~~Item 1. Financial Statements~~See notes to condensed consolidated financial statements.

1.	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, ~~2017,~~ 2018, which was derived from the Company’s audited financial statements as of December 31, ~~2017,~~ 2018, and our accompanying unaudited condensed consolidated financial statements as of June 30, ~~2018~~ 2019 and for the periods ended June 30, ~~2018~~ 2019 and ~~2017,~~2018, 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~~10-Q and Article 10 of Regulation ~~S-X.~~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~~Subsequent to the Raycom Merger (as defined herein) we manage our business on the basis of ~~one reportable segment.~~two operating segments, broadcasting and production companies. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2017 (the “2017~~2018 (the “2018 Form ~~10-K”~~10-K”). Our financial condition as of, and operating results for the ~~six-month period~~six-months ended June 30, ~~2018,~~ 2019, 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, ~~2018.~~2019. In addition, we have changed our reporting increment for dollars from thousands to millions.

Overview

We are a television broadcast company headquartered in Atlanta, ~~Georgia, that owns and operates~~Georgia. On January 2, 2019, we completed the Raycom Merger (as defined herein), which completed our transformation from a small, regional broadcaster to a leading media company with nationwide scale based on high-quality stations with exceptional talent in attractive markets. Upon the completion of the Raycom Merger on January 2, 2019, we became the largest owner of top-rated local television stations and ~~leading~~ digital assets in ~~markets throughout~~ the United States. ~~As of June 30, 2018,~~Currently, we ~~owned and operated~~own television stations in 5793 television markets broadcasting over ~~200 programming~~400 separate program streams including ~~over 100 channels affiliated with~~approximately 150 affiliates of the ~~CBS~~ABC Network (“~~CBS”~~ABC”), the NBC Network (“NBC”), the ~~ABC~~CBS Network (“~~ABC”~~CBS”) and the FOX Network (“FOX”). AsWe refer to these major broadcast networkscollectively as the “Big Four” networks. Our television stations ranked first or second among all local television stations in 87 of ~~June 30, 2018,~~ our 93 markets between December 2017 and November 2018. Our station ~~group reached~~portfolio reaches approximately ~~10.4%~~24% of total United States television households. We also own video program production, marketing, and digital businesses including Raycom Sports, Tupelo-Raycom, and RTM Studios, the producer of PowerNation programs and content which we refer to collectively as our “production companies”.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our actual results could differ materially from these estimated amounts. Our most significant estimates are of our allowance for doubtful accounts in receivables, valuation of goodwill and intangible assets, amortization of program rights and intangible assets, pension costs, income taxes, employee medical insurance claims, useful lives of property and equipment and contingencies.

Earnings Per Share

We compute basic earnings per share by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the relevant period. The weighted-average number of common shares outstanding does not include restricted shares. These shares, although classified as issued and outstanding, are considered contingently returnable until the restrictions lapse and, in accordance with 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 common shares, including restricted shares and shares underlying stock options, in 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 and six-month periods ended June 30, 2019 and 2018, respectively (in millions):

	*Three Months Ended*				*Six Months Ended*
	*June 30,*				*June 30,*
	*2019*		*2018*		*2019*		*2018*

Weighted-average shares outstanding-basic		100		88		100		88
Common stock equivalents for stock options and restricted shares		1		-		-		1
Weighted-average shares outstanding-diluted		101		88		100		89

Accumulated Other Comprehensive Loss

Our accumulated other comprehensive loss balances as of June 30, 2019 and December 31, 2018, consist of adjustments to our pension liability and the related income tax effect. Our comprehensive (loss) income for the six -months ended June 30, 2019 consisted of net (loss) income and an adjustment to the tax effect of our pension liability as a result of our adoption of Accounting Standards Update (“ASU”) 2018-02,Income Statement - Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. As of June 30, 2019, and December 31, 2018 the balances were as follows (in millions):

	*June 30,*			*December 31,*
	*2019*			*2018*

Accumulated balances of items included in accumulated other comprehensive loss:
Increase in pension liability	$	(35	)	$	(35	)
Income tax benefit		(9	)		(14	)
Accumulated other comprehensive loss	$	(26	)	$	(21	)

Property and Equipment

Property and equipment are carried at cost. Depreciation is computed principally by the straight-line method. The following table lists the components of property and equipment by major category (dollars in millions):

							*Estimated*
	*June 30,*			*December 31,*			*Useful Lives*
	*2019*			*2018*			*(in years)*
Property and equipment:
Land	$	115		$	52
Buildings and improvements		272			166			7	to	40
Equipment		734			548			3	to	20
		1,121			766
Accumulated depreciation		(435	)		(403	)
Total property and equipment, net	$	686		$	363

Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. The cost of any assets divested, sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting profit or loss is reflected in income or expense for the period.

In April 2017, the Federal Communications Commission (the “FCC”) began a process of reallocating the broadcast spectrum (the “Repack”). Specifically, the FCC is requiring certain television stations to change channels and/or modify their transmission facilities. The U.S. Congress passed legislation which provides the FCC with a $1.7 billion fund to reimburse all reasonable costs incurred by stations operating under a full power license and a portion of the costs incurred by stations operating under a low power license that are reassigned to new channels. Subsequent legislation in March 2018 appropriated an additional $1.0 billion for the Repack fund, of which up to $750.0 million may be made available to reimburse the Repack costs of full power, Class A television stations and multichannel video programming distributors. Other funds are earmarked to assist low power television stations and for other transition costs. The sufficiency of the FCC’s fund to reimburse for Repack costs is dependent upon a number of factors including the amounts to be reimbursed to other industry participants for Repack costs. Therefore, we cannot predict whether the fund will be sufficient to reimburse our Repack costs to the extent authorized under the legislation. Forty-seven of our current full power stations and thirty-seven of our current low power stations are affected by the Repack. The Repack process began in the summer of 2017 and will take approximately three years to complete. The majority of our costs associated with the Repack qualify for capitalization, rather than expense. Upon receipt of funds reimbursing us for our Repack costs, we record those proceeds as a component of our (gain) loss on disposal of assets, net.

The following tables provide additional information related to gain on disposal of assets, net included in our condensed consolidated statements of operations and purchases of property and equipment included in our condensed consolidated statements of cash flows (in millions):

	*Three Months Ended*					*Six Months Ended*
	*June 30,*					*June 30,*
	*2019*			*2018*		*2019*			*2018*
Gain (loss) on disposal of assets, net:
Proceeds from sale of assets	$	1		$	-	$	3		$	-
Proceeds from FCC - Repack		5			1		17			2
Net book value of assets disposed		(2	)		-		(4	)		-
Other		(1	)		-		(3	)		-
Total	$	3		$	1	$	13		$	2

Purchase of property and equipment:
Recurring purchases - operations						$	14		$	10
Repack							30			10
Total						$	44		$	20

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 January 2017, the Financial Accounting Standards Board (“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. After adoption of the standard, the annual, or interim, goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized will not exceed the total amount of goodwill allocated to that reporting unit. 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 a determination as to whether to early-adopt this standard. We do not expect that the adoption of this standard will have a material impact on our financial statements.

In August 2018, the FASB issued ASU 2018-14,Compensation Retirement Benefits Defined Benefit Plans General (Subtopic 715-20) - Disclosure Framework Changes to the Disclosure Requirements for Defined Benefit Plans ASU 2018-14 adds, removes, and modifies disclosure requirements related to defined benefit pension and other postretirement plans. The update amends only annual disclosure requirements. Retrospective adoption of the update is required in fiscal 2022. The standard allows for early adoption, but we have not yet made a determination as to whether to early-adopt this standard. The adoption of this guidance requires a change in disclosures only and is not expected to have a material impact on our financial statements.

Adoption of Accounting Standards and Reclassifications

In February 2016, the FASB issued ASU 2016-02 – Leases (Topic 842). ASU 2016-02 superseded Topic 840, Leases, and thus superseded 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. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) – Targeted Improvements, which provided the option of applying the requirements of the new lease standard in the period of adoption using the modified retrospective approach with no restatement of comparative periods. We adopted the standard effective January 1, 2019, using the modified retrospective approach provided in ASU 2018-11. The transition guidance allowed for the election of a number of practical expedients. We elected the package of practical expedients and the short term lease practical expedient. The package of practical expedients allowed us to carryforward our classification of existing leases. With the election of the short-term practical expedient, we are not required to recognize on our consolidated balance sheet, the present value of leases with an initial term of twelve months or less. We also implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The standard had a material impact in our consolidated balance sheets, but did not have an impact in our consolidated income statements. Upon the adoption of this standard, we recorded a right of use (“ROU”) asset and a lease obligation liability of approximately$21 million. In addition, upon the completion of the Raycom Merger on January 2, 2019, we implemented these standards to the leases acquired in the Raycom Merger and recorded a ROU asset and a lease obligation liability of approximately$52 million for each. Please refer to Note 3 “Acquisitions and Divestitures” and Note 10 “Leases” for further information.

