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Note 1 - Basis of Presentation | 3 Months Ended
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Mar. 31, 2017
Notes to Financial Statements |
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] | 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, 2016, which was derived from the Company’s audited financial statements as of December 31, 2016, and our accompanying unaudited condensed consolidated financial statements as of March 31, 2017 and for the periods ended March 31, 2017 and 2016, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. 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 U.S. 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. Our operations consist of one reportable segment. 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, 2016 (the “2016 Form 10 -K”). Our financial condition as of, and operating results for the three -month period ended, March 31, 2017 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, 2017. Overview We are a television broadcast company headquartered in Atlanta, Georgia, that owns and/or operates television stations and leading digital assets in markets throughout the United States. As of March 31, 2017, we owned and/or operated television stations in 54 television markets broadcasting over 200 programming streams, including over 100 channels affiliated with the CBS Network (“CBS”), the NBC Network (“NBC”), the ABC Network (“ABC”) and the FOX Network (“FOX”). As of March 31, 2017, our station group reached approximately 10.1% of total United States television households. Cyclicality and Seasonality Broadcast advertising revenues are generally highest in the second and fourth quarters each year. This seasonality results partly from increases in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. Broadcast advertising revenues are also typically higher in even-numbered years due to increased spending by political candidates, political parties and special interest groups in advance of elections. This political spending typically is heaviest during the fourth quarter. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements. Our actual results could differ materially from these estimates. The most significant estimates we make relate to our allowance for doubtful accounts in receivables, valuation of goodwill and intangible assets, amortization of program broadcast rights and intangible assets, pension costs, income taxes, employee medical insurance claims, useful lives of property and equipment and contingencies. Variable Interest Entit y We consolidate a VIE when we are determined to be the primary beneficiary. In accordance with U.S. GAAP, in determining whether we are the primary beneficiary of a VIE for financial reporting purposes, we consider whether we have the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether we have the obligation to absorb losses or the right to receive returns that would be significant to the VIE. On January 17, 2017, we acquired two television stations that were divested by Nexstar Broadcasting, Inc. upon its merger with Media General, Inc. (“Media General”): WBAY-TV (ABC), in the Green Bay, Wisconsin television market, and KWQC-TV (NBC), in the Davenport, Iowa, Rock Island, Illinois, and Moline, Illinois or “Quad Cities” television market, for an adjusted purchase price of $269.9 million (the “Media General Acquisition”) using cash on hand. The Media General Acquisition was completed, in part, through a transaction with Gray Midwest EAT, LLC (“GME”), pursuant to which, we loaned GME $106.0 million that GME in turn used to acquire the broadcast licenses of the stations. Under the terms of our agreement with GME, we hold an option to acquire either the broadcast licenses held by GME or the equity ownership interests of GME for the same purchase price paid by GME for the property, net of the remaining balance owed to us by GME (the “Option”). The agreement includes both put and call provisions that also may require us to acquire the property following receipt of certain approvals from the Federal Communications Commission (the “FCC”). Based on the terms of our agreements with GME, the significance of the Media General Acquisition’s broadcast licenses, the terms of our option with GME and our loan to GME, we have determined that GME is a VIE of Gray. We believe we are the primary beneficiary of GME because, subject to the ultimate control of the licensees, we have the power to direct the activities that significantly impact the economic performance of GME through the services we provide, and our obligation to absorb losses and earn returns that would be considered significant to GME. As a result, we included the assets, liabilities and results of operations of GME in our consolidated financial statements beginning January 17, 2017, and continuing for so long as we remain the primary beneficiary. The carrying amounts and classification of the assets and liabilities of GME included in our condensed consolidated balance sheets as of March 31, 2017 are as follows (in thousands):
|  | March 31, |
|  | 2017 |
Assets: |  |  |  |
Broadcast licenses |  | $ | 149,846 |
Total assets |  | $ | 149,846 |
Liabilities: |  |  |  |
Current liabilities: |  |  |  |
Accrued liability for option exercise |  | $ | 43,846 |
Note payable |  |  | 106,000 |
Total current liabilities |  |  | 149,846 |
Total liabilities |  | $ | 149,846 |
