# GRAY MEDIA, INC (GTN) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from GRAY MEDIA, INC's 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/43196/000143774925005406/gtn20241231_10k.htm Accession: 0001437749-25-005406 Filing date: 2025-02-27 Report date: 2024-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/GTN/ All MD&A years: /company/GTN/mda/ Previous year: /company/GTN/mda/fy2023/ (FY 2023) Next year: /company/GTN/mda/fy2025/ (FY 2025) Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Overview Introduction. The following discussion and analysis of the financial condition and results of operations of Gray Media, Inc. and its consolidated subsidiaries (except as the context otherwise provides, “Gray,” the “Company,” “we,” “us” or “our”) should be read in conjunction with our audited consolidated financial statements and notes thereto included elsewhere herein. This section of our Annual Report discusses 2024 and 2023 items and year-over-year comparisons between 2024 and 2023. A detailed discussion of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7. of our Annual Report for the year ended December 31, 2023. Business 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 serving 113 television markets that collectively reach approximately 37 percent of US television households. The portfolio includes 78 markets with the top-rated television station and 99 markets with the first and/or second highest rated television station, as well as the largest Telemundo Affiliate group with 44 markets totaling over 1.5 million Hispanic TV Households. We also own Gray Digital Media, a full-service digital agency offering national and local clients digital marketing strategies with the most advanced digital products and services. Our additional media properties include video production companies Raycom Sports, Tupelo Media Group, and PowerNation Studios, and studio production facilities Assembly Atlanta and Third Rail Studios. Our operating revenues are derived primarily from broadcast and digital advertising, retransmission consent fees and, to a lesser extent, other sources such as production of television and event programming, television commercials, tower rentals and management fees. For the years ended December 31, 2024, 2023 and 2022, we generated revenue of $3.6 billion, $3.3 billion and $3.7 billion, respectively. Revenues, Operations, Cyclicality and Seasonality. Broadcast advertising is sold for placement generally preceding or following a television station’s network programming and within local and syndicated programming. Broadcast advertising is sold in time increments and is priced primarily on the basis of a program’s popularity among the specific audience an advertiser desires to reach. In addition, broadcast advertising rates are affected by the number of advertisers competing for the available time, the size and demographic makeup of the market served by the station and the availability of alternative advertising media in the market area. Broadcast advertising rates are generally the highest during the most desirable viewing hours, with corresponding reductions during other hours. The ratings of a local station affiliated with a major network can be affected by ratings of network programming. Most advertising contracts are short-term, and generally run only for a few weeks. We also sell digital advertising on our stations’ websites and mobile apps. These advertisements may be sold as banner advertisements, video advertisements and other types of advertisements or sponsorships. 34 Our broadcast and digital advertising revenues are affected by several factors that we consider to be seasonal in nature. These factors include: [[GREPCENT_TABLE]] [["\u25cf","Spending by political candidates, political parties and special interest groups increases during the even-numbered \u201con-year\u201d of the two-year election cycle. This political spending typically is heaviest during the fourth quarter of such years;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Broadcast advertising revenue is generally highest in the second and fourth quarters each year. This seasonality results partly from increases in advertising in the spring and in the period leading up to and including the holiday season;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Core advertising revenue on our NBC-affiliated stations increases in certain years as a result of broadcasts of the Olympic Games; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Because our stations and markets are not evenly divided among the Big Four broadcast networks, our local and national advertising revenue can fluctuate between years related to which network broadcasts the Super Bowl."]] [[/GREPCENT_TABLE]] We derived a material portion of our non-political broadcast advertising revenue from advertisers in a limited number of industries, particularly the services sector, comprising financial, legal and medical advertisers, and the automotive industry. The services sector has become an increasingly important source of advertising revenue over the past few years. During the years ended December 31, 2024, 2023 and 2022 approximately 23%, 27% and 28%, respectively, of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to the services sector. During the years ended December 31, 2024, 2023 and 2022 approximately 20%, 20% and 17%, respectively, of our broadcast advertising revenue (excluding political advertising revenue) was obtained from advertising sales to automotive customers. Revenue from these industries may represent a lower percentage of total revenue in even-numbered years due to, among other things, the decreased availability of advertising time, as a result of such years being the “on-year” of the two-year election cycle. Our primary broadcasting operating expenses are employee compensation, related benefits and programming costs. In addition, the broadcasting operations incur overhead expenses, such as maintenance, supplies, insurance, rent and utilities. A large portion of the operating expenses of our broadcasting operations is fixed. We continue to monitor our operating expenses and seek opportunities to reduce them where possible. Please see our “Results of Operations” and “Liquidity and Capital Resources” sections below for further discussion of our operating results. 