In February 2018, the FASB issued ASU 2018-02,Income Statement - Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“TCJA”). Consequently, the amendments eliminate the stranded tax effects resulting from the TCJA and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. We have adopted this standard effective on January 1, 2019 and have recorded an adjustment of $5 million to increase our retained earnings and accumulated other comprehensive loss.

In January 2017, the FASB issued ASU 2017-01,Business Combinations (Topic 805) – Clarifying the Definition of a Business. ASU 2017-01 adds guidance to assist entities in the determination of whether an acquisition (or disposal) represents assets or a business. The update provides a test to determine whether or not an acquisition is a business. If substantially all of the fair value of the assets acquired is concentrated in a single asset or a group of similar identifiable assets, the acquired assets do not represent a business. If this test is not met, the update provides further guidance to evaluate if the acquisition represents a business. The Company adopted the guidance on January 1, 2019. The adoption did not have an impact on our financial statements.

Certain amounts in the condensed consolidated statement of cash flows have also been reclassified to conform to the current presentation.

Revenue

Revenue Recognition

We recognize revenue when we have completed a specified service and effectively transferred the control of that service to a customer in return for an amount of consideration we expect to be entitled to receive. The amount of revenue recognized is determined by the amount of consideration specified in a contract with our customers. We have elected to exclude taxes assessed by a governmental authority on transactions with our customers from our revenue. Any unremitted balance is included in current liabilities on our balance sheet.

~~Seasonality and~~ ~~Cyclicality~~

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 during the “on-year” of the two year election cycle. This political spending typically is heaviest during the fourth quarter. In addition, the broadcast of Olympic Games by our NBC affiliated stations during even-numbered years generally leads to increased viewership and revenue during those years.

~~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 related notes. Our actual experience and accordingly, our 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.

~~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 and six-month periods ended June 30, 2018 and 2017, respectively (in thousands):

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Weighted-average shares outstanding-basic
87,765 71,821 88,408 71,849
Common stock equivalents for stock options and restricted shares
540 680 529 661
Weighted-average shares outstanding-diluted
88,305 72,501 88,937 72,510

~~Accumulated Other Comprehensive Loss~~

Our accumulated other comprehensive loss balances as of June 30, 2018 and December 31, 2017 consist of adjustments to our pension liability and the related income tax effect. Our comprehensive income for the three and six-month periods ended June 30, 2018 and 2017 consisted entirely of net income. Therefore, a consolidated statement of comprehensive income is not presented for the three or six-month periods ended June 30, 2018 and 2017.

~~Property and Equipment~~

Estimated

June 30,

December 31,

Useful Lives

2018

2017

(in years)

Property and equipment:

Land
$ 51,946 $ 50,458
Buildings and improvements
157,667 156,924 7 to 40
Equipment
528,442 511,878 3 to 20
738,055 719,260
Accumulated depreciation
(395,059 ) (368,602 )
Total property and equipment, net
$ 342,996 $ 350,658

In April 2017, the Federal Communications Commission (the “FCC”) began a process of reallocating the broadcast spectrum (the “Repack”). Specifically, the FCC is requiring certain television stations to change channels and/or modify their transmission facilities. The U.S. Congress passed legislation which provides the FCC with a $1.7 billion fund to reimburse all reasonable costs incurred by stations operating under a full power license and a portion of the costs incurred by stations operating under a low power license that are reassigned to new channels. Subsequent legislation in March 2018 appropriated an additional $1.0 billion for the repacking fund, of which up to $750.0 million may be made available to reimburse the Repack costs of full power and Class A television stations and multichannel video programming distributors. Other funds are earmarked to assist low power television stations and for other transition costs. The sufficiency of the FCC’s fund to reimburse for Repack costs is dependent upon a number of factors including the amounts to be reimbursed to other industry participants for repacking costs. Therefore, we cannot predict whether the fund will be sufficient to reimburse our Repack costs to the extent authorized under the legislation. Twenty-six of our current full power stations and thirty six of our current low power stations are affected by the Repack. The Repack process began in the summer of 2017 and will take approximately three years to complete. We anticipate that the majority of our costs associated with the Repack will qualify for capitalization, rather than expense. Upon receipt of funds reimbursing us for our repacking costs, we record those proceeds as a component of our (gain) loss on disposal of assets, net.

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Gain on disposal of assets, net:

Proceeds from sale of assets
$ 63 $ 90,900 $ 104 $ 90,950
Proceeds from FCC - Repack
909 - 1,846 -
Net book value of assets disposed
(178 ) (13,574 ) (335 ) (14,151 )
Total
$ 794 $ 77,326 $ 1,615 $ 76,799

Purchase of property and equipment:

Recurring purchases - operations
$ 9,704 $ 10,287
Repack
10,211 128
Total
$ 19,915 $ 10,415

~~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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. 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. As of December 31, 2017, the values of those assets and related liabilities were each approximately $17.6 million. We are also evaluating our footnote disclosure requirements. We are continuing to review our contractual obligations related to this standard, and develop our disclosures, assessing our internal controls and availing ourselves of broadcasting industry related guidance. We are making preparations for implementing lease accounting software with our current lease inventory.

~~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. After adoption of the standard, the annual, or interim, goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized will not exceed the total amount of goodwill allocated to that reporting unit. 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 a determination as to whether to early-adopt this standard. We do not expect that the adoption of this standard will have a material impact on our financial statements.

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income~~ ~~(Topic 220) –~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“TCJA”). Consequently, the amendments eliminate the stranded tax effects resulting from the TCJA and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The standard allows for early adoption, but we have not yet made a determination as to whether to early-adopt this standard. 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 January 2016, the FASB issued ASU 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. This ASU 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. ASU 2016-01 requires equity investments previously measured at cost to be measured at fair value with changes in fair value recognized in net income. However, equity investments without a readily determinable fair value may be measured using a proscribed measurement alternative that reflects current fair value with changes in the current fair value recognized in net income and includes a qualitative evaluation of impairment. In February 2018, the FASB issued ASU 2018-03 – ~~Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities.~~ ASU 2018-03 clarifies certain aspects of the guidance issued in ASU 2016-01. ASU 2018-03 is effective for interim periods beginning after June 15, 2018 but can be adopted early. We adopted the amendments in both updates concurrently beginning in the first quarter of 2018. We currently have equity investments in the television broadcasting industry that do not have readily determinable fair values. We have applied the measurement alternative as defined in the amendments. These investments are reported together as a non-current asset on our balance sheet. We evaluate these investments on an interim basis for impairment. Accordingly, the adoption of this standard did not 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. We adopted this standard beginning in the first quarter of 2018. Because our defined benefit pension plans were frozen in prior years, we have not incurred any service cost in our condensed consolidated statements of operations during the three or six-months ended June 30, 2018 or 2017. Upon the adoption of this standard we reclassified our net pension expense (benefit) from our operating expenses to our miscellaneous income, net. The amount was not material.

In addition to the reclassification of our net pension expense (benefit) in our condensed consolidated statement of operations as described above, certain amounts in the condensed consolidated statement of cash flows have also been reclassified to conform to the current presentation.

Revenue from our production companies segment is generated through our direct sales channel. Revenue from our broadcast and other segment is generated through both our direct and advertising agency intermediary sales channels. The following table presents our revenue from contracts with customers disaggregated by type of service and sales channel (in millions):

3.~~Long-term Debt~~
3.
Acquisitions and Divestitures

During the six-months ended June 30, 2019, we completed acquisition and divestiture transactions which we believe will, 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 could provide us with, among other things, the ability to negotiate more favorable terms in our agreements with third parties.

Raycom Merger

On January 2, 2019, we completed an acquisition of all the equity interests of Raycom Media, Inc. (“Raycom”). In connection with the acquisition of Raycom and on the same date, Gray assumed and completed Raycom’s pending acquisitions of WUPV-DT in the Richmond, VA market and KYOU-TV in the Ottumwa, IA market. To facilitate regulatory approval of the acquisition of Raycom and to satisfy the conditions placed on the acquisition by the Antitrust Division of the U.S. Department of Justice (the “DOJ”) and the FCC, we completed the divestiture of nine television stations in overlapping markets. We refer to the acquisition of Raycom, WUPV-DT and KYOU-TV and the divestiture of the stations in the nine overlapping markets collectively as the “Raycom Merger.”

