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Note 3 - Acquisitions and Divestitures | 12 Months Ended
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Dec. 31, 2022
Notes to Financial Statements |
Mergers, Acquisitions and Dispositions Disclosures [Text Block] |
3. | Acquisitions and Divestitures
During 2022, 2021 and 2020, we completed a number of acquisition and divestiture transactions. The acquisition transactions were and are expected to, among other things, increase our revenues and cash flows from operating activities, and allow us to operate more efficiently and effectively by increasing our scale and providing us, among other things, with the ability to negotiate more favorable terms in our agreements with third parties. For each television station described, the DMA rank presented is the DMA rank at the time of acquisition. 2022 Acquisition On April 1, 2022, we acquired television station WKTB-TV the Telemundo Network Group, LLC affiliate in the Atlanta, Georgia market (DMA 6), as well as certain digital media assets, for a combined purchase price of $31 million, using cash on hand (the “Telemundo Atlanta Transaction”). The following table summarizes the values of the assets acquired and resulting goodwill of the Telemundo Atlanta Transaction (in millions):
Accounts receivable, net |  | $ | 1 |
Property and equipment |  |  | 1 |
Goodwill |  |  | 10 |
Broadcast licenses |  |  | 1 |
Network affiliation |  |  | 14 |
Other intangible assets |  |  | 4 |
Total |  | $ | 31 |
These amounts are based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches. In determining the fair value of the acquired assets and assumed liabilities, the fair values were determined based on, among other factors, expected future revenue and cash flows, expected future growth rates, and estimated discount rates. Property and equipment are recorded at their fair value and are being depreciated over their estimated useful lives ranging from 3 to 40 years. Amounts related to network affiliation and other intangible assets are being amortized over their estimated useful lives of approximately 1 to 4 years. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, as well as future synergies that we expect to generate from each acquisition. The goodwill recognized related to this acquisition is deductible for income tax purposes. In addition, we acquired broadcast licenses totaling approximately $27 million that did not qualify as acquisitions of businesses. 2021 Acquisitions. Meredith Transaction. On December 1, 2021, we completed the acquisition of all the equity interests of Meredith, immediately after the spinoff of Meredith’s National Media Group to the current Meredith shareholders, for an adjusted purchase price of $2.8 billion in total enterprise value. Meredith owned and operated television stations in 12 markets. To facilitate regulatory approvals for the Meredith Transaction, on September 23, 2021, we divested our existing television station WJRT (ABC) in the Flint-Saginaw, Michigan market (DMA 66), to Allen for an adjusted purchase price of $72 million in cash, including working capital (the “Flint Divestiture”). The Flint Divestiture resulted in a non-cash loss of $4 million. We refer to the acquisition of Meredith and the WJRT Divestiture collectively as the Meredith Transaction. The following table lists the 17 television stations in 12 local markets that were acquired, adding 11 new markets to our operations:
Then-Current |  |  |  | Station Call |  | Network
DMA Rank |  | DMA |  | Letters |  | Affiliations
10 |  | Atlanta, GA |  | WCGL/WPCH |  | CBS/Ind.
12 |  | Phoenix, AZ |  | KPHO/KTVK |  | CBS/Ind.