2024 Refinancing and Debt Reduction Activities. During 2024 we completed several steps to enhance our liquidity, to extend the maturity of portions of our debt obligations that were scheduled to mature in the near future and to reduce the principal amount of our debt outstanding. Please refer to Note 4. “Long-Term Debt” for further information. During 2024, we: [[GREPCENT_TABLE]] [["\u25cf","Increased lender commitments under our Revolving Credit Facility to $680 million and extended the maturity date of all commitments thereunder to December 31, 2027;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Issued a $500 million 2024 Term Loan that will mature on June 4, 2029 ($498 million outstanding at December 31, 2024);"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Issued $1.25 billion of 2029 Notes, that are secured pari passu with our Senior Credit Agreement and that will mature on July 15, 2029;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Fully repaid the $1.15 billion 2019 Term Loan that was scheduled to mature on January 2, 2026; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Pre-paid through a tender offer, $690 million of the $700 million in outstanding 2026 Notes that were scheduled to mature on July 15, 2026."]] [[/GREPCENT_TABLE]] 35 In addition, in the year ended December 31, 2024 we used $327 million of cash to repurchase and retire an aggregate principal amount of $373 million of our outstanding 2019 Term Loan, 2027 Notes, 2030 Notes and 2031 Notes on the open market. Currently, our Board of Directors has authorized us to make additional open market repurchases of our indebtedness of $250 million. Together with other payments at par, collectively, these actions resulted in a $520 million reduction in the principal amount of our outstanding indebtedness at December 31, 2024, as compared to December 31, 2023. Risk Factors. The broadcast television industry relies primarily on advertising revenue and faces significant competition. For a discussion of certain other presently known, significant risk factors that may affect our business, see “Item 1A. Risk Factors” included elsewhere herein. Revenue Set forth below are the principal types of revenue, less agency commissions, and the percentage contribution of each to our total revenue (dollars in millions): [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2024","","","2023","","","2022"],["","","Amount","","","%","","","Amount","","","%","","","Amount","","","%"],["Revenue:"],["Core advertising","","$","1,490","","","","41","%","","$","1,514","","","","46","%","","$","1,496","","","","41","%"],["Political","","","497","","","","14","%","","","79","","","","2","%","","","515","","","","14","%"],["Retransmission consent","","","1,482","","","","41","%","","","1,532","","","","47","%","","","1,496","","","","41","%"],["Production companies","","","105","","","","3","%","","","86","","","","3","%","","","93","","","","3","%"],["Other","","","70","","","","1","%","","","70","","","","2","%","","","76","","","","1","%"],["Total","","$","3,644","","","","100","%","","$","3,281","","","","100","%","","$","3,676","","","","100","%"]] [[/GREPCENT_TABLE]] Results of Operations Year Ended December 31, 2024 (“2024”) Compared to Year Ended December 31, 2023 (“2023”) Revenue. Total revenue increased $363 million, or 11%, to $3.6 billion for 2024 compared to 2023. During 2024: [[GREPCENT_TABLE]] [["","\u25cf","Core advertising revenue decreased by $24 million, due primarily to displacement during the on-year of the two-year political advertising cycle, partially offset by advertising revenue of $18 million from the broadcast of the Super Bowl on our 54 CBS channels, compared to $6 million of revenue relating to the broadcast of the Super Bowl on our 27 FOX channels during 2023, and $20 million of advertising revenue on our 53 NBC channels from the broadcast of the 2024 Olympic Games;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Consistent with 2024 being the on-year of the two-year political advertising cycle, political advertising revenue increased by $418 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Retransmission consent revenue decreased by $50 million due to a decrease in subscribers, offset, in part, by an increase in rates; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Production company revenue increased by $19 million in 2024 primarily due to the start-up of our operations at Assembly Atlanta."]] [[/GREPCENT_TABLE]] Broadcasting Expenses. Broadcasting expenses (before depreciation, amortization, impairment and gain on disposal of assets) increased $49 million, or 2%, to $2.3 billion for 2024, compared to 2023. 36 During 2024: [[GREPCENT_TABLE]] [["","\u25cf","Broadcasting payroll and employee benefit expenses increased by $27 million primarily as a result of routine increases in compensation of $32 million, increases of $2 million severance pay and offset in part by decreases of $8 million in contributions to our defined contribution retirement plan;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Broadcasting non-payroll expenses increased by $21 million primarily due to increases in sports programming costs; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Broadcast non-cash stock-based compensation expense was $5 million in each of the 2024 and 2023 years."]] [[/GREPCENT_TABLE]] Production Company Expenses. Production company expenses (before depreciation, amortization, impairment and gain or loss on disposal of assets) decreased by approximately $32 million in 2024 to $83 million, compared to $115 million in 2023. Production company operating expenses decreased in 2024 primarily due to significant expenses incurred in 2023, which did not re-occur in 2024. Corporate and administrative expenses. Corporate and administrative expenses (before depreciation, amortization, impairment and gain or loss on disposal of assets) decreased by $8 million, or 7%, to $104 million in 2024 compared to $112 million in 2023, primarily as a result of decreases in professional services costs. We recorded corporate non-cash stock-based compensation expense of $17 million and $15 million in 2024 and 2023, respectively. Depreciation. Depreciation of property and equipment totaled $144 million and $145 million for 2024 and 2023, respectively. Amortization of