We believe the completion of the Raycom Merger is a significant step in our pursuit of strategic growth through accretive acquisition opportunities. The Raycom Merger completed our transformation from a small, regional broadcaster to a leading media company with nationwide scale based on high-quality stations with exceptional talent in attractive markets. The following table lists the stations acquired and retained, net of divestitures:

		Station
DMA	Designated Market Area	Call	Network
Rank	("DMA")	Letters	Affiliation

11	Tampa-St. Petersburg (Sarasota), FL	WWSB	ABC
19	Cleveland-Akron (Canton)	WOIO	CBS
19	Cleveland-Akron (Canton)	WUAB	CW
23	Charlotte, NC	WBTV	CBS
35	Cincinnati, OH	WXIX	FOX
37	West Palm Beach-Ft. Pierce, FL	WFLX	FOX
43	Birmingham (Ann and Tusc)	WBRC	FOX
48	Louisville, KY	WAVE	NBC
50	New Orleans, LA	WVUE	FOX
51	Memphis, TN	WMC	NBC
56	Richmond- Petersburg, VA	WWBT	NBC
56	Richmond- Petersburg, VA	WUPV	CW
66	Honolulu, HI	KHNL	NBC
66	Honolulu, HI	KGMB	CBS
66	Honolulu, HI	KHBC	NBC/CBS
66	Honolulu, HI	KOGG	NBC/CBS
73	Tucson (Nogales), AZ	KOLD	CBS
74	Columbia, SC	WIS	NBC
79	Huntsville- Decatur (Florence), AL	WAFF	NBC
88	Paducah, KY/Cape Girardeau, MO/
	Harrisburg, IL	KFVS	CBS
90	Shreveport, LA	KSLA	CBS
92	Jackson, MS	WLBT	NBC
93	Savannah, GA	WTOC	CBS
94	Charleston, SC	WCSC	CBS
95	Myrtle Beach-Florence	WMBF	NBC
97	Baton Rouge, LA	WAFB	CBS
97	Baton Rouge, LA	WBXH	MY
100	Boise, ID	KNIN	FOX
103	Evansville, IN	WFIE	NBC
114	Tyler-Longview, TX	KLTV	ABC
114	Tyler-Longview, TX	KTRE	ABC
116	Montgomery, AL	WSFA	NBC
127	Columbus, GA (Opelika, AL)	WTVM	ABC
129	Wilmington, NC	WECT	NBC
131	Amarillo, TX	KFDA	CBS
131	Amarillo, TX	KEYU	TEL
142	Odessa/Midland, TX	KCWO	CW
142	Odessa/Midland, TX	KTLE	TEL
143	Lubbock, TX	KCBD	NBC
148	Wichita Falls, TX & Lawton, OK	KSWO	ABC
148	Wichita Falls, TX & Lawton, OK	KKTM	TEL
152	Albany, GA	WALB	NBC/ABC
156	Biloxi-Gulfport, MS	WLOX	ABC/CBS
168	Hattiesburg/Laurel, MS	WDAM	NBC/ABC
180	Jonesboro, AR	KAIT	ABC/NBC
200	Ottumwa, IA/Kirksville, MO	KYOU	FOX/NBC

The divestiture transactions included one station owned by us. On December 31, 2018, we sold the assets of WSWG-TV (DMA-152) in the Albany, Georgia television market for $8.5 million, excluding transaction related expenses to Marquee Broadcasting, Inc. and Marquee Broadcasting Georgia, Inc. In connection with the divestiture of the assets of WSWG-TV, we recorded a gain of approximately $4.8 million in the fourth quarter of 2018.

On January 2, 2019, the following stations were acquired from Raycom and their assets were immediately divested in eight markets as follows (dollars in millions):

Total

Cash

Consideration

Television

Purchaser

Received

Station

Location

DMA

Lockwood Broadcasting, Inc.
$ 67
WTNZ

Knoxville, TN
60

WFXG

Augusta, GA
105

WPGX

Panama City, FL
150

WDFX

Dothan, AL
173

Scripps Media, Inc.
55
KXXV

Waco-Temple-Bryan, TX
89

KRHD

Waco-Temple-Bryan, TX
89

WTXL

Tallahassee, FL
112

TEGNA, Inc.
109
WTOL

Toledo, OH
71

KWES

Odessa - Midland, TX
142
Total
$ 231
The allocated portion of net consideration paid for the assets and liabilities divested for the stations in these eight overlap markets was approximately $234 million.
The net consideration paid to acquire Raycom consisted of $2.84 billion of cash, 11.5 million shares of our common stock, valued at $170 million (a non-cash financing transaction), and $650 million of a new series of preferred stock (a non-cash financing transaction), for a total of $3.66 billion. Please refer to Note 6 “Stockholders Equity” and Note 7 “Preferred Stock” for further information. The cash consideration paid to acquire the two stations that Raycom had previously agreed to acquire (KYOU-TV and WUPV-TV listed above) was $17 million. The following table summarizes the consideration paid related to the Raycom Merger and the amount representing the net assets acquired and liabilities assumed (in millions):

KYOU

and

Net

Raycom

WUPV

Consideration

Purchase Price
$ 3,660 $ 17 $ 3,677
Less - consideration allocated to all assets acquired and net of liabilites assumed for the Raycom overlap market stations which were also divested on January 2, 2019
(234 ) - (234 )
Purchase consideration for assets acquired and liabilities assumed net of divestitures
$ 3,426 $ 17 $ 3,443
United Acquisition
On May 1, 2019, we acquired the assets of WWNY-TV (CBS) and WNYF-CD (FOX) in Watertown, New York (DMA 178) and KEYC-TV (CBS/FOX) in Mankato, Minnesota (DMA 199) from United Communications Corporation (the “United Acquisition”) for an adjusted purchase price of $48 million of cash, excluding transaction related expenses. We began operating those stations on March 1, 2019 under a local programming and marketing agreement, which increased the total number of our markets from 91 to 93.

The following table summarizes the preliminary values of the assets acquired, liabilities assumed and resulting goodwill of the Raycom Merger and the United Acquisition, together, the “2019 Acquisitions,” (in millions):

Raycom

United

Total

Cash
$ 116 $ - $ 116
Accounts receivable, net
245 3 248
Program broadcast rights
12 - 12
Other current assets
8 - 8
Property and equipment
311 10 321
Operating lease right of use asset
52 - 52
Goodwill
836 3 839
Broadcast licenses
2,004 24 2,028
Other intangible assets
493 8 501
Other non-current assets
22 - 22
Accrued compensation and benefits
(29 ) - (29 )
Program broadcast obligations
(16 ) - (16 )
Other current liabilities
(60 ) - (60 )
Income taxes payable
(12 ) - (12 )
Deferred income taxes
(462 ) - (462 )
Operating lease liabilities
(52 ) - (52 )
Other long-term liabilities
(25 ) - (25 )
Total
$ 3,443 $ 48 $ 3,491
These amounts are based upon management’s preliminary estimate of the fair values using valuation techniques including income, cost and market approaches. In determining the preliminary 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. Because of the magnitude and complexity of the calculations involved and the inherent issues related to the integration of our operations, the valuation of the assets acquired, liabilities assumed and resulting goodwill of the 2019 Acquisitions are not yet final. However, we expect that any adjustments to these amounts reported in subsequent periods will not be material to our financial statements as a whole.
Accounts receivable are recorded at their fair value representing the amount we expect to collect. Gross contractual amounts receivable are approximately $2 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 3 years to 40 years.
Amounts related to other intangible assets represent primarily the estimated fair values of retransmission agreements of $313 million; favorable income leases of $76 million; and network affiliation agreements of $48 million. These intangible assets are being amortized over their estimated useful lives of approximately 4.6 years for retransmission agreements; approximately 9.2 years for favorable income leases; and approximately 4.2 years for network affiliation agreements.
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, including assembled workforce, as well as future synergies that we expect to generate from each acquisition. We recorded $836 million of goodwill related to stations acquired and retained in the Raycom Merger, and $3 million of goodwill related to the stations acquired in the United Acquisition. A portion of the goodwill acquired, in the amount of approximately $150 million that was deductible by Raycom will be deductible by us for income tax purposes.

