Gray Television's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Gray Television (GTN)

Q1 2012 Earnings Call

May 02, 2012 11:30 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

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Aaron Watts - Deutsche Bank AG, Research Division

Barry L. Lucas - Gabelli & Company, Inc.

Lawrence Schnurmacher

Michael McCaffrey

Unknown Analyst

Presentation

Operator

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

Hilton H. Howell

Thank you, operator, and good morning, everyone. Welcome to the first quarter 2012 earnings call for Gray Television. As the operator mentioned, I am Hilton Howell, Vice Chairman and CEO of the company. I will make a few brief comments, followed by Bob Prather, our President and Chief Operating Officer; and then Jim Ryan, our Senior Vice President and Chief Financial Officer. They will all add on after this quarter's outstanding results. Questions will be answered at the conclusions of our comments.

Candidly, it was a fantastic quarter. Total revenues soared by 16% to $80.6 million from $69.7 million last year, a $10.9 million increase. Record-setting political advertising and retransmission consent revenue, coupled with strong growth and local advertising and Internet advertising, were behind this quarter's record-setting results. And what we see as a sign of things to come, Gray received $5 million in political advertising this quarter, a new record for first quarter political ad spends. To compare in 2011, for the first quarter, Gray received $1.4 million in political advertising, in 2010, we received $2.8 million and in 2009, we received $3.1 million.

And what we can only see as a sign of improving economy in our core advertising categories, our 5 largest local and national advertising categories all increased. Automotive increased by 8%, restaurants increased also by 8%, medical increased by 15%, communications increased by 17% and furniture and appliances increased by 5%. These excellent results led to net income of $2.2 million or $0.04 per share for the quarter compared to a loss of $4.9 million or $0.09 per share last year.

In our last conference call, we said that we expected robust and likely record revenue growth and earnings for the year, and our results today have, we believed, confirmed our confidence. The Super Bowl on NBC produced about $600,000 in increase for Gray compared to last year's Super Bowl broadcast on the FOX network. Further, we believe that the NBC broadcast of the Summer Olympics from London will be a certain ratings winner for the network and for Gray's 10 NBC stations this summer. And obviously, we expect continued record-setting political advertising in this presidential election year.

We're also proud to note that on April 4, Standard & Poor's raised its corporate credit rating on Gray from B- to B with a stable outlook, and this past Monday, Moody's followed suit and raised its outlook on Gray to positive.

With regard to our balance sheet this quarter, we have continued to reduce our debt and have prepaid approximately $10 million and expect much more substantial debt reduction to the balance of the year. Clearly, we are very pleased with our results this quarter and expect great things for the rest of 2012.

With that, I will turn it over to Bob Prather. Bob?

Robert S. Prather

Thanks, Hilton. I appreciate it. Thank you. Hilton summed it up pretty good. It was a good quarter. We're very happy with it. I think the rest of the year is looking strong right now. The economy, at least for the broadcast industry, seems to be coming back pretty strong. Local has been very, very good. Automotive is leading the charge as you would expect. I've talked to a lot of our managers and a lot of car dealers around and they're all saying that they're getting a huge amount of activity in showrooms, and the key thing is, that finance is available, interest rates at all-time lows, leasing is back in a big way. And so I think the car dealers are going to continue to have a very, very strong year the rest of this year. There's a lot of pent-up demand from 2009 and '10 when the volume of cars that show in this country has dropped close to almost 40% during that time period. So I think there's a lot of people out there sitting with the 5-, 6-, 7-year-old cars that are looking to get a new car. So I think this is going to continue.

We're continuing our local HD conversion. We'll be through with virtually all our stations, except for a few of our smaller markets by the end of this year. I think it's gone extremely well. I think it's extremely important. I think all of you that have an HD television. I'm pretty sure [indiscernible] probably got one. You can't even watch standard definition anymore once you watch HD. And that includes local news. And I think people work with their feet. If you don't have local news on in the market, somebody else does. We have been very fortunate to be first in most of our markets with local news and where we work first. We were right behind whoever went on first. So I want us to continue this, and this is extremely important for us to maintain our news presence and also to maintain our strong #1 ratings and reinforce our markets. So this is something we want to continue.

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