intangible assets. Amortization of intangible assets totaled $125 million and $194 million for 2024 and 2023, respectively. Amortization decreased primarily due to finite-lived intangible assets becoming fully amortized. Impairment of goodwill and other intangible assets. In 2024 we did not incur impairment charges, compared to $43 million of impairment charges incurred in 2023. Loss on Disposals of Assets, Net. We recognized a loss on disposal of assets of $20 million in 2024 compared to a loss on disposal of assets of $21 million in 2023. The loss in 2024 was primarily related to the acquisition of a construction permit to build television station KCBU in exchange for the divestiture of television stations KCWY and KGWN in which we recognized a loss of $14 million. The loss in 2023 was primarily related to the sale of television station KNIN, in which we recognized a loss of $14 million in 2023. Miscellaneous Income, Net. Miscellaneous income, net totaled $117 million and $7 million in 2024 and 2023, respectively. Miscellaneous income, net in 2024 was due primarily to a gain of $110 million from the sale of our investment in BMI. Impairment of Investments. During 2024 and 2023, we wrote down the value of certain investments to their estimated net realizable values. The total impairment charges were $25 million and $29 million in 2024 and 2023, respectively. Interest Expense. Interest expense increased $45 million, or 10%, to $485 million for 2024 compared to 2023. This increase was primarily attributable to several factors including: increases in average interest rates on all of our debt to 7.2% in 2024 compared to 6.5% in 2023, partially offset by a decrease in the outstanding principal balances of our debt, for a net increase of $22 million; a reduction in the amount of capitalized construction period of interest which increased interest expense by $19 million; an increase in deferred financing cost amortization, consistent with our 2024 refinancing activities, which increased interest expense by $2 million; and an increase in the amortization of costs related to our interest rate caps which increased interest expense by $2 million. 37 Gain (Loss) on Early Extinguishment of Debt. We recorded a gain on the early extinguishment of debt of $34 million in 2024, primarily as a result of our open-market repurchases of debt, partially offset by the write-off of deferred financing costs related to the open-market repurchases and expenses incurred related to our refinancing activities. We recorded a loss on the early extinguishment of debt of $3 million in 2023 related the write-off of deferred financing costs related to the partial repayment of a portion of our 2017 Term Loan. Income Tax Expense. Our effective income tax rate increased to a net provision of 24% for 2024 from 7% for 2023. Our effective income tax rates differed from the statutory rate due to the following items: [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2024","","","2023"],["Statutory federal income tax rate","","","21","%","","","21","%"],["Current year permanent items","","","1","%","","","(13",")%"],["State and local taxes, net of federal tax benefit","","","4","%","","","6","%"],["Reserve for uncertain tax positions","","","(3",")%","","","(1",")%"],["Other items, net","","","1","%","","","(6",")%"],["Effective income tax expense rate","","","24","%","","","7","%"]] [[/GREPCENT_TABLE]] We file a consolidated federal income tax return and such state or local tax returns as are required based on our current forecasts. We estimate that these income tax payments, before deducting refunds, will be within a range of $80 million to $100 million in 2025. Liquidity and Capital Resources General. Our primary sources of liquidity are cash on hand, cash flows from operations and borrowing capacity under our Revolving Credit Facility. We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of December 31, 2024, while others are considered future commitments. Our contractual obligations primarily consist of amounts required to be paid for: the acquisition of television stations; the purchase of property and equipment; service and other agreements; commitments for various syndicated television programs; and commitments under affiliation agreements with networks. In addition to our contractual obligations, we expect that our primary anticipated uses of liquidity in 2025 will be to reduce our indebtedness, fund our working capital, make interest and tax payments, fund capital expenditures, pursue certain strategic opportunities and maintain operations. For a description of the Company’s various contractual and other commitments requiring future payments, see Note 12 “Commitments and Contingencies” of our audited consolidated financial statements included elsewhere herein. In addition, for a description of the Company's interest payments and future maturities of long-term debt, see Note 4 “Long-term Debt” of our audited consolidated financial statements included elsewhere herein. 38 The following tables present data that we believe is helpful in evaluating our liquidity and capital resources (dollars in millions): [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2024","","","2023","","","2022"],["Net cash provided by operating activities","","$","751","","","$","648","","","$","829"],["Net cash used in investing activities","","","(28",")","","","(291",")","","","(503",")"],["Net cash used in financing activities","","","(609",")","","","(397",")","","","(454",")"],["Net increase (decrease) in cash","","$","114","","","$","(40",")","","$","(128",")"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","December 31,"],["","","2024","","","2023"],["Cash","","$","135","","","$","21"],["Long-term debt, including current portion, less deferred financing costs","","$","5,621","","","$","6,160"],["Series A Perpetual Preferred Stock","","$","650","","","$","650"],["Borrowing availability under Senior Credit Agreement","","$","674","","","$","494"]] [[/GREPCENT_TABLE]] Net Cash Provided By (Used In) Operating, Investing and Financing Activities – 2024 Compared to 2023 Net cash provided by operating activities increased $103 million to $751 million in 2024 compared to net cash provided by operating activities of $648 million in 2023. The increase in cash provided by operating activities was