The Company’s consolidated results of operations for three and six-months ended June 30, 2019 include the results of the Raycom Merger beginning on January 2, 2019 and the United Acquisition beginning on March 1, 2019. Revenues attributable thereto and included in our consolidated statement of operations for the three and six-months ended June 30, 2019 were $264 million and $545 million, respectively. Operating income attributable thereto and included in our consolidated statement of operations was $53 million and $49 million for the three and six-months ended June 30, 2019, respectively.
The following table summarizes the approximate “Transaction Related Expenses” incurred in connection with the 2019 Acquisitions, during the three and six-months ended June 30, 2019, by type and by financial statement line item (in millions):

June 30, 2019

Three Months

Six Months

Ended

Ended

Transaction Related Expenses by type:

Legal, consulting and other professional fees
$ 1 $ 23
Incentive compensation and other severance costs
- 18
Termination of sales representation agreements
1 29
Total transaction related expenses
$ 2 $ 70

Transaction Related Expenses by financial statement line item:

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

Broadcast
$ 1 $ 37
Corporate and administrative
1 33
Total transaction related expenses
$ 2 $ 70
Unaudited Pro Forma Financial Information.
The following table sets forth certain unaudited pro forma information for the six-months ended June 30, 2019 and 2018 assuming that the 2019 Acquistions occurred on January 1,2018 (in millions, except per share data):

Six Months Ended

June 30,

2019

2018

Revenue (less agency commissions)
$ 1,029 $ 995

Net income
$ 44 $ 61

Net income attributable to common stockholders
$ 18 $ 35

Basic net income per common share
$ 0.18 $ 0.40

Diluted net income per common share
$ 0.18 $ 0.40
This pro forma financial information is based on Gray’s historical results of operations and the historical results of operations of the television stations acquired, net of divestitures, included in the 2019 Acquisitions, adjusted for the effect 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 2019 Acquisitions on January 1,2018 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 six-months ended June 30, 2019 and 2018 reflect depreciation expense and amortization of finite-lived intangible assets related to the fair value of the assets acquired, transaction related expenses and the 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.

4.
Long-term Debt

As of June 30, ~~2018 and December 31, 2017,~~ 2019, long-term debt primarily consisted of obligations under our ~~2017~~2019 Senior Credit Facility (as defined below), our 5.125% Senior Notes due 2024 (the ~~“2024~~“2024 Notes”), our 5.875% senior notes due 2026 (the “2026 Notes”) and our ~~5.875%~~7.0% senior notes due 2027 (the “2027 Notes”). As of December 31, 2018, long-term debt primarily consisted of obligations under our 2017 Senior Credit Facility (as defined below), our 2024Notes, ~~due~~ our 2026 ~~(the “2026 Notes”),~~ Notes and our 2027 Notes as follows (in ~~thousands)~~millions):

June 30,

December 31,

June 30,

December 31,

2018

2017

2019

2018

Long-term debt :

2017 Senior Credit Facility
$ 632,026 $ 635,234
2017 Term Loan
$ 595 $ 595
2019 Term Loan
1,393 -
2024 Notes
525,000 525,000 525 525
2026 Notes
700,000 700,000 700 700
Total outstanding principal
1,857,026 1,860,234
Unamortized deferred loan costs - 2017 Senior Credit Facility
(10,519 ) (11,777 )
2027 Notes
750 750
Total outstanding principal, including current portion
3,963 2,570
Unamortized deferred loan costs - 2017 Term Loan
- (9 )
Unamortized deferred loan costs - 2019 Term Loan
(47 ) -
Unamortized deferred loan costs - 2024 Notes
(6,244 ) (6,743 ) (5 ) (6 )
Unamortized deferred loan costs - 2026 Notes
(8,915 ) (9,473 ) (8 ) (8 )
Unamortized deferred loan costs - 2027 Notes
(12 ) (2 )
Unamortized premium - 2026 Notes
4,881 5,187 4 4
Carrying value of long-term debt
1,836,229 1,837,428
Long-term debt, less deferred financing costs
3,895 2,549
Less current portion
(37,000 ) (6,417 ) (14 ) -
Carrying value of long-term debt, less current portion
$ 1,799,229 $ 1,831,011
Long-term debt, less current portion and deferred financing costs
$ 3,881 $ 2,549

Borrowing availability under the Revolving Credit Facility
$ 100,000 $ 100,000
Borrowing availability under Revolving Credit Facility
$ 200 $ 100

~~On February 7, 2017,~~ In connection with the Raycom Merger, on January 2, 2019, we ~~entered into a Third Amended~~amended our senior credit facility (the “2017 Credit Facility” and, ~~Restated Credit Agreement (the “2017~~as amended, the “2019 Senior Credit Facility”)~~. As~~ as follows: (1) we replaced our existing $100 million revolving credit facility under our prior senior credit facility with a new 5 year revolving credit facility (the “2019 Revolving Credit Facility”), the terms of ~~June 30, 2018,~~which provide for up to $200 million in available borrowings and a maturity date of January 2, 2024, and (2) we incurred a $1.4 billion term loan (the “2019 Term Loan”), which matures on January 2, 2026 and (3) assumed the ~~2017 Senior Credit Facility provided total commitments of $732.0 million, consisting of a $632.0~~outstanding $556 million term loan facility (the ~~“2017~~“2017 Initial Term Loan”) and $85 million incremental term loan (the “2017 Incremental Term Loan” and, together with the 2017 Initial Term Loan, the “2017 Term Loan”). Since the Raycom Merger was not completed by December 15, 2018, we incurred a ~~$100.0~~ticking fee of $0.8 million ~~revolving credit facility (the “2017 Revolving Credit Facility”).~~
~~For all~~at a rate of 1.25% of the 2019 Term Loan amount, from December 16, 2018 to January 2, 2019. In addition, we assumed $750 million of the 2027 Notes, which were issued by our ~~interest bearing obligations, we made interest payments~~special purpose, wholly-owned subsidiary on November 16, 2018. The proceeds of ~~approximately $47.0 million~~the 2019 Term Loan and ~~$50.9 million during~~ the ~~six-months ended June 30, 2018 and 2017, respectively. We did not capitalize any interest payments during~~2027 Notes were used to fund a portion of the ~~six-months ended June 30, 2018 or 2017.~~cash consideration payable in the Raycom Merger.

Borrowings under the ~~2017~~2019 Term Loan bear interest, at our option, at either the London Interbank Offered Rate (“LIBOR”) or the Base Rate, in each case, plus an applicable margin is 2.5% for LIBOR borrowings and 1.5% for Base Rate borrowings. As of June 30, 2019, the interest rate on the balance outstanding under the 2019 Term Loan was 4.9%. The 2019 Term Loan matures on January 2, 2026.

Borrowings under the 2017 Term Loan bear interest, at our option, at either the LIBOR or the Base Rate (as defined below), in each case, plus an applicable margin. Currently, the applicable margin is 2.25% for LIBOR borrowings and 1.25% for Base Rate borrowings. The applicable margin is determined quarterly based on our leverage ratio as set forth in the ~~2017~~2019 Senior Credit Facility (the “Leverage Ratio”). If our Leverage Ratio is less than or equal to 5.25 to 1.00, the applicable margin is 2.25% for all LIBOR borrowings and 1.25% for all Base Rate borrowings, and if the Leverage Ratio is greater than 5.25 to 1.00, the applicable margin is 2.5% for all LIBOR borrowings and 1.5% for all Base Rate borrowings. As of June 30, ~~2018,~~ 2019, the interest rate on the balance outstanding under the 2017 Term Loan was ~~4.3%~~4.7%. The 2017 Term Loan matures on February 7, 2024.