The terms of the Option provide for the acquisition of the license assets of GME at an exercise price that was less than the carrying value of such assets as of March 31, 2017. The assets of GME can only be used to settle the obligations of GME and may not be sold, or otherwise disposed of, except for assets sold or replaced with others of like kind or value. A note payable of $106.0 million representing our loan to GME, and an accrued liability of $43.9 million representing the fair value of the Option, as of March 31, 2017, were eliminated in our condensed consolidated financial statements. Earnings Per Share We compute basic earnings per share by dividing net income by the weighted-average number of our common shares and Class A common shares outstanding during the relevant period. The weighted-average number of 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 U.S. 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 shares, including restricted shares and shares underlying stock options, in the denominator of the diluted weighted-average shares outstanding calculation, unless their inclusion would be antidilutive. The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding for the three -month periods ended March 31, 2017 and 2016 (in thousands):
|  | Three Months Ended |
|  | March 31, |
|  | 2017 |  |  | 2016 |
Weighted-average shares outstanding-basic |  |  | 71,877 |  |  |  | 71,791 |
Common stock equivalents for stock options and restricted stock |  |  | 642 |  |  |  | 791 |
Weighted-average shares outstanding-diluted |  |  | 72,519 |  |  |  | 72,582 |
Accumulated Other Comprehensive Loss Our accumulated other comprehensive loss balances as of March 31, 2017, and December 31, 2016, consist of adjustments to our pension liability and the related income tax effect. Our comprehensive income for the three -month periods ended March 31, 2017 and 2016 consisted entirely of net income. Therefore, a consolidated statement of comprehensive income is not presented for the three -month periods ended March 31, 2017 or 2016. Pro perty and Equipme nt Property and equipment are carried at cost. Depreciation is computed principally by the straight-line method. Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. The cost of any assets sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting profit or loss is reflected in income or expense for the period. In the three -month period ended March 31, 2017, our total property and equipment balance, before accumulated depreciation, increased approximately $23.1 million as a result of property and equipment acquired in connection with acquisitions of television stations in the period. The remaining changes in the balances in the three -months ended March 31, 2017 were due to routine property and equipment purchases and retirements. The following table lists the components of property and equipment by major category (dollars in thousands):
|  |  |  |  |  |  |  |  |  | Estimated |
|  | March 31, |  |  | December 31, |  |  | Useful Lives |
|  | 2017 |  |  | 2016 |  |  | (in years) |
Property and equipment: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | $ | 48,421 |  |  | $ | 44,611 |  |  |  |  |  |  |
Buildings and improvements |  |  | 145,077 |  |  |  | 139,078 |  |  |  | 7 | to | 40 |
Equipment |  |  | 487,667 |  |  |  | 471,798 |  |  |  | 3 | to | 20 |
|  |  | 681,165 |  |  |  | 655,487 |  |  |  |  |  |  |
Accumulated depreciation |  |  | (341,181 | ) |  |  | (329,394 | ) |  |  |  |  |  |
Total property and equipment, net |  | $ | 339,984 |  |  | $ | 326,093 |  |  |  |  |  |  |
Allowance for Doubtful Accounts Our allowance for doubtful accounts is equal to a portion of our receivable balances that are 120 days old or older. We may provide allowances for certain receivable balances that are less than 120 days old when warranted by specific facts and circumstances. We generally write-off accounts receivable balances when the customer files for bankruptcy or when all commonly used methods of collection have been exhausted. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014 - 09, Revenue from Contracts with Customers (Topic 606). ASU 2014 - 09 provides new guidance on revenue recognition for revenue from contracts with customers and will replace most existing revenue recognition guidance when it becomes effective. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard is intended to improve comparability of revenue recognition practices across entities and provide more useful information through improved financial statement disclosures. In August 2015, the FASB issued ASU 2015 - 14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date . ASU 2015 - 14 deferred the effective date of ASU 2014 - 09 by one year to interim and annual reporting periods beginning after December 15, 2017, and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. The standard permits the use of either a retrospective to each reporting period presented method, or a retrospective with the cumulative effect method to adopt the standard. In April 2016, the FASB issued ASU 2016 - 10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing . This ASU amends the guidance of ASU 2014 - 09 to clarify the identification of performance obligations and to provide additional licensing implementation guidance. In May 2016, the FASB issued ASU 2016 - 12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients . This ASU was issued to provide guidance in assessing collectibility, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition, in order to reduce the potential for diversity in practice at initial application, and to reduce the cost and complexity of applying the standard. In December 2016, the FASB issued ASU 2016 - 20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements . This ASU was issued to clarify the standard and to correct unintended application of guidance. We