primarily due to an increase in net income of $451 million; offset, in part, by a $144 million decrease in cash provided by changes in working capital; and a decrease in net non-cash charges of $204 million. Net cash used in investing activities decreased $263 million to $28 million for 2024 compared to $291 million for 2023. The net decrease in the amount used was primarily due to a decrease in cash used for purchases of property and equipment and an increase in proceeds received from the sale of investments and other assets. Net cash used in financing activities increased $212 million to $609 million in 2024 compared to net cash used in financing activities of $397 million in 2023. During 2024 and 2023, we used $52 million of cash to pay dividends to holders of our preferred stock and $32 million and $30 million, respectively, to pay dividends to holders of our common stock. During 2024 and 2023, we used a net amount of $474 million and $310 million, respectively, for principal payments net of borrowings on our long-term debt. Liquidity. Based on our debt outstanding as of December 31, 2024, we estimate that we will make approximately $450 million in debt interest payments over the twelve months immediately following December 31, 2024. Although our cash flows from operations are subject to a number of risks and uncertainties, we anticipate that our cash on hand, future cash expected to be generated from operations, borrowings from time to time under the Senior Credit Agreement (or any such other credit facility as may be in place at the appropriate time) and, potentially, external equity or debt financing, will be sufficient to fund any debt service obligations, estimated capital expenditures and acquisition-related obligations for the next twelve months and the forseeable future. Any potential equity or debt financing would depend upon, among other things, the costs and availability of such financing at the appropriate time. We also believe that our future cash expected to be generated from operations and borrowing availability under the Senior Credit Agreement (or any such other credit facility) will be sufficient to fund our future capital expenditures and long-term debt service obligations for the next twelve months and the forseeable future. 39 Collateral, Covenants and Restrictions of our Credit Agreements. Our obligations under the Senior Credit Agreement and the 2029 Notes are secured by substantially all of our consolidated assets, excluding real estate. In addition, substantially all of our subsidiaries are joint and several guarantors of, and our ownership interests in those subsidiaries are pledged to collateralize, our obligations under the Senior Credit Agreement. Gray Media, Inc. is a holding company, and has no material independent assets or operations. For all applicable periods, the 2026 Notes, 2027 Notes, 2030 Notes and 2031 Notes have been fully and unconditionally guaranteed, on a joint and several, senior unsecured basis, by substantially all of Gray Media, Inc.’s subsidiaries. Any subsidiaries of Gray Media, Inc. that do not guarantee the 2026 Notes, 2027 Notes, 2030 Notes and 2031 Notes are not material or are designated as unrestricted under the Senior Credit Agreement. As of December 31, 2024, there were no significant restrictions on the ability of Gray Media, Inc.’s subsidiaries to distribute cash to Gray or to the guarantor subsidiaries. The Senior Credit Agreement contains affirmative and restrictive covenants with which we must comply, including: (a) limitations on additional indebtedness, (b) limitations on liens, (c) limitations on the sale of assets, (d) limitations on guarantees, (e) limitations on investments and acquisitions, (f) limitations on the payment of dividends and share repurchases, (g) limitations on mergers and (h) maintenance of the First Lien Leverage Ratio while any amount is outstanding under the revolving credit facility, as well as other customary covenants for credit facilities of this type. The 2026 Notes, 2027 Notes, 2029 Notes, 2030 Notes and 2031 Notes include covenants with which we must comply which are typical for financing transactions of their nature. As of December 31, 2024, we were in compliance with all required covenants under all of our debt obligations. In addition to results prepared in accordance with U.S. GAAP, “Leverage Ratio Denominator” is a metric that management uses to calculate our compliance with our financial covenants in our indebtedness agreements. This metric is calculated as specified in our Senior Credit Agreement and is a significant measure that represents the denominator of a formula used to calculate compliance with material financial covenants within the Senior Credit Agreement that govern our ability to incur indebtedness, incur liens, make investments and make restricted payments, among other limitations usual and customary for credit agreements of this type. Accordingly, management believes this metric is a very material metric to our debt and equity investors. Leverage Ratio Denominator gives effect to the revenue and broadcast expenses of all completed acquisitions and divestitures as if they had been acquired or divested, respectively, on January 1, 2023. It also gives effect to certain operating synergies expected from the acquisitions and related financings, and adds back professional fees incurred in completing the acquisitions. Certain of the financial information related to the acquisitions, if applicable, has been derived from, and adjusted based on, unaudited, un-reviewed financial information prepared by other entities, which Gray cannot independently verify. We cannot assure you that such financial information would not be materially different if such information were audited or reviewed and no assurances can be provided as to the accuracy of such information, or that our actual results would not differ materially from this financial information if the acquisitions had been completed on the stated date. In addition, the presentation of Leverage Ratio Denominator as determined in the Senior Credit Agreement and the adjustments to such information, including expected synergies, if applicable, resulting from such transactions, may not comply with U.S. GAAP or the requirements for pro forma financial information under Regulation S-X under the Securities Act of 1933. Leverage Ratio Denominator, as determined in the Senior Credit Agreement, represents an average amount for the preceding eight quarters then ended. 