23 |  | St. Louis, MO |  | KMOV |  | CBS
26 |  | Portland, OR |  | KPTV/KPDX |  | FOX/MY
28 |  | Nashville, TN |  | WSMV |  | NBC
29 |  | Hartford - New Haven, CT |  | WFSB |  | CBS
32 |  | Kansas City, MO |  | KCTV/KSMO |  | CBS/MY
38 |  | Greenville - Spartanburg, SC |  | WHNS |  | FOX
41 |  | Las Vegas, NV |  | KVVU |  | FOX
60 |  | Mobile, AL - Pensacola, FL |  | WALA |  | FOX
66 |  | Flint - Saginaw, MI |  | WNEM |  | CBS
113 |  | Springfield, MA |  | WGGB/WSHM |  | ABC/FOX/CBS
Quincy Transaction. On August 2, 2021, we completed the acquisition of all the equity interests of Quincy for an adjusted purchase price of $936 million, which amount includes an additional $6 million for working capital. Also on August 2, 2021, and concurrently with the acquisition of Quincy, we completed the divestiture to Allen of television stations in seven markets previously owned by Quincy and located in our existing television markets, for an adjusted divestiture price of $401 million, which amount includes $21 million for working capital. Consistent with the acquisition of equity interests, for tax purposes the divested stations recorded values included a deferred tax liability. Upon the subsequent sale, a tax gain was recognized and the deferred tax libility was relieved resulting in a book loss. The Quincy Divestiture resulted in a non-cash loss of $45 million, which is included in loss on disposal of assets, net in our consolidated statement of operations in the year ended December 31, 2021. We refer to the acquisition of Quincy and the Quincy Divestiture collectively as the “Quincy Transaction.” The following table lists the stations acquired and retained, net of divestitures:
Then-Current |  |  |  | Station Call |  | Network
DMA Rank |  | DMA |  | Letters |  | Affiliations
103 |  | Fort Wayne, IN |  | WPTA/WISE |  | ABC/NBC/CW
119 |  | Peoria, IL |  | WEEK |  | NBC/ABC/CW
134 |  | Duluth, MN, Superior, WI |  | KBJR/KDLH |  | NBC/CBS/CW
147 |  | Sioux City, IA |  | KTIV |  | NBC/CW
152 |  | Binghamton, NY |  | WBNG |  | CBS/CW
153 |  | Rochester, MN - Mason City, IA |  | KTTC |  | NBC/CW
161 |  | Bluefield-Beckley, WV |  | WVVA |  | NBC/CW
174 |  | Quincy, IL |  | WGEM |  | NBC/FOX/CW
The following stations were acquired and divested in the Quincy Transaction:
Then-Current |  |  |  | Station Call |  | Network
DMA Rank |  | DMA |  | Letters |  | Affiliations
76 |  | Madison, WI |  | WKOW |  | ABC
80 |  | Tucson, AZ |  | KVOA |  | NBC
92 |  | Paducah, KY - Harrisburg, IL |  | WSIL |  | ABC
94 |  | Cedar Rapids, IA |  | KWWL |  | NBC
128 |  | La Crosse-Eau Claire, WI |  | WXOW |  | ABC
135 |  | Wausau-Stevens Point, WI |  | WAOW |  | ABC
136 |  | Rockford, IL |  | WREX |  | NBC
The following table summarizes the allocation of consideration paid in the Quincy Transaction (in millions):
Adjusted purchase price |  | $ | 936 |
Less - consideration allocated to assets acquired and liabilities assumed for the Quincy overlap markets that were divested on August 2, 2021 |  |  | 383 |
Purchase consideration for assets acquired and liabilities assumed, net of divestitures |  | $ | 553 |
Third Rail Acquisition. On September 13, 2021, we acquired the studio, production and office facilities as well as the related production and administrative assets and liabilities of Third Rail Studios (“Third Rail”) from Third Rail Studios, LLC and Studio Sixty, LLC for an adjusted purchase price of $27 million of cash. We refer to this transaction as the “Third Rail Acquisition”. This transaction represents an initial step in the broader development of our planned studio production facilities. Purchase Price Allocations. The following table summarizes the values of the assets acquired, liabilities assumed and resulting goodwill of the Meredith Transaction, Quincy Transaction and the Third Rail Acquisition (together, the “2021 Acquisitions”), in millions:
|  | Meredith |  |  | Quincy |  |  | Third Rail |  |  | Total |
Cash |  | $ | 1 |  |  | $ | 4 |  |  | $ | - |  |  | $ | 5 |
Accounts receivable, net |  |  | 146 |  |  |  | 23 |  |  |  | - |  |  |  | 169 |
Other current assets |  |  | 15 |  |  |  | 5 |  |  |  | - |  |  |  | 20 |
Property and equipment |  |  | 235 |  |  |  | 74 |  |  |  | 24 |  |  |  | 333 |
Operating lease right of use asset |  |  | 15 |  |  |  | 1 |  |  |  | - |  |  |  | 16 |
Goodwill |  |  | 1,016 |  |  |  | 190 |  |  |  | 4 |  |  |  | 1,210 |
Broadcast licenses |  |  | 1,516 |  |  |  | 245 |  |  |  | - |  |  |  | 1,761 |
Other intangible assets |  |  | 455 |  |  |  | 85 |  |  |  | - |  |  |  | 540 |
Other non-current assets |  |  | 3 |  |  |  | - |  |  |  | - |  |  |  | 3 |