Borrowings under the ~~2017~~2019 Revolving Credit Facility currently bear interest, at our option, at either LIBOR plus ~~1.50%~~the applicable margin or Base Rate plus ~~0.50%,~~the applicable margin, in each case based on a first lien leverage ratio test as set forth in the ~~2017~~2019 Senior Credit Facility (the “First Lien Leverage Ratio”). Base Rate is defined as the greatest of (i) the administrative agent’s prime rate, (ii) the overnight federal funds rate plus 0.50% ~~and~~or (iii) LIBOR plus ~~1.00%~~1.50%. We are required to pay a commitment fee on the average daily unused portion of the ~~2017~~2019 Revolving Credit Facility, which ~~rate~~ may range from 0.375% to 0.50% on an annual basis, based on the First Lien Leverage Ratio. The ~~2017~~2019 Revolving Credit Facility matures on ~~February 7, 2022,~~January 2, 2024.
We incurred $42.5 million of transaction fees and expenses related to the 2019 Senior Credit Facility. At June 30, 2019 these were recorded as a reduction of the balance of the outstanding debt and are amortized over the life of the 2019 Senior Credit Facility. The amortization of these fees is included in our interest expense.
As of June 30, 2019, the aggregate minimum principal maturities of our long term debt for the remainder of 2019 and the ~~2017 Term Loan matures on February 7, 2024.~~succeeding 5 years were as follows (in millions):

Minimum Principal Maturities

Year

2019 Senior
Credit Facility

2024 Notes

2026 Notes

2027 Notes

Total

Remainder of 2019
$ 7 $ - $ - $ - $ 7
2020
14 - - - 14
2021
14 - - - 14
2022
14 - - - 14
2023
14 - - - 14
2024
609 525 - - 1,134
Thereafter
1,316 - 700 750 2,766
Total
$ 1,988 $ 525 $ 700 $ 750 $ 3,963

Our obligations under the ~~2017~~2019 Senior Credit Facility 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 ~~2017~~2019 Senior Credit Facility. Gray Television, Inc. is a holding company, and has no material independent assets or operations. For all applicable periods, the 2024 Notes, 2026 Notes and ~~2026~~2027 Notes have been fully and unconditionally guaranteed, on a joint and several, senior unsecured basis, by substantially all of Gray Television, Inc.'s subsidiaries. Any subsidiaries of Gray Television, Inc. that do not guarantee the 2024 Notes, 2026 Notes and ~~2026~~2027 Notes are minor. As of June 30, ~~2018,~~ 2019, there were ~~no significant~~nosignificant restrictions on the ability of Gray Television, Inc.'s subsidiaries to distribute cash to Gray or to the guarantor subsidiaries.

The ~~2017~~2019 Senior Credit Facility 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 ~~2017 Revolving Credit Facility,~~revolving credit facility, as well as other customary covenants for credit facilities of this type. The 2024 Notes, the 2026 Notes and ~~2024~~the 2027 Notes include covenants with which we must comply which are typical for borrowing transactions of their nature. As of June 30, ~~2018~~ 2019 and December 31, ~~2017,~~ 2018, we were in compliance with all required covenants under all our debt obligations.

~~On July 27, 2018, we prepaid $37.0 million~~For all of our ~~2017 Term Loan in order to comply with~~interest bearing obligations, we made interest payments of approximately $105 million and $47 million during the ~~2017 Senior Credit Facility's requirements related to our sale of broadcast spectrum in~~six-months ended June 30, 2019 and 2018, respectively. We did not capitalize any interest payments during the ~~FCC's 2017 spectrum auction. This prepayment satisfied all future quarterly payment obligations under the 2017 Term loan.~~six-months ended June 30, 2019 and 2018.

4
5.~~Fair Value Measurement~~
Fair Value Measurement

For purposes of determining a fair value measurement, we utilize market data or assumptions that market participants would use in pricing an asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized into a hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1”) and the lowest priority to unobservable inputs that require assumptions to measure fair value (“Level 3”). Level 2 inputs are those that are other than quoted prices on national exchanges included within Level 1 that are observable for the asset or liability either directly or indirectly (“Level 2”).
~~Equity Investments Without Readily Determinable Fair Values~~
We have equity investments in privately held broadcasting and technology companies for which there is no readily determinable fair value. As such, we have elected the measurement alternative to measure our equity investments as provided by ASC Topic 321, ~~Investments – Equity Securities~~. The measurement alternative is intended to reflect current fair value by taking the cost basis of each investment and subtracting impairment, if any, while adding or subtracting changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

The carrying amount of our equity investments without readily determinable fair values was $16.6 million as of each of June 30, 2018 and December 31, 2017. There were no impairment charges or changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer for the period ended June 30, 2018.
Fair Value of Other Financial Instruments

The estimated fair value of other financial instruments is determined using market information and appropriate valuation methodologies. Interpreting market data to develop fair value estimates involves considerable judgment. The use of different market assumptions or methodologies could have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange, or the value that ultimately will be realized upon maturity or disposition.

The carrying amounts of the following instruments approximate fair value due to their short term to maturity: (i) accounts receivable, (ii) prepaid and other current assets, (iii) accounts payable, (iv) accrued employee compensation and benefits, (v) accrued interest, (vi) other accrued expenses, (vii) acquisition-related liabilities and (viii) deferred revenue.

The carrying amount of our long-term debt was ~~$1.8~~$3.9 billion and ~~$1.8~~$2.5 billion, respectively, and the fair value was ~~$1.8~~$4.1 billion and ~~$1.9~~$2.4 billion, respectively, as of June 30, ~~2018~~ 2019 and December 31, ~~2017.~~ 2018. Fair value of our long-term debt is based on observable estimates provided by ~~third-party~~third-party financial professionals as of June 30, ~~2018~~ 2019 and December 31, ~~2017~~ 2018 and as such is classified within Level 2 of the fair value hierarchy.

6.
5.     Stockholders’ Equity

~~As of June 30, 2018, we were~~We are authorized to issue ~~245.0~~245 million shares in total of all classes of stock consisting of, ~~200.0 million shares of common stock, 25.0~~25 million shares of Class A common stock, ~~and 20.0~~200 million shares of common stock, and 20 million shares of “blank check” preferred stock for which our ~~board~~Board of ~~directors~~Directors has the authority to determine the rights, powers, limitations and restrictions. ~~As of June 30, 2018, we had outstanding 82.0 million shares of common stock and 6.7 million shares of Class A common stock. No shares of preferred stock were outstanding.~~ The rights of our common stock and Class A common stock are identical, except that our Class A common stock has 10 votes per share and our common stock has one vote per ~~share on all matters submitted to a vote of our shareholders.~~share. Our common stock and Class A common stock are entitled to receive cash dividends if declared, on an equal per-share basis. For the ~~six-months ended~~ six-months ending June 30, ~~2018~~ 2019 and ~~2017,~~2018, we did ~~not~~ notdeclare or pay any common stock or Class A common stock dividends.

On January 2, 2019, we issued 11.5 million shares of our common stock at a price of $14.74 per share, the closing price for our common stock on the last trading day preceding the transaction, to certain former shareholders of Raycom as part of the total consideration paid for the Raycom Merger. We incurred transaction fees and expenses of approximately $0.1 million related to the issuance of these shares that were recorded as a reduction of the balance outstanding of our common stock in our balance sheets.
In each of March and November 2004, the Board of Directors ~~of the Company~~ authorized the Company to repurchase up to 2.0 million shares of the Company's common stock and Class A common stock. In March 2006, this authorization was increased to an aggregate of 5.0 million shares (the ~~“2004-2006~~“2004-2006 Repurchase Authorization”). As of June 30, ~~2018,~~ 2019, 279,200 shares remain available for repurchase under this authorization, which has no expiration date. On November 6, 2016, the Board of Directors ~~of the Company~~ authorized the Company to purchase up to an additional ~~$75.0~~$75 million of our outstanding common stock prior to December 31, 2019 ~~(the “2016~~(the “2016 Repurchase Authorization”). The 2016 Repurchase Authorization prohibits the Company from purchasing shares directly from the Company’s officers, directors, or the Gray Television, Inc. Capital Accumulation Plan (the ~~“401(k) plan”~~“401k Plan”). ~~During the six-months ended~~ As of June 30, 2018, under the 2016 Repurchase Authorization, we purchased 1,551,710 shares of our common stock at an average purchase price, including related brokerage commissions, of $12.64 per share, for a total cost of $19.6 million. As of June 30, 2018, $49.52019, $50 million remains available to purchase shares of our common stock under the 2016 Repurchase Authorization.

The extent to which the Company repurchases any of its shares, the number of shares and the timing of any repurchases will depend on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. The Company is not required to repurchase a minimum number of shares, and the repurchase authorizations may be modified, suspended or terminated at any time without prior notice.

Under our various employee benefit plans, we may, at our discretion, issue authorized and unissued shares, or previously issued shares held in treasury, of our common stock or Class A common stock. During the six-months ended June 30, 2019, we issued 196,509 shares of our common stock, valued at $4 million, to the qualifying participants in our 401(k) plan for our discretionary profit sharing contribution for the year ended December 31, 2018. As of June 30, ~~2018,~~ 2019, we had reserved ~~7,078,916~~6,163,624 shares and ~~1,703,064~~1,503,254 shares of our common stock and Class A common stock, respectively, for future issuance under various employee benefit plans.