40 Our “Adjusted Total Indebtedness”, “First Lien Adjusted Total Indebtedness” and “Secured Adjusted Total Indebtedness”, in each case “Net of All Cash”, represents the amount of outstanding principal of our long-term debt, plus certain other obligations as defined in our Senior Credit Agreement, less all cash (excluding restricted cash) for the applicable amount of indebtedness. Below is a calculation of our “Leverage Ratio”, “First Lien Leverage Ratio” and “Secured Leverage Ratio” as defined in our Senior Credit Agreement as of December 31, 2024: Calculation of Leverage Ratio, First Lien Leverage Ratio and Secured Leverage Ratio, as each is defined in our Senior Credit Agreement (Unaudited): [[GREPCENT_TABLE]] [["","","Eight Quarters Ended"],["","","December 31, 2024"],["","","(in millions)"],["Net income","","$","299"],["Adjustments to reconcile from net income to Leverage Ratio Denominator as defined in our Senior Credit Agreement:"],["Depreciation","","","289"],["Amortization of intangible assets","","","319"],["Non-cash stock-based compensation","","","42"],["Common stock contributed to 401(k) plan","","","10"],["Loss on disposal of assets, net","","","41"],["Gain on disposal of investment, not in the ordinary course","","","(110",")"],["Interest expense","","","925"],["Gain on early extinguishment of debt","","","(31",")"],["Income tax expense","","","111"],["Impairment of investment","","","97"],["Amortization of program broadcast rights","","","66"],["Payments for program broadcast rights","","","(67",")"],["Pension benefit","","","(5",")"],["Contributions to pension plans","","","(4",")"],["Adjustments for unrestricted subsidiaries","","","45"],["Adjustments for stations acquired or divested, financings and expected synergies during the eight quarter period","","","(1",")"],["Other","","","2"],["Total eight quarters ended December 31, 2024","","$","2,028"],["Leverage Ratio Denominator (total eight quarters ended December 31, 2024, divided by 2)","","$","1,014"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","December 31, 2024"],["","","(dollars in millions)"],["Total outstanding principal, including current portion","","$","5,690"],["Letters of credit outstanding","","","6"],["Cash","","","(135",")"],["Adjusted Total Indebtedness","","$","5,561"],["Leverage Ratio (maximum permitted incurrence is 7.00 to 1.00)","","","5.49"],["Total outstanding principal secured by a first lien","","$","3,143"],["Cash","","","(135",")"],["First Lien Adjusted Total Indebtedness","","$","3,008"],["First Lien Leverage Ratio (maximum permitted incurrence is 3.5 to 1.00) (1)","","","2.97"],["Total outstanding principal secured by a lien","","$","3,143"],["Cash","","","(135",")"],["Secured Adjusted Total Indebtedness","","$","3,008"],["Secured Leverage Ratio (maximum permitted incurrence is 5.50 to 1.00)","","","2.97"]] [[/GREPCENT_TABLE]] (1) At any time any amounts are outstanding under our revolving credit facility, our maximum First Lien Leverage Ratio cannot exceed 4.25 to 1.00. 41 Retirement Plans We sponsor and contribute to defined benefit and defined contribution retirement plans. Effective on January 1, 2025, these plans were: [[GREPCENT_TABLE]] [["","\u25cf","The Gray Media, Inc. Retirement Plan (the \u201cGray Pension Plan\u201d)"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","The Gray Media 401(k) Savings Plan (the \u201cGray 401(k) Plan\u201d)"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Gray Media, Inc. Retirement Plan for Certain Bargaining Class Employees (the \u201cMeredith Plan\u201d)"]] [[/GREPCENT_TABLE]] The Gray Pension Plan is a defined benefit pension plan covering certain of our legacy employees. Benefits under the Gray Pension Plan are frozen and can no longer increase, and no new participants can be added to the plan. Our funding policy for the Gray Pension Plan is consistent with the funding requirements of existing federal laws and regulations under the Employee Retirement Income Security Act of 1974. A discount rate is selected annually to measure the present value of the benefit obligations. In determining the selection of a discount rate, we estimated the timing and amounts of expected future benefit payments and applied a yield curve developed to reflect yields available on high-quality bonds. The yield curve is based on an externally published index specifically designed to meet the criteria of United States Generally Accepted Accounting Principles (“U.S. GAAP”). The discount rate selected for determining benefit obligations as of December 31, 2024, was 5.48%, which reflects the results of this yield curve analysis. The discount rate used for determining benefit obligations as of December 31, 2023 was 4.79%. Our assumptions regarding expected return on plan assets reflects asset allocations, the investment strategy and the views of investment managers, as well as historical experience. In 2024, we used an assumed rate of return of 6.25% for our assets invested in the Gray Pension Plan. The estimated asset returns for this plan, calculated on a mean market value assuming mid-year contributions and benefit payments, were a gain of 0.7% for the year ended December 31, 2024, and a gain of 13.7% for the year ended December 31, 2023. Other significant assumptions relate to inflation, retirement and mortality rates. Our inflation assumption is based on an evaluation of external market indicators. Retirement rates are based on actual plan experience and mortality rates are based on the Pri-2012 total mortality table and the MP-2021 projection scale published by the Society of Actuaries. During the year ended December 31, 2024, we determined that no contribution to the Gray Pension Plan was required. During the year ended December 31, 2023, we contributed $4 million to the Gray Pension Plan. Currently we do not expect that a contribution to the Gray Pension Plan will be needed in 2025. The use of significantly different assumptions, or if actual experienced results differ significantly from those assumed, could result in our funding obligations being materially different. The Gray 401(k) Plan is a defined contribution plan intended to meet the