ 1,084       (2,251,727 )   $ (32 )     (19,952,346 )   $ (282 )   $ (23 )   $ 1,971  
                                                                                         

Net income

    -       -       -       -       88       -       -       -       -       -       88  
                                                                                         

Preferred stock dividends

    -       -       -       -       (13 )     -       -       -       -       -       (13 )
                                                                                         

Common stock dividends

    -       -       -       -       (8 )     -       -       -       -       -       (8 )
                                                                                         

Adjustment to fair value of interest rate cap

    -       -       -       -       -       -       -       -       -       -       -  
                                                                                         

Issuance of common stock:

                                                                                       

401(k) Plan

    -       -       1,765,444       9       -       -       -       -       -       -       9  

2022 Equity and Incentive Compensation Plan:

                                                                                       

Restricted stock awards

    823,393       -       1,126,296       -       -       (142,895 )     (1 )     (146,470 )     (1 )     -       (2 )

Restricted stock unit awards

    -       -       564,793       -       -       -       -       (188,400 )     (1 )     -       (1 )
                                                                                         

Stock-based compensation

    -       2       -       4       -       -       -       -       -       -       6  
                                                                                         

Balance at March 31, 2024

    11,237,386     $ 52       110,636,360     $ 1,187     $ 1,151       (2,394,622 )   $ (33 )     (20,287,216 )   $ (284 )   $ (23 )   $ 2,050  

 

See notes to condensed consolidated financial statements.

 

7

 

 

GRAY TELEVISION, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 (in millions)

 

  

Three Months Ended

 
  

March 31,

 
  

2024

  

2023

 

Operating activities

        

Net income (loss)

 $88  $(31)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Depreciation

  36   35 

Amortization of intangible assets

  31   49 

Amortization of deferred loan costs

  3   4 

Amortization of restricted stock awards

  6   2 

Amortization of program broadcast rights

  7   10 

Payments on program broadcast obligations

  (8)  (11)

Deferred income taxes

  (6)  8 

Loss on disposal of assets, net

  -   10 
Gain on sale of investment  (110)  - 

Loss on early extinguishment of debt

  -   3 

Other

  (2)  5 

Changes in operating assets and liabilities:

        

Accounts receivable, net

  (20)  317 

Income tax receivable or prepaid

  4   (21)

Other current assets

  (10)  9 

Accounts payable

  13   (15)

Employee compensation, benefits and pension cost

  (33)  (34)

Accrued network fees and other expenses

  5   41 

Accrued interest

  30   27 

Income taxes payable

  34   3 

Deferred revenue

  -   1 

Net cash provided by operating activities

  68   412 
         

Investing activities

        

Purchases of property and equipment

  (34)  (110)

Proceeds from asset sales

  7   8 
Proceeds from sale of investment  110   - 

Reimbursement of development costs

  -   11 

Investments in broadcast, production and technology companies

  (3)  (4)

Net cash provided by (used in) investing activities

  80   (95)
         

Financing activities

        

Proceeds from borrowings on long-term debt

  50   50 

Repayments of borrowings on long-term debt

  (54)  (349)

Payment of common stock dividends

  (8)  (7)

Payment of preferred stock dividends

  (13)  (13)

Deferred and other loan costs

  (7)  - 

Payment for taxes related to net share settlement of equity awards

  (3)  (3)

Net cash used in financing activities

  (35)  (322)

Net increase (decrease) in cash

  113   (5)

Cash at beginning of period

  21   61 

Cash at end of period

 $134  $56 

 

See notes to condensed consolidated financial statements.

 

8

 

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, 2023, which was derived from the Company’s audited financial statements as of December 31, 2023, and our accompanying unaudited condensed consolidated financial statements as of March 31, 2024 and for the three-month periods ended March 31, 2024 and 2023, have been prepared in accordance with accounting principles generally accepted in the United States of America (“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 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 two 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 The Nielsen Company, LLC (“Nielsen”) and/or 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, 2023 (the “2023 Form 10-K”). Our financial condition as of, and operating results for the three-months ended March 31, 2024, 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, 2024.

 

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 in the United States. Our television stations serve 114 television markets that collectively reach approximately 36 percent of US television households.  This portfolio includes 79 markets with the top-rated television station and 102 markets with the first and/or second highest rated television station.  We also own video program companies Raycom Sports, Tupelo Media Group, PowerNation Studios, as well as the studio production facilities Assembly Atlanta and Third Rail Studios. 