Other current liabilities |  |  | (104 | ) |  |  | (7 | ) |  |  | (1 | ) |  |  | (112 | )
Deferred income taxes |  |  | (477 | ) |  |  | (66 | ) |  |  | - |  |  |  | (543 | )
Operating lease liabilities |  |  | (15 | ) |  |  | (1 | ) |  |  | - |  |  |  | (16 | )
Other non-current liabilities |  |  | (3 | ) |  |  | - |  |  |  | - |  |  |  | (3 | )
Total |  | $ | 2,803 |  |  | $ | 553 |  |  | $ | 27 |  |  | $ | 3,383 |
These amounts are based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches. In determining the fair value of the acquired assets and assumed liabilities, the fair values were estimated based on, among other factors, expected future revenue and cash flows, expected future growth rates, and estimated discount rates. Accounts receivable are recorded at their fair value representing the amount we expect to collect. Gross contractual amounts receivable were approximately $3 million more than their recorded fair value. Property and equipment are recorded at their fair value and are being depreciated over their estimated useful lives ranging from three years to 40 years. Amounts related to other intangible assets represent primarily the estimated fair values of retransmission agreements of $374 million, network affiliation agreements of $136 million. These intangible assets are each being amortized over their estimated useful lives of approximately 5 years. Amounts related to other intangible assets are being amortized over their estimated useful lives of approximately 1 to 10 years. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, as well as future synergies that we expect to generate from each acquisition. A portion of the goodwill acquired in the Meredith and Quincy Transactions, in the amount of $89 million, will be deductible by us for income tax purposes. In addition, we acquired broadcast licenses totaling approximately $4 million that did not qualify as acquisitions of businesses. The Company’s consolidated results of operations for the year ended December 31, 2021 included the results of the Meredith Transaction beginning on December 1, 2021, the Quincy Transaction beginning on August 2, 2021 and the Third Rail Acquisition beginning on September 13, 2021. Revenues attributable to the 2021 Acquisitions included in our consolidated statements of operations for the year ended December 31, 2021 were $128 million. The following table summarizes the approximate “Transaction Related Expenses” incurred in connection with the 2021 Acquisitions and the Flint Divestiture, during the year ended December 31, 2021, by type and by financial statement line item (in millions):
|  | Year Ended |
|  | December 31, |
|  | 2021 |
Transaction Related Expenses by type: |  |  |  |
Legal, consulting and other professional fees |  | $ | 80 |
Termination of sales representation and other agreements |  |  | 1 |
Total Transaction Related Expenses |  | $ | 81 |
Transaction Related Expenses by financial statement line item: |  |  |  |
Operating expenses before depreciation, amortization and loss (gain) on disposal of assets, net: |  |  |  |
Broadcasting |  | $ | 3 |
Corporate and administrative |  |  | 71 |
Miscellaneous Expense |  |  | 7 |
Total Transaction Related Expenses |  | $ | 81 |
Unaudited Pro Forma Financial Information – 2021 Acquisitions. The following table sets forth certain unaudited pro forma information for the year December 31, 2021, assuming that the 2021 Acquisitions and the Flint Divestiture occurred on January 1, 2021 (in millions, except per share data):
|  | Year Ended |
|  | December 31, |
|  | 2021 |
Revenue (less agency commissions) |  | $ | 3,153 |
Net income |  | $ | 199 |
Net income attributable to common stockholders |  | $ | 147 |
Basic net income attributable to common stockholders, per share |  | $ | 1.55 |
Diluted net income attributable to common stockholders, per share |  | $ | 1.55 |
This pro forma financial information is based on our historical results of operations and the historical results of operations of the businesses acquired, net of divestitures, included in the 2021 Acquisitions and the Flint Divestiture, adjusted for the effects of fair value estimates and other acquisition accounting adjustments, and is not necessarily indicative of what our results would have been had we completed the 2021 Acquisitions and the Flint Divestiture, on January 1, 2021, or on any other historical date, nor is it reflective of our expected results of operations for any future period. The pro forma adjustments for the year ended December 31, 2021 reflect depreciation expense and amortization of finite-lived intangible assets related to the fair value of the assets acquired, Transaction Related Expenses and related tax effects of the adjustments. This pro forma financial information has been prepared based on estimates and assumptions that we believe are reasonable as of the date hereof, and are subject to change based on, among other things, changes in the fair value estimates or underlying assumptions. 