have preliminarily determined that the adoption of this standard will not have a material effect on our balance sheets and statements of operations. We have not yet determined which method of adoption we will use when we implement the standard. We are evaluating our footnote disclosures and expect that this standard will have an effect on these disclosures. We will continue to develop these disclosures and the related tasks of gathering data to be disclosed, assessing our internal controls and availing ourselves of broadcasting industry related guidance. In January 2016, the FASB issued ASU No. 2016 - 01, Financial Instruments - Overall (Subtopic 825 - 10) - Recognition and Measurement of Financial Assets and Financial Liabilities . ASU 2016 - 01 amends the guidance in U.S. GAAP regarding the classification and measurement of financial instruments. The new standard significantly revises an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We do not expect that the adoption of this standard will have a material impact on our financial statements. In February 2016, the FASB issued ASU 2016 - 02, Leases (Topic 842). ASU 2016 - 02 will supersede Topic 840, Leases , and thus will supersede nearly all existing lease guidance by requiring the reclassification of lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. The standard will be effective for fiscal years beginning after December 15, 2018. We have preliminarily determined that the adoption of this standard will not have a material effect on our statements of operations. However, this standard is expected to have a material effect on our balance sheets. Specifically, we expect that, once adopted we will record a right of use asset and lease obligation liability. Based on our current portfolio of lease obligations, we expect that this asset and liability would each total approximately $13.2 million. We are also evaluating our footnote disclosures and expect that this standard will have an effect on these disclosures. We will continue to develop these disclosures and the related tasks of gathering data to be disclosed, assessing our internal controls and availing ourselves of broadcasting industry related guidance. In August 2016, the FASB issued ASU 2016 - 15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments . ASU 2016 - 15 amends the guidance of U.S. GAAP with the intent of addressing eight specific cash flow issues with the objective of reducing the existing diversity in practice. One or more of these eight issues are applicable to our financial statements. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We do not expect that the adoption of this standard will have a material impact on our financial statements. In January 2017, the FASB issued ASU 2017 - 01, Business Combinations (Topic 805) – Clarifying the Definition of a Business . ASU 2017 - 01 amends the guidance of U.S. GAAP with the intent of clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We do not expect that the adoption of this standard will have a material impact on our financial statements. In January 2017, the FASB issued ASU 2017 - 04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment . ASU 2017 - 04 amends the guidance of U.S. GAAP with the intent of simplifying how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The standard allows for early adoption, but we have not yet made that determination. We do not expect that the adoption of this standard will have a material impact on our financial statements. In March 2017, the FASB issued ASU 2017 - 07, Compensation – Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . ASU 2017 - 07 amends the guidance of U.S. GAAP with the intent of improving the presentation of net periodic pension cost and net periodic postretirement benefit cost by prescribing where the amount of net benefit cost should be presented in an employer’s income statement and requiring the disclosure by line item of the amount of net benefit cost that is included in the income statement or capitalized in assets. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We do not expect that the adoption of this standard will have a material impact on our financial statements. Adoption of Accounting Standards and Reclassifications In November 2015, the FASB issued ASU No. 2015 - 17, Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes . ASU 2015 - 17 requires a “noncurrent” presentation of all deferred income taxes. As required by our adoption of this standard, the affected amounts have been reclassified on our balance sheets for all periods presented. In March 2016, the FASB issued ASU 2016 - 09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. ASU 2016 - 09 amended the guidance in U.S. GAAP with the intent of simplifying several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards, and classification on the statement of cash flows. Our adoption of this standard included an adjustment to record the impact on our deferred asset related to the net federal and state income tax deductions for grants, and subsequent vesting, of restricted stock in excess of our book basis expense. Accordingly, we have recorded adjustments to increase our deferred tax asset and our accumulated deficit, as of January 1, 2017, by approximately $1.1 million. Beginning in 2017, we will record similar net excess or deficit tax deductions as current tax benefit or expense and as reductions in the related income tax prepaid or payable, or deferred tax assets. Certain amounts in the condensed consolidated statement of cash flows have been reclassified to conform to the current presentation.

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