7.
Preferred Stock
6
In connection with the Raycom Merger, on January 2, 2019, we issued 650,000 shares of our Series A Perpetual Preferred Stock, with a stated face value and liquidation value of $1,000 per share (the “Series A Preferred Stock”). ~~Retirement~~ ~~Plans~~Holders of shares of the Series A Preferred Stock are entitled to receive mandatory and cumulative dividends paid quarterly in cash or, at the Company’s option, paid quarterly in kind by issuance of additional shares of Series A Preferred Stock (“PIK Election Dividends”). The per-share amount of such quarterly mandatory and cumulative dividends will be calculated by multiplying the face value by 8% per annum if the dividends are to be paid in cash or 8.5% per annum if such dividends are to be paid in additional shares of Series A Preferred Stock. If the Company elects to pay any portion of accrued dividends with PIK Election Dividends, it will be prohibited from repurchasing, redeeming or paying dividends on any stock that is junior to the Series A Preferred Stock, through the end of that quarter and the subsequent two quarters, subject to certain exceptions.
With respect to the payment of dividends, the Series A Preferred Stock will rank senior to all classes and series of our common stock and all other equity securities designated as ranking junior to the Series A Preferred Stock, and no new issuances of common or preferred stock will rank on a parity with, nor senior to, the Series A Preferred Stock.
All or any portion of the outstanding Series A Preferred Stock may be redeemed at the Company’s option at any time, upon written notice to the holders of Series A Preferred Stock at least 30 and not more than 60 days prior to the date of such optional redemption. The per-share redemption price for Series A Preferred Stock will be equal to the sum of the liquidation value and the per-share amount of any unpaid dividends for the current quarterly dividend period, up to and including the date of redemption. Holders of shares of Series A Preferred Stock redeemed will be paid in cash.

The ~~following table provides~~Series A Preferred Stock is also subject to mandatory redemption upon the occurrence of certain change of control transactions or upon the sale or other disposition of all or substantially all of our assets. The holders of Series A Preferred Stock do not have any right to exchange or convert the shares into any other securities.
In general, the holders of the Series A Preferred Stock do not have any voting rights except as set forth in the terms of the Series A Preferred Stock or as otherwise required by law, in which case, each share of Series A Preferred Stock will be entitled to one vote.
The approval of the holders of the Series A Preferred Stock, voting separately as a class, is required in order to authorize, create, issue new shares of Series A Perpetual Preferred stock (other than to pay dividends) or alter the rights of any other shares that are or would be equal to or senior to the Series A Preferred Stock, or to amend, alter or repeal the Company’s Restated Articles of Incorporation as amended from time to time if such amendment, alteration or repeal adversely affects the powers, preferences or special rights of the Series A Preferred Stock.
The Series A Preferred Stock does not have preemptive rights as to any of our other securities, or any warrants, rights, or options to acquire any of our securities.

In the event that the Company voluntarily or involuntarily liquidates, dissolves or winds up its affairs, holders of Series A Preferred Stock will be entitled to receive for each share of Series A Preferred Stock, out of the Company’s assets or proceeds thereof available for distribution to shareholders, subject to the rights of any creditors, payment in full in an amount equal to the liquidation value and the per-share amount of any unpaid dividends for the current quarterly dividend period. Holders of Series A Preferred Stock would be entitled to receive this amount before any distribution of assets or proceeds to holders of our common stock and any other stock whose rights are junior to the Series A Preferred Stock. If in any distribution described above, our assets are not sufficient to pay in full the amounts payable with respect to the outstanding shares of Series A Preferred Stock or any stock whose rights are equal to the Series A Preferred Stock, holders of the Series A Preferred Stock would share ratably in any such distribution in proportion to the full respective distributions to which they are entitled. Shareholders are not subject to further assessments on their shares of the New Preferred Stock.
8.
Retirement Plans
The components of our net periodic pension benefit ~~cost or~~are included in miscellaneous income ~~for~~in our ~~defined benefit pension plans for~~income statement. During the ~~three-month and six-month periods~~six-months ended June 30, ~~2018~~2019, the amount recorded as a benefit was not material, and ~~2017 (in thousands):~~

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Interest cost
$ 1,106 $ 1,528 $ 2,212 $ 2,335
Expected return on plan assets
(1,536 ) (1,848 ) (3,072 ) (2,824 )
Loss amortization
169 158 339 242
Net periodic income, net
$ (261 ) $ (162 ) $ (521 ) $ (247 )
~~During the six-month period ended June 30, 2018,~~ we did not make ~~any~~a contribution to our defined benefit pension ~~plans.~~plan. During the remainder of ~~2018,~~2019, we expect to contribute ~~$2.0~~$3 million to ~~these plans.~~this plan.

During the three and ~~six-month~~six-month periods ended June 30, ~~2018,~~ 2019, we contributed ~~$1.6~~$3 million and ~~$3.5~~$7 million, respectively, in matching contributions to our ~~401(k)~~401(k) Plan. During the remainder of ~~2018,~~2019, we estimate that our contributions will be approximately ~~$3.2~~$6 million to this plan, excluding discretionary profit-sharing contributions.

9.
7. Stock-based Compensation

We recognize compensation expense for stock-based payment awards made to our employees, consultants and directors. Our current stock-based compensation plans include our 2017 Equity and Incentive Compensation Plan (the ~~“2017~~“2017 EICP”); our 2007 Long-Term Incentive Plan, as amended (the ~~“2007~~“2007 Incentive Plan”); and our Directors’ Restricted Stock Plan. The following table provides our stock-based compensation expense and related income tax benefit for the three and ~~six-month~~six-month periods ended June 30, ~~2018~~ 2019 and ~~2017~~2018 (in ~~thousands)~~millions):

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

2018

2017

2018

2017

2019

2018

2019

2018

Stock-based compensation expense, gross
$ 1,742 $ 1,434 $ 3,899 $ 2,772 $ 2 $ 1 $ 5 $ 3
Forfeitures (528 ) - (528 ) -
Income tax benefit at our statutory rate associated with stock-based compensation
(308 ) (559 ) (856 ) (1,081 ) (1 ) - (1 ) (1 )
Stock-based compensation expense, net
$ 906 $ 875 $ 2,515 $ 1,691 $ 1 $ 1 $ 4 $ 2

All shares of common stock and Class A common stock underlying outstanding options, restricted stock units and performance awards are counted as issued at target levels under the 2017 EICP, the 2007 Incentive Plan and the Directors’ Restricted Stock Plan for purposes of determining the number of shares available for future issuance.

During the ~~six-months~~six-months ended June 30, ~~2018,~~ 2019, we granted under the 2017 EICP:

●
99,905 shares of restricted Class A common stock with a grant date fair value per share of $15.36 to an employee, of which 33,302 shares will vest on each of January 31, 2020 and 2021 and 33,301 shares will vest on January 31, 2022;
●
99,905 shares of restricted Class A common stock with a grant date fair value per share of $15.36 to an employee, subject to the achievement of certain performance measures, which will vest on January 31, 2022;

●
340,993 shares of restricted common stock with a grant date fair value per share of $14.85 to certain employees that will vest on January 2, 2021;
●
277,048 shares of restricted common stock with a grant date fair value of $16.55 to certain employees, of which 92,349 shares will vest on each of January 31, 2020 and 2021, and 92,350 shares will vest on January 31, 2022;
●
48,338 shares of restricted common stock with a grant date fair value per share of $16.55 to an employee, subject to the achievement of certain performance measures, which will vest on January 31, 2022; and
●
11,223 shares of restricted common stock with a grant date fair value per share of $17.83 to an employee that will vest on February 15, 2020.
●
41,181 shares of restricted common stock with a grant date fair value of $22.10 to our non-employee directors that will vest on April 30, 2020.
●
Restricted stock units representing 398,000 shares of our common stock with a grant date fair value of $18.21 that will vest on June 1, 2020.
During the six-months ended June 30, 2018, we granted under the 2017 EICP:

●
110,040 shares of restricted Class A common stock with a grant date fair value per share of $12.65 to an employee, of which 36,680 shares vested on February 28, 2019, and 36,680 shares will vest on each of February 28, ~~2019,~~ 2020 and 2021;

●
110,040 shares of restricted Class A common stock with a grant date fair value per share of $12.65 to an employee, subject to the achievement of certain performance measures, which will vest on February 28, 2021;

●
318,196 shares of restricted common stock with a grant date fair value per share of $15.25 to certain employees; net of forfeitures, 131,106 shares ~~will vest~~vested on February 28, 2019; 69,651 shares will vest on February 28, 2020; and 69,652 shares will vest on February 28, 2021; and

●
73,640 shares of restricted common stock to our non-employee directors, all of which will vest on May 31, 2019.