 

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 income (expense), net in our 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 income (expense), net in our consolidated statements of operations. These investments are reported together as a non-current asset on our consolidated balance sheets.

 

BMI Investment Proceeds. On February 8, 2024, we received $110 million from the sale of our investment in Broadcast Music, Inc. (“BMI”). These proceeds are included in miscellaneous income (expense), net, in our condensed consolidated statement of operations.

 

9

 

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. 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.

 

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 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, in the diluted weighted-average shares outstanding calculation, unless their inclusion would be antidilutive.

 

The following table reconciles basic weighted-average common shares outstanding to diluted weighted-average common shares outstanding for the three-months ended March 31, 2024 and 2023, respectively (in millions):

 

  

Three Months Ended

 
  

March 31,

 
  

2024

  

2023

 
         

Weighted-average common shares outstanding-basic

  94   92 

Common stock equivalents for stock options and restricted stock

  1   - 

Weighted-average common shares outstanding-diluted

  95   92 

 

Accumulated Other Comprehensive Loss. Our accumulated other comprehensive loss balances as of March 31, 2024 and December 31, 2023, consist of adjustments to our pension liability and changes in the fair value of our interest rate cap, each net of tax. Our comprehensive income (loss) for the three-months ended March 31, 2024 and 2023 consisted of our net income (loss) and recognition of the initial fair value adjustment related to our interest rate cap, and the related income tax benefit. As of March 31, 2024 and December 31, 2023 the balances were as follows (in millions):

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

Items included in accumulated other comprehensive loss:

        

Adjustment to pension liability

 $(7) $(7)

Adjustment to fair value of interest rate caps

  (23)  (23)

Income tax benefit

  (7)  (7)

Accumulated other comprehensive loss

 $(23) $(23)

 

10

 

Property and Equipment. Property and equipment are carried at cost, or in the case of acquired businesses, at 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):

 

          

Estimated

 
  

March 31,

  

December 31,

  

Useful Lives

 
  

2024

  

2023

  

(in years)

 

Property and equipment:

             

Land

 $366  $368      

Buildings and improvements

  873   868  7to40 

Equipment

  1,087   1,082  3to20 

Construction in progress

  94   81      
   2,420   2,399      

Accumulated depreciation

  (830)  (798)     

Total property and equipment, net

 $1,590  $1,601      

 

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.

 

We incurred costs to build public infrastructure within the Assembly Atlanta project. Pursuant to our Purchase and Sale Agreement with the Doraville Community Improvement District (the “CID”), we receive cash reimbursements for the transfer of specific infrastructure projects to the CID and for other construction costs previously incurred. During the first quarter of 2024 and 2023, we received a total of $5 million and $26 million, respectively, in cash proceeds from the CID. The following table lists the type of proceeds received (dollars in millions):

 

  

Three Months Ended

 
  

March 31,

 
  

2024

  

2023

 
         

Proceeds from asset sold

 $5  $6 

Proceeds received in advance of asset sale

  -   9 

Total proceeds received for asset transfer to CID

  5   15 

Proceeds for reimbursement of development costs

  -   11 

Total proceeds received from CID

 $5  $26 

 

The following tables provide additional information related to loss 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

 
  

March 31,

 
  

2024

  

2023

 

Loss on disposal of assets, net:

        

Proceeds from disposal of assets

 $(7) $(8)

Net book value of assets disposed

  7   9 

Discount - Securitization Facility

  -   9 

Total

 $-  $10 
         

Purchase of property and equipment:

        

Recurring purchases - operations

 $19  $19 

Assembly Atlanta development

  15   91 

Total

 $34  $110 

 

11

 

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 account receivable balances when the customer files for bankruptcy or when all commonly used methods of collection have been exhausted.

 

On February 23, 2023, we, certain of our subsidiaries and a wholly-owned special purpose subsidiary (the “SPV”), entered into a three-year $300 million revolving accounts receivable securitization facility (the “Securitization Facility”) with Wells Fargo Bank, N.A., as administrative agent, and certain third-party financial institutions (the “Purchasers”). The Securitization Facility permits the SPV to draw up to a total of $300 million, subject to the outstanding amount of the receivables pool and other factors. The Securitization Facility matures on February 23, 2026, and is subject to customary termination events related to transactions of this type. The sale of receivables from the SPV is accounted for in the Company’s financial statements as a "true-sale" under Accounting Standards Codification ("ASC") Topic 860.