requirements of section 401(k) of the Internal Revenue Code. During 2024 and 2023, employer contributions under the Gray 401(k) Plan include matching cash contributions at a rate of 100% of the first 1% of each employee’s salary deferral, and 50% of the next 5% of each employee’s salary deferral. In addition, the Company, at its discretion, may make an additional profit-sharing contribution, based on annual Company performance, to those employees who meet certain criteria. For the years ended December 31, 2024 and 2023, our matching contributions to our Capital Accumulation Plan were approximately $28 million and $26 million, respectively. An additional profit-sharing contribution was not approved for 2024. As of and for the year ended December 31, 2023, an additional profit-sharing contribution of $10 million was approved and accrued as a liability. This liability was settled in the first quarter of 2024 by the issuance of Gray common stock to the participants of the Gray 401(k) Plan. In connection with the Meredith Transaction, in 2021, we assumed a defined benefit pension plan covering certain legacy Meredith bargaining class employees. As of December 31, 2024 and 2023, the Meredith Plan had combined plan assets of $22 million and $16 million, respectively, and combined projected benefit obligations of $18 million and $11 million, respectively. A net asset of $4 million and $5 million for this plan are recorded in our financial statements as of December 31, 2024 and 2023, respectively. 42 See Note 11 “Retirement Plans” of our audited consolidated financial statements included elsewhere herein for further information concerning these retirement plans. Capital Expenditures We currently expect that our capital expenditures will range between approximately $85 million to $90 million during 2025, which includes capital expenditures at our Assembly Atlanta project. 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. Consistent with previous practice, we anticipate transferring certain public infrastructure at Assembly Atlanta to the CID for which we anticipate receiving proceeds during 2025. We expect reimbursements of approximately $25 million in 2025 for work completed to date, and that our capital expenditures in 2025 will be less than the reimbursements we expect to receive. We can give no assurances of the actual proceeds to be received in the future from the CID, nor the timing of any such proceeds. Off-Balance Sheet Arrangements Operating Commitments. We have various commitments for syndicated television programs. We have two types of syndicated television program contracts: first run programs and off network reruns. First run programs are programs such as Wheel of Fortune and off network reruns are programs such as The Big Bang Theory. First run programs have not been produced at the time the contract to air such programming is signed, and off network reruns have already been produced. For all syndicated television contracts, we record an asset and corresponding liability for payments to be made only for the current year of the first run programming and for the entire contract period for off-network programming. Only an estimate of the payments anticipated to be made in the year following the balance sheet date of the first run contracts are recorded on the current balance sheet, because the programs for the later years of the contract period have not been produced or delivered. The total license fee payable under a program license agreement allowing us to broadcast programs is recorded at the beginning of the license period and is charged to operating expense over the period that the programs are broadcast. The portion of the unamortized balance expected to be charged to operating expense in the succeeding year is classified as a current asset, with the remainder classified as a non-current asset. The liability for license fees payable under program license agreements is classified as current or long-term, in accordance with the payment terms of the various license agreements. The following are our material expected off balance sheet contractual obligations and commitments as of December 31, 2024: [[GREPCENT_TABLE]] [["\u25cf","Cash interest on long-term debt obligations, including interest expense on long-term debt and required future principal repayments under those obligations."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Preferred Stock dividends."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","On February 23, 2023, we, certain of our subsidiaries and a wholly-owned special purpose subsidiary (the \u201cSPV\u201d), entered into a three-year $300 million revolving accounts receivable securitization facility (the \u201cSecuritization Facility\u201d) with Wells Fargo Bank, N.A., as administrative agent, for the purpose of providing additional liquidity in order to repay indebtedness under the Senior Credit Agreement. 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 is subject to interest charges, at the one-month SOFR rate plus 100 basis points on the amount of the outstanding facility. The SPV is also required to pay an upfront fee and a commitment fee in connection with the Securitization Facility."]] [[/GREPCENT_TABLE]] 43 [[GREPCENT_TABLE]] [["\u25cf","Programming obligations not currently accrued that represent obligations for syndicated television programming whose license period has not yet begun, or the program is not yet available."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Network affiliation agreements representing the fixed obligations under our current agreements with broadcast networks. Certain network affiliation agreements include variable fee components such as percentage of revenue or rate per subscriber. Our network affiliation agreements expire at various dates primarily through December 31, 2028."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Service and other agreements for various non-cancelable contractual agreements for maintenance services and other professional services."