~~During the six-months ended June 30, 2017, we granted:~~

●
Under the 2007 Incentive Plan, 307,943 shares of restricted common stock to certain employees, of which 102,648 shares vested on January 31, 2018; net of forefeitures, 86,783 shares will vest on January 31, 2019; and 86,781 shares will vest on January 31, 2020;
●
Under the 2007 Incentive Plan, 198,220 shares of restricted Class A common stock to an employee, of which 66,073 shares vested on January 31, 2018; 66,073 shares will vest on January 31, 2019; and 66,074 shares will vest on January 31, 2020; and
●
~~Under the 2017 EICP, 76,856 shares of restricted Class A common stock to our non-employee directors, all of which vested on January 31, 2018.~~
A summary of restricted common stock and Class A common stock activity for the ~~six-month~~six-month periods ended June 30, ~~2018~~ 2019 and ~~2017,~~2018, respectively, is as follows:

Six Months Ended

Six Months Ended

June 30, 2018

June 30, 2017

June 30, 2019

June 30, 2018

Weighted-

Weighted-

Weighted-

Weighted-

average

average

average

average

Grant Date

Grant Date

Grant Date

Grant Date

Number of

Fair Value

Number of

Fair Value

Number of

Fair Value

Number of

Fair Value

Shares

Per Share

Shares

Per Share

Shares

Per Share

Shares

Per Share

Restricted stock - common:

Outstanding - beginning of period
503,685 $ 11.14 396,033 $ 12.06 578,894 $ 13.14 503,685 $ 11.14
Granted
391,836 $ 14.63 307,943 $ 10.40 718,783 $ 16.08 391,836 $ 14.63
Vested
(225,570 ) $ 11.21 (200,291 ) $ 11.82 (352,810 ) $ 12.98 (225,570 ) $ 11.21
Forfeited
(91,057 ) $ 13.27 - $ - - $ 0.00 (91,057 ) $ 13.27
Outstanding - end of period
578,894 $ 13.14 503,685 $ 11.14 944,867 $ 15.44 578,894 $ 13.14

Restricted stock - Class A common:

Outstanding - beginning of period
462,632 $ 10.63 415,082 $ 10.15 407,786 $ 11.82 462,632 $ 10.63
Granted (1)
220,080 $ 12.65 275,076 $ 10.84
Granted
199,810 $ 15.36 220,080 $ 12.65
Vested
(274,926 ) $ 10.48 (227,526 ) $ 10.00 (158,312 ) $ 11.38 (274,926 ) $ 10.48
Restricted stock - end of period
407,786 $ 11.82 462,632 $ 10.63
Outstanding - end of period
449,284 $ 13.55 407,786 $ 11.82

Restricted stock units - common stock:

Outstanding - beginning of period
209,500 $ 15.70 - $ 0.00 209,500 $ 15.70
Granted
398,000 $ 18.21 - $ 0.00
Vested
(209,500 ) $ 15.70 - $ 0.00 (209,500 ) $ 15.70
Outstanding - end of period
- $ - 398,000 $ 18.21 - $ 0.00

~~(1)     For awards subject to future performance conditions, amounts assume target performance.~~

(1)
For awards subject to future performance conditions, amounts assume target performance.

At June 30, ~~2018~~ 2019 and December 31, ~~2017,~~ 2018, we had outstanding options to acquire 274,746 shares of our common stock, all of which were vested and exercisable. The exercise price of all outstanding stock options is $1.99 per share. As of June 30, ~~2018~~ 2019 and December 31, ~~2017,~~ 2018, we did ~~not~~ nothave any options outstanding for our Class A common stock. The aggregate intrinsic value of our outstanding stock options was ~~$3.8~~approximately $4 million based on the closing market price of our common stock on June 30, ~~2018.~~2019.

8. ~~Commitments and Contingencies~~10. Leases

~~From~~Operating Leases
We lease various assets with non-cancellable lease terms that range between 1 and 99 years. Many of these leases have optional renewal periods ranging between 1 and 20 years. We define the lease term as the original lease base period plus optional renewal periods that we reasonably expect to be exercised. We do not include renewal periods exercisable more than ten years from the commencement date in the lease term as we cannot reasonably expect to exercise an option that far into the future. Some of our leases have free rent periods, tenant allowances and/or fixed or variable rent escalators. We record operating lease expense on a straight-line basis over the lease term. Operating lease expense is included in operating expenses in our statements of operations.
We lease land, buildings, transmission towers, right of way easements, and equipment through operating leases. We generally lease land for the purpose of erecting transmission towers for our broadcast operations. Our building leases consist of office space and broadcast studios. For transmission towers we do not own, we lease space for our transmission equipment on third-party towers. We lease right of ways for various purposes including ingress and egress for tower locations and guyed wire space. Our equipment leases consist of office, transmission and production equipment.

We allocate consideration paid in the contract to lease and non-lease components based upon the contract or associated invoice received if applicable. Lease components include base rent, fixed rate escalators and in-substance fixed payments associated with the leased asset. Non-lease components include common area maintenance and operating expenses associated with the leased asset. We have not elected the practical expedient to combine lease and non-lease components. As such, we only include the lease component in the calculation of right-of-use asset and lease liability. The incremental borrowing rate we use for the calculation is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term based upon our borrower risk profile.
Variable lease payments are not significant and are included in operating lease expense as a component of operating expense in our statement of operations. Variable lease payments are generally associated with usage based leases and variable payment escalators such as consumer price index increases (CPI) incurred after the date of the adoption of ASC 842. Some of our land leases require us to pay a percentage of the revenue earned from leasing space on the towers we erect on the leased land. We included the payment level of CPI and percentage rent amounts at the time of the adoption of ASC 842 in the base rent for calculating the right-of-use asset and lease liability. CPI adjustments and percentage rent amounts that differ from the amount included in ASC 842 calculation are included in variable lease payments.
We recognize leases with an initial term of 12 months or less as short-term leases. Lease payments associated with short-term leases are expensed as incurred in our operating lease expense and are not included in our calculation of right-of-use assets or lease liabilities. Short-term leases generally consist of rentals of production or broadcast equipment for short periods of time.
Our operating lease costs, including variable lease costs, for the three and six-month periods ended June 30, 2019 were $3 million and $6 million, respectively. Our short-term lease costs for the three-month period ended June 30, 2019 were notsignificant and for the six-month period ended June 30, 2019 were $1 million. Cash flows from operations included cash paid for operating leases of $7 million in the six-months ended June 30, 2019. Additional right of use assets recognized in the six-months ended June 30, 2019 were not material. As of June 30, 2019, the weighted average remaining term of our operating leases was 10.5 years. The weighted average discount rate used to ~~time, we~~ calculate the values associated with our operating leases was 6.75%.
The maturities of operating lease liabilities as of June 30, 2019, for the remainder of 2019 and the succeeding years were as follows (in millions):
        Year ending
       December 31,

Operating Leases

2019
$ 5
2020
10
2021
9
2022
9
2023
9
Thereafter
53
Total lease payments
95
Less: Imputed interest
(28 )
Present value of lease liabilties
$ 67

We had no material capital leases as of December 31, 2018. Our aggregate minimum lease payments under operating leases as of December 31, 2018 were as follows (in millions):
        Year ending
        December 31,

Operating Leases

2019
$ 3
2020
3
2021
3
2022
3
2023
2
Thereafter
12
Total
$ 26
Our aggregate lease payments under operating leases as of December 31, 2018 are ~~or may become~~based on ASC 840that was superseded upon the adoption of ASC 842on January 1, 2019. Our maturities of operating lease liabilities as of June 30, 2019 was significantly higher than our aggregate lease payments under operating leases as of December 31, 2018 due primarily to our completion of the Raycom Merger on January 2, 2019.
Financing Leases
We lease certain vehicles through a financing master lease. The weighted average remaining lease term of the vehicles under this lease is 2.3 years. The interest rate for each vehicle leased is 4.25%. We recorded a right-of-use asset and lease liability of $2 million, respectively, upon the adoption of ASC 842 related to these financing leases. The right-of-use asset is recorded in other noncurrent assets in our balance sheets. The current portion of the lease liability is recorded in the balance of other accrued expenses in current liabilities and the long term portion is recorded in the balance of other liabilities in non-current liabilities in our balance sheets.
Amortization expense associated with this lease is included in amortization expense as a component of operating expense, and interest expense is included in interest expense in our statement of operations. Amortization and interest expenses were not material in the three and six-months ended June 30, 2019. Cash paid for financing leases is included in our cash flows from financing activities and cash paid for interest on financing leases is included in our cash flow from operating activities.
For the three and six-months ended June 30, 2019, cash paid for amounts included in measurement of liabilities for operating cash flows from finance leases and financing cash flows from finance leases as well as ROU assets obtained in exchange for lease liabilities were not material.
11.
Commitments and Contingencies
Legal Proceedings and Claims
We are and expect to continue to be subject to legal actions, proceedings and claims that arise in the normal course of our business. In ~~our~~the opinion of management, the amount of ultimate liability, if any, with respect to ~~known~~these actions, proceedings and claims will not materially affect our financial ~~position. However, the outcome~~position, results of ~~any one~~operations or ~~more matters cannot be predicted with certainty,~~cash flows, although legal proceedings are subject to inherent uncertainties, and ~~the~~ unfavorable ~~resolution of any matter~~rulings or events could have a material adverse ~~effect~~impact on ~~us.~~our financial position, results of operations or cash flows.