 

Under the Securitization Facility, the SPV sells to the Purchasers certain receivables, including all rights, title, and interest in the related receivables (“Sold Receivables”). The parties intend that the conveyance of accounts receivables to the Purchasers, for the ratable benefit of the Purchasers will constitute a purchase and sale of receivables and not a pledge for security. The SPV has guaranteed to each Purchaser the prompt payment of Sold Receivables, and to secure the prompt payment and performance of such guaranteed obligations, the SPV has granted a security interest to the Purchasers in all assets of the SPV. In our capacity as servicer under the Securitization Facility, we are responsible for administering and collecting receivables and have made customary representations, warranties, covenants and indemnities. We do not record a servicing asset or liability since the estimated fair value of the servicing of the receivables approximates the servicing income. We also provided a performance guarantee for the benefit of the Purchasers.

 

The Securitization Facility is subject to interest charges, at the adjusted one-month Secured Overnight Financing Rate (“SOFR”) plus a margin (100 basis points) on the amount of the outstanding facility. The SPV was required to pay an upfront fee and a commitment fee in connection with the Securitization Facility. Servicing fee income recognized during the three-months ended March 31, 2023, was not material. The SPV is a separate legal entity with its own separate creditors who will be entitled to access the SPV’s assets before the assets become available to us. As a result, the SPV’s assets are not available to pay our creditors or any of our subsidiaries, although collections from the receivables in excess of amounts required to repay the Purchasers under the Securitization Facility and other creditors of the SPV may be remitted to us.

 

The proceeds of the Securitization Facility are classified as operating activities in our Consolidated Statement of Cash Flows. Cash received from collections of Sold Receivables is used by the SPV to fund additional purchases of receivables on a revolving basis or to return all or any portion of outstanding capital of the Purchasers. Subsequent collections on the pledged receivables, which have not been sold, will be classified as operating cash flows at the time of collection.

 

The amount sold to the Purchasers was $300 million at each of March 31, 2024 and December 31, 2023, which was derecognized from the Consolidated Balance Sheets. As collateral against sold receivables, the SPV maintains a certain level of unsold receivables, which was $307 million and $296 million at March 31, 2024 and December 31, 2023, respectively. Total receivables sold under the Securitization Facility were $607 million and $597 million in the three-months ended March 31, 2024 and 2023, respectively. Pursuant to the Securitization Facility, we recognized a charge of $9 million in the three-months ended March 31, 2023, and the charge recognized in the three-months ended March 31, 2024 was not material. These charges represented the discount on the accounts receivable balance transferred to the SPV. This discount is included in our loss on disposal of assets in our Consolidated Statements of Operations.

 

12

 

The following table provides a roll-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):

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Beginning balance

 $17  $16 

Provision for credit losses

  -   15 

Amounts written off

  (1)  - 

Ending balance

 $16  $31 

 

Recent Accounting Pronouncements. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The purpose of this amendment was to improve disclosures related to reportable segments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Currently we do not expect that the implementation of these changes will have a material effect on our financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The purpose of this amendment was to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Currently we do not expect that the implementation of these changes will 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. 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 balance sheet.

 

Deferred Revenue. We record a deferred revenue for cash deposits received from our customers that are to be applied as payment once the performance obligation arises and is satisfied. These deposits are recorded as deferred revenue on our balance sheet as advertising deposit liabilities. 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 balance sheet. 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 an advertising 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 $13 million of revenue in the three-months ended March 31, 2024 that was included in the advertising deposit liability balance as of December 31, 2023. We also record other deposit liabilities for cash received in advance for other arrangements, for which revenue is as earned in future periods.

 

13

 

The following table presents our deferred revenue by type (in millions):

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

Advertising deposit liabilities

 $12  $13 

Other deposit liabilities

  10   10 
Total deferred revenue $22  $23 

 

Disaggregation of Revenue. Revenue from our production companies segment is generated through our direct sales channel. Revenue from our broadcast 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

 
  

March 31,

 
  

2024

  

2023

 

Market and service type:

        

Broadcast advertising:

        

Core advertising

 $372  $357 

Political

  27   8 

Total advertising

  399   365 

Retransmission consent

  381   395 

Production companies

  24   22 

Other

  19   19 

Total revenue

 $823  $801 
         

Sales Channel:

        

Direct

 $556  $558 

Advertising agency intermediary

  267   243 

Total revenue

 $823  $801 

 

14

 
 

3.