2020 Acquisitions. Alaska Transactions. On July 31, 2020, we completed the acquisition of television station operations in the Anchorage and Juneau, Alaska television market (DMA 148 and 207, respectively), for $19 million, using cash on hand (the “Alaska Transactions”). Columbus Transactions. On September 1, 2020, we acquired certain non-license assets of WLTZ-TV (NBC), in the Columbus, Georgia market (DMA 129) and entered into shared services and other related agreements with SagamoreHill of Columbus GA, LLC (“SagamoreHill”) to provide news and back-office services to WLTZ-TV (the “Columbus Transactions”). We paid $22 million to SagamoreHill, using cash on hand (the “Columbus Transactions”). Sioux Falls Transactions. On November 2, 2020, Gray entered into a new network affiliation agreement with the FOX Broadcasting Network for one of its television stations in the Sioux Falls, South Dakota television market (DMA 115) that utilize certain non-license assets that Gray acquired at the same time from Independent Communications, Inc., for $22 million using cash on hand, for the former FOX affiliate for the market. Lubbock Transactions. On December 31, 2020, we acquired television station KLCW-TV (CW) and certain low power television stations in the Lubbock, Texas market (DMA 142), as well as certain non-license assets of KJTV-TV (FOX) and two additional low power stations and certain real estate, for a combined purchase price of $24 million, using cash on hand. On that date, we also entered into a shared services agreement with SagamoreHill to provide news and back-office services to KJTV-TV and its associated low power stations using cash on hand (the “Lubbock Transactions”). In addition, we acquired broadcast licenses totaling approximately $5 million that did not qualify as acquisitions of businesses. The following table summarizes the preliminary values of the assets acquired and resulting goodwill of the Lubbock Transactions, Alaska Transactions, Columbus Transactions and the Sioux Falls Transactions (in millions):
|  | 2020 Acquisitions |
|  | Lubbock |  |  | Alaska |  |  | Columbus |  |  | Sioux Falls |  |  | Total |
Accounts receivable and other current assets |  | $ | - |  |  | $ | 1 |  |  | $ | - |  |  | $ | - |  |  | $ | 1 |
Property and equipment |  |  | 6 |  |  |  | 5 |  |  |  | 2 |  |  |  | - |  |  |  | 13 |
Operating lease right of use asset |  |  | 1 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1 |
Goodwill |  |  | 6 |  |  |  | 2 |  |  |  | 1 |  |  |  | 11 |  |  |  | 20 |
Broadcast licenses |  |  | 5 |  |  |  | 2 |  |  |  | - |  |  |  | - |  |  |  | 7 |
Other intangible assets |  |  | 7 |  |  |  | 9 |  |  |  | 19 |  |  |  | 11 |  |  |  | 46 |
Other current liabilities |  |  | (1 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1 | )
Total |  | $ | 24 |  |  | $ | 19 |  |  | $ | 22 |  |  | $ | 22 |  |  | $ | 87 |
These amounts are based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches. In determining the fair value of the acquired assets and assumed liabilities, the fair values were determined based on, among other factors, expected future revenue and cash flows, expected future growth rates, and estimated discount rates. Property and equipment are recorded at their fair value and are being depreciated over their estimated useful lives ranging from three years to 40 years. Amounts related to other intangible assets are being amortized over their estimated useful lives of approximately 1 to 4 years. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, as well as future synergies that we expect to generate from each acquisition. The goodwill recognized related to this acquisition is deductible for income tax purposes. The Company’s consolidated results of operations for year ended December 31, 2020 include the results of the 2020 Acquisitions beginning on each transaction’s date of acquisition, but these amounts were not material. Transaction Related Expenses incurred in connection with the 2020 Acquisitions, during the year ended December 31, 2020, were approximately $1 million.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
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