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","Non-cancelable contractual obligations for various materials, services and construction costs related to development of our studio production facilities."]] [[/GREPCENT_TABLE]] For more information about these off-balance sheet contractual obligations and commitments please refer to Note 12 “Commitments and Contingencies” of our audited consolidated financial statements included elsewhere herein. Subsequent Events In December 2024, we entered into a series of agreements through which we anticipate receiving approximately $35 million in return for (a) all of Gray’s interests in certain third-party leases for space at Gray-owned tower sites, and (b) the exclusive right to market and lease space at those Gray-owned tower sites to third parties. We will retain ownership and control of each such tower site and will not incur any additional operating costs with respect to the subject tower sites. We anticipate closing the transactions at various times during 2025, with the majority of closings occurring in the first half of 2025. Inflation During 2024, we have experienced moderate inflation of our operating expenses and increases in interest rates on amounts outstanding under our Senior Credit Agreement. There can be no assurance that further increases in the rate of inflation or interest rates in the future would not have an adverse effect on operating results. Critical Accounting Policies The preparation of financial statements in conformity with U.S. GAAP requires us to make judgments and estimations that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those reported amounts. We consider our accounting policies relating to intangible assets and income taxes to be critical policies that require significant judgments or estimations in their application where variances may result in significant differences to future reported results. Our policies concerning intangible assets and income taxes are disclosed below. Variability of Critical Accounting Estimates. Our critical accounting estimates include estimates and assumptions that are material to our financial statements. These estimates and assumptions are used in: [[GREPCENT_TABLE]] [["\u25cf","our annual impairment testing of broadcast licenses and goodwill;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u25cf","our estimates of the fair value of assets acquired and liabilities assumed in businesses combinations; and"]] [[/GREPCENT_TABLE]] Our estimates and assumptions have been materially accurate in the past and have not changed materially. We do not expect that these assumptions are likely to change materially in the future. 44 Annual Impairment Testing of Broadcast Licenses and Goodwill. We evaluate broadcast licenses and goodwill for impairment on an annual basis, or more often when certain triggering events occur. Goodwill is evaluated at the reporting unit level. Our broadcasting operating segment is comprised of a single reporting unit. Each of the distinct businesses within our production companies operating segment represent a reporting unit. Therefore, as of December 31, 2024, we evaluated our goodwill for impairment for five reporting units. One reporting unit for all of our broadcast television operations and four for each of the distinct businesses within our production companies. The Company has considered the requirements as stipulated within ASC 350. Management has identified the applicable assets and liabilities for each of the reporting units in accordance with ASC 350. In the performance of our annual broadcast license and reporting unit impairment assessments, we have the option of performing a qualitative assessment to determine if it is more likely than not that the respective asset has been impaired. In 2024, we performed a qualitative assessment for 56 of our broadcast licenses and three of our reporting units. In 2023, we performed a qualitative assessment for 59 of our broadcast licenses and one of our reporting units. As part of this qualitative assessment, we evaluate the relative impact of factors that are specific to the reporting units as well as industry, regulatory and macroeconomic factors that could affect the significant inputs used to determine the fair value of the assets. We also consider the significance of the excess fair value over the carrying value reflected in prior quantitative assessments and the changes to the reporting units’ carrying value since the last impairment test. If we conclude that it is more likely than not that a broadcast license or reporting unit is impaired, or if we elect not to perform the optional qualitative assessment, we perform the quantitative assessment which involves comparing the estimated fair value of the broadcast license or reporting unit to its respective carrying value. For our annual broadcast licenses impairment test in 2024, we concluded that it was more likely than not that all of our broadcast licenses that were evaluated were not impaired based upon our qualitative assessments. We elected to perform a quantitative assessment for our remaining broadcast licenses and concluded that their fair values exceeded their carrying values. To estimate the fair value of our broadcast licenses, we considered assumptions related to historical market and station growth trends, third party market specific industry data, the anticipated performance of the stations and discount rates. Our valuation technique included theoretical assumptions of the costs that would be incurred to construct a station when the only owned asset is the broadcast license and theoretical assumptions for the associated revenues, operating margins and capital expenditures expected to be incurred in the start-up years. We also consider other relevant factors such as the technical qualities of the broadcast license and the number of competing broadcast licenses within that market. For our annual goodwill impairment test in 2024, we concluded that it was more likely than not that goodwill was not impaired based upon our qualitative assessments for one of our reporting units. We elected to perform a quantitative assessment for the remainder of our reporting units and concluded that their fair values exceeded their carrying values. To estimate the fair value of our reporting units, we utilize a discounted cash flow model supported by a market multiple approach. We believe that a discounted cash flow analysis is the most appropriate methodology to test the recorded value of long-term assets with a demonstrated long-lived/enduring franchise value. We believe the results of the discounted cash flow and market multiple approaches provide reasonable estimates of the fair value of our reporting units because these approaches are based on our actual results and reasonable estimates of future performance, and also take into consideration a number of other factors deemed relevant by us including, but not limited to, expected future market revenue growth, market revenue shares and operating profit margins. We have historically used these approaches in determining the value of our reporting units. We also consider a market multiple approach to corroborate our discounted cash flow analysis. We believe that this methodology is consistent with the approach that a strategic market participant would utilize if they were to value our television stations. 