Long-term Debt

 

As of March 31, 2024 and December 31, 2023, long-term debt consisted of obligations under our 2019 Senior Credit Agreement (as defined below), our 5.875% senior notes due 2026 (the “2026 Notes”), our 7.0% senior notes due 2027 (the “2027 Notes”), our 4.75% senior notes due 2030 (the “2030 Notes”) and our 5.375% notes due 2031 (the “2031 Notes”), as follows (in millions):

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

Long-term debt:

        

2019 Senior Credit Agreement:

        

2019 Term Loan (matures January 2, 2026)

  1,190   1,190 

2021 Term Loan (matures December 1, 2028)

  1,466   1,470 

2026 Notes (matures July 15, 2026)

  700   700 

2027 Notes (matures May 15, 2027)

  750   750 

2030 Notes (matures October 15, 2030)

  800   800 

2031 Notes (matures November 15, 2031)

  1,300   1,300 

Total outstanding principal, including current portion

  6,206   6,210 

Unamortized deferred loan costs - 2019 Term Loan

  (13)  (12)

Unamortized deferred loan costs - 2021 Term Loan

  (4)  (4)

Unamortized deferred loan costs - 2024 Revolving Credit Facility

  (6)  (2)

Unamortized deferred loan costs - 2026 Notes

  (2)  (3)

Unamortized deferred loan costs - 2027 Notes

  (5)  (6)

Unamortized deferred loan costs - 2030 Notes

  (9)  (10)

Unamortized deferred loan costs - 2031 Notes

  (14)  (14)

Unamortized premium - 2026 Notes

  1   1 

Less current portion

  (15)  (15)

Long-term debt, less deferred financing costs

 $6,139  $6,145 
         

Borrowing availability under Revolving Credit Facility

 $619  $494 

 

Revolving Credit Facility. On February 16, 2024, we entered into a second amendment (the “Second Amendment”) of our Senior Credit Agreement. The Second Amendment, among other things, (i) increased the aggregate commitments under the existing $500 million Revolving Credit Facility by $125 million, resulting in aggregate commitments under the Revolving Credit Facility of $625 million and (ii) extended the maturity date of a $552.5 million tranche of the Revolving Credit Facility to December 31, 2027 (subject to a springing maturity in certain circumstances set forth in the Second Amendment), with a remaining non-extending tranche of the Revolving Credit Facility of $72.5 million maturing on December 1, 2026 (subject to a springing maturity in certain circumstances set forth in the Second Amendment). Borrowings under the Revolving Credit Facility bear interest, at our option, at either the SOFR rate or the Base Rate, in each case, plus an applicable margin. Because of their relationship to the interest rate caps, described below, borrowings under the 2021 Term Loan and 2019 Term Loan bear interest at the 1-month SOFR rate, plus applicable margin. As of March 31, 2024, the interest rate on the balance outstanding under the 2021 Term Loan and the 2019 Term Loan were 8.4% and 7.9%, respectively.

 

Interest Rate Caps. On February 23, 2023, we entered into two interest rate caps pursuant to an International Swaps and Derivatives Association ("ISDA") Master Agreement with two counterparties, Wells Fargo Bank, NA and Truist Bank, respectively. At March 31, 2024, the caps have a combined notional value of approximately $2.6 billion and mature on December 31, 2025. The interest rate caps protect the us against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows on a portion of our variable-rate debt. We designated the interest rate caps as cash flow hedges of our risk of changes in cash flows attributable to changes in 1-month SOFR on our outstanding variable-rate debt in accordance with ASC 815.

 

15

 

The interest rate caps, as amended, effectively limit the annual interest charged on our 2019 Term Loan and 2021 Term Loan to a maximum of 1-month Term SOFR of 4.97% and 5.015%. We are required to pay aggregate fees in connection with the interest rate caps of approximately $34 million that is due and payable at maturity on December 31, 2025. On the initial designation date, we recognized an asset and corresponding liability for the deferred premium payable equal to $34 million. The asset is amortized into interest expense straight-line over the term of the hedging relationship. At March 31, 2024, the recorded value of the asset was $21 million, net of accumulated amortization. At March 31, 2024 and December 31, 2023, the fair value of the derivative liability was $23 million. We present the deferred premium, the asset, and the fair value of the derivative, net within other non-current liabilities in our condensed consolidated balance sheets.

 

The ISDA Master Agreement, together with its related schedules, contain customary representations, warranties and covenants. The interest rate caps were not entered into for speculative trading purposes. Changes in the fair value of the interest rate caps are reported as a component of other comprehensive income. Actual gains and losses are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and are presented in the same income statement line item as the earnings effect of the hedged transaction. Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness are recognized currently in earnings and are presented in the same line of the income statement for the hedged item. We recognized $3 million and $1 million of amortization expense for the asset during the three-months ended March 31, 2024 and 2023, respectively, which is included as a component of cash flows from operating activities in our condensed consolidated statement of cash flows. Cash flows received from the counterparties pursuant to the interest rate caps are included as components of cash flows from financing activities in our condensed consolidated statements of cash flows. During the three-months ended March 31, 2024, we received $2 million of cash payments from the counterparties that we reclassified as reductions of interest expense from the interest rate caps in our condensed consolidated statement of operations. During the three-months ended March 31, 2023, SOFR was less than 4.97% and 5.015%, therefore, we did not receive any cash payments from the counterparties and, thus, we did not reclassify any amounts into interest expense from the interest rate caps in our condensed consolidated statement of operations.

 

For all of our interest bearing obligations, we made interest payments of approximately $75 million and $78 million during the three-months ended March 31, 2024 and 2023, respectively. During the three-months ended March 31, 2024 and 2023, respectively, we capitalized less than $1 million and $6 million and of interest payments related to the Assembly Atlanta project.

 

As of March 31, 2024, the aggregate minimum principal maturities of our long-term debt for the remainder of 2024 and the succeeding five years were as follows (in millions):

 

  

Minimum Principal Maturities

 

Year

 

2019 Senior

Credit

Agreement

  

2026

Notes

  

2027

Notes

  

2030

Notes

  

2031

Notes

  

Total

 

Remainder of 2024

 $11  $-  $-  $-  $-  $11 

2025

  15   -   -   -   -   15 

2026

  1,205   700   -   -   -   1,905 

2027

  15   -   750   -   -   765 

2028

  1,410   -   -   -   -   1,410 

2029

  -   -   -   -   -   - 

Thereafter

  -   -   -   800   1,300   2,100 

Total

 $2,656  $700  $750  $800  $1,300  $6,206 

 

As of March 31, 2024, there were no significant restrictions on the ability of our subsidiaries to distribute cash to us or to the guarantor subsidiaries. The 2019 Senior Credit Agreement contains affirmative and restrictive covenants with which we must comply. The 2026 Notes, the 2027 Notes, the 2030 Notes and the 2031 Notes also include covenants with which we must comply. As of March 31, 2024 and December 31, 2023, we were in compliance with all required covenants under all our debt obligations.

 

16

 
 

4.

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 1, 2, 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

 

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The use of different market assumptions or methodologies could have a material effect on the fair value measurement.

 

The carrying amounts of accounts receivable, prepaid and other current assets, accounts payable, employee compensation and benefits, accrued interest, other accrued expenses, and deferred revenue approximate fair value at both March 31, 2024 and December 31, 2023.

 

At each of March 31, 2024 and December 31, 2023 the carrying amount of our long-term debt was $6.2 billion. The fair value of our long-term debt at March 31, 2024 and December 31, 2023 was $5.3 billion and $5.6 billion, respectively. The fair value of our long-term debt is based on observable estimates provided by third party financial professionals as of each date, and as such is classified within Level 2 of the fair value hierarchy.

 

The fair value of our interest rate caps are based on observable estimates provided by the counterparties and, as such, are classified within Level 2 of the fair value hierarchy. At each of March 31, 2024 and December 31, 2023, the fair value of the interest caps was a liability of $23 million and is recorded as an other non-current liability in our condensed consolidated balance sheets.

 

 

5.

Stockholders Equity

 

We are authorized to issue 245 million shares in total of all classes of stock consisting of 25 million shares of Class 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 common stock and Class A common stock are identical, except that our Class A common stock has 10 votes per share and our common stock has one vote per share.

 

Our common stock and Class A common stock are entitled to receive cash dividends if declared, on an equal per-share basis. The Board of Directors declared a quarterly cash dividend of $0.08 per share on our common stock and Class A common stock to shareholders of record on each of March 15, 2024 and 2023, payable on March 28, 2024 and March 31, 2023. The total dividend paid was $8 million and $7 million during the three-month periods ending March 31, 2024 and 2023, respectively.

 

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 common stock. As of March 31, 2024, we had reserved 4 million shares and 1 million shares of our common stock and Class A common stock, respectively, for future issuance under various employee benefit plans. As of December 31, 2023, we had reserv