45 We believe we have made reasonable estimates and utilized appropriate assumptions to evaluate whether the fair values of our broadcast licenses and reporting units were less than their carrying values. If future results are not consistent with our assumptions and estimates, including future events such as a deterioration of market conditions or significant increases in discount rates, we could be exposed to impairment charges in the future. Any resulting impairment loss could have a material adverse impact on our consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows. At December 31, 2024 and 2023, the recorded value of our broadcast licenses was $5.3 billion and the recorded value of our goodwill was $2.6 billion, at each date. See Note 13 “Goodwill and Intangible Assets” of our audited consolidated financial statements included elsewhere herein, for the results of our annual impairment tests for the years ended December 31, 2024, 2023 and 2022. During 2023, as a result of the bankruptcy of Diamond Sports Group, LLC (“Diamond”), our production companies segment recorded a non-cash charge of $43 million for impairment of goodwill and other intangible assets.   Valuation of Network Affiliation Agreements. We believe that the value of a television station is derived primarily from the attributes of its broadcast license rather than its network affiliation agreement. These attributes have a significant impact on the audience for network programming in a local television market compared to the national viewing patterns of the same network programming. Certain other broadcasting companies have valued their stations on the basis that it is the network affiliation and not the other attributes of the station, including its broadcast license, which contributes to the operational performance of that station. As a result, we believe that these broadcasting companies allocate a significant portion of the purchase price for any station that they may acquire to the network affiliation relationship, and include in their network affiliation valuation amounts related to attributes which we believe are more appropriately reflected in the value of the broadcast license or reporting units. The methodology we used to value our stations was based on our evaluation of the broadcast licenses acquired and the characteristics of the markets in which they operated. Given our assumptions and the specific attributes of the stations we acquired from 2002 through December 31, 2024, we generally ascribe no incremental value to the incumbent network affiliation relationship in each market beyond the cost of negotiating a new agreement with another network and the value of any terms of the affiliation agreement that were more favorable or unfavorable than those generally prevailing in the market. Due to certain characteristics of a small number of the stations acquired in 2023, we ascribed approximately $14 million of the value of those transactions to network affiliations. Some broadcast companies may use methods to value acquired network affiliations different than those that we use. These different methods may result in significant variances in the amount of purchase price allocated to these assets among broadcast companies. If we were to assign higher values to all of our network affiliations and less value to our broadcast licenses or goodwill and if it is further assumed that such higher values of the network affiliations are finite-lived intangible assets, this reallocation of value might have a significant impact on our operating results. There is diversity of practice within the industry, and some broadcast companies have considered such network affiliation intangible assets to have a life ranging from 15 to 40 years depending on the specific assumptions utilized by those broadcast companies. 46 The following table reflects the hypothetical impact of the reassignment of value from broadcast licenses to network affiliations for our historical acquisitions (the first acquisition being in 1994) and the resulting increase in amortization expense assuming a hypothetical 15-year amortization period as of our most recent impairment testing date of December 31, 2024 (in millions, except per share data): [[GREPCENT_TABLE]] [["","","","","","","Percentage of Total"],["","","","","","","Value Reassigned to"],["","","","","","","Network"],["","","As","","","Affiliation Agreements"],["","","Reported","","","50%","","","25%"],["Balance Sheet (As of December 31, 2024):"],["Broadcast licenses","","$","5,311","","","$","2,656","","","$","3,983"],["Other intangible assets, net (including network affiliation agreements)","","","290","","","","1,741","","","","1,016"],["Statement of Operations (For the year ended December 31, 2024):"],["Amortization of intangible assets","","","125","","","","275","","","","200"],["Operating income","","","851","","","","701","","","","776"],["Net income attributable to common stockholders","","","323","","","","211","","","","267"],["Per share - basic","","$","3.40","","","$","2.22","","","$","2.81"],["Per share - diluted","","$","3.36","","","$","2.20","","","$","2.78"]] [[/GREPCENT_TABLE]] For future acquisitions, if any, the valuation of the network affiliations may differ from the values of previous acquisitions due to the different characteristics of each station and the market in which it operates. Recent Accounting Pronouncements. See Note 1 “Description of Business and Summary of Significant Accounting Policies” of our audited consolidated financial statements included elsewhere herein for more information.