Pending ~~Acquisition – Sioux Falls~~Acquisitions and Divestitures

On May 1, 2018, we entered into an agreement to acquire KDLT-TV (NBC), ~~a television station serving~~in the Sioux Falls, South Dakota market (DMA ~~110)~~115), for $32.5 million. The transaction is subject to regulatory approvals and other customary closing conditions. WePending such approvals and acquisitions, we expect that this transaction will close later in ~~the third quarter of 2018,~~2019, using cash on hand.

~~Pending Merger with Raycom Media~~

On ~~June 23, 2018,~~ February 28, 2019, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with, among others, Raycom Media, Inc., a Delaware corporation (the “Raycom Merger”). Upon completion of the Raycom Merger, Raycom is expected to become a direct wholly owned subsidiary of Gray and, prior to any station divestitures due to market overlaps, we will own and/or operate 142 full-power television stations serving 92 markets. At that time, our station portfolio would reach approximately 24 percent of U.S. television households through nearly 400 separate program streams including approximately 165 affiliates of the ABC/ NBC/CBS/FOX networks, and over 100 affiliates of CW, MyNetwork, and MeTV. These stations were ranked number-one in all day Nielsen ratings in 62 of the combined markets, and in 92% of the combined markets were the number-one or number-two ranked television station. In addition to high quality television stations, we expectagreement to acquire ~~additional Raycom businesses that provide sports marketing, production and digital signage services, resulting in our becoming a more diversified media company.~~
~~The aggregate consideration consists~~the assets of ~~11,500,000 shares of our common stock, $2.85 billion in cash (subject to certain adjustments as set forth~~WVIR-TV (NBC) in the ~~Merger Agreement) and 650,000 shares of a new series of perpetual preferred stock of the Company, with a stated face value of $1,000 per share (the “New Preferred Stock”~~Charlottesville, Virginia market (DMA 183).
~~We have agreed to file a registration statement, following the effective time of the Raycom Merger, covering the resale of the shares of the common stock issuable in the Raycom Merger.~~
Shares of the New Preferred Stock will be issuable to holders of warrants to purchase shares of Raycom capital stock outstanding immediately prior to the effective time of the Merger. The New Preferred Stock will accrue dividends at 8% per annum payable in cash or 8.5% per annum payable in the form of additional New Preferred Stock, at the election of Gray. The holders of the New Preferred Stock will not be entitled to vote on any matter submitted to the stockholders of the Company from Waterman Broadcasting Corporation for a vote, except as required by Georgia law. Upon a liquidation of the Company, holders of the New Preferred Stock will be entitled to receive a liquidation preference equal to $1,000 per share plus all accrued and unpaid dividends.
~~Also on June 23, 2018, and in connection with our entry into the Merger Agreement,~~ $12.0 million. On May 31, 2019, we entered into a financing commitment letter with Wells Fargo Bank, National Association, and a syndicate of other lenders, pursuant to which it has committed to provide the debt financing in the form of an incremental term loan facility in an aggregate principal amount of $2.525 billion for a portion of thepre-paid this purchase price to ~~be paid~~the seller. Also on February 28, 2019, in order to ~~complete~~meet regulatory requirements, we agreed to divest our stations in that market, WCAV-TV (CBS/FOX) and WVAW-TV (ABC). We expect these transactions will close later in 2019.
12.
Goodwill and Intangible Assets
During the ~~Raycom Merger~~six-months ended June 30, 2019, we completed the 2019 Acquisitions that included the acquisition of goodwill, broadcast licenses and finite-lived intangible assets. See Note 3 “Acquisitions and Divestitures” for more information regarding these transactions. A summary of changes in our goodwill and other intangible assets, on a net basis, for the ~~refinancing of certain existing indebtedness of Raycom. The commitment letter contains conditions to funding~~six-months ended June 30, 2019 is as follows (in millions):

Net Balance at

Net Balance at

December 31,

June 30,

2018

Additions

Dispositions

Impairments

Amortization

2019

Goodwill
$ 612 $ 1,069 $ (229 ) $ - $ - $ 1,452
Broadcast licenses
1,530 2,028 - - - 3,558
Finite-lived intangible assets
53 501 - - (57 ) 497
Total intangible assets net of accumulated amortization
$ 2,195 $ 3,598 $ (229 ) $ - $ (57 ) $ 5,507
A summary of the ~~debt financing customary for commitments of this type. The incremental term loan will be secured~~changes in our goodwill, on a ~~pari passu~~gross basis, ~~with~~for the ~~other obligations of the Company and its subsidiaries under the 2017 Senior Credit Facility. Various economic terms of the debt financing are subject to change in the process of syndication.~~six-months ended June 30, 2019, is as follows (in millions):

As of

As of

December 31,

June 30,

2018

Additions

Dispositions

Impairments

2019

Goodwill, gross
$ 711 $ 1,069 $ (229 ) $ - $ 1,551
Accumulated goodwill impairmant
(99 ) - - - (99 )
Goodwill, net
$ 612 $ 1,069 $ (229 ) $ - $ 1,452

~~The consummation~~
As of the Raycom Merger is subject to the satisfaction or waiver of certain customary conditions, including: (i) the receipt of approval from the Federal Communications Commission, (ii) the expiration or early termination of the waiting period applicable to the Raycom Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of certain legal impediments to the consummation of the Raycom Merger, and (iv) the receipt of certain customary third-party consents. We believe that the Raycom Merger will be completed during the fourth quarter of 2018. Either party may terminate the Raycom Merger if it is not consummated on or before June 30, 2019 ~~with an automatic extension to September 30, 2019 if necessary to obtain regulatory approval under the circumstances specified in the Merger Agreement.~~
9.~~Goodwill~~ and ~~Intangible Assets~~
~~As of June 30, 2018 and~~ December 31, ~~2017,~~ 2018, our intangible assets and related accumulated amortization consisted of the following (in ~~thousands)~~millions):

As of June 30, 2018 As of December 31, 2017
As of June 30, 2019

As of December 31, 2018

Accumulated

Accumulated

Accumulated

Accumulated

Gross

Amortization

Net

Gross

Amortization

Net

Gross

Amortization

Net

Gross

Amortization

Net

Intangible assets not currently subject to amortization:

Broadcast licenses
$ 1,584,402 $ (53,699 ) $ 1,530,703 $ 1,584,402 $ (53,699 ) $ 1,530,703 $ 3,612 $ (54 ) $ 3,558 $ 1,583 $ (53 ) $ 1,530
Goodwill
611,100 - 611,100 611,100 - 611,100 1,452 - 1,452 612 - 612
$ 2,195,502 $ (53,699 ) $ 2,141,803 $ 2,195,502 $ (53,699 ) $ 2,141,803 $ 5,064 $ (54 ) $ 5,010 $ 2,195 $ (53 ) $ 2,142

Intangible assets subject to amortization:

Network affiliation agreements
$ 6,134 $ (4,842 ) $ 1,292 6,134 $ (3,551 ) $ 2,583 $ 54 $ (11 ) $ 43 $ 6 $ (6 ) $ -
Other definite lived intangible assets
143,446 (81,542 ) 61,904 143,446 (72,245 ) 71,201 596 (142 ) 454 143 (90 ) 53
$ 149,580 $ (86,384 ) $ 63,196 $ 149,580 $ (75,796 ) $ 73,784 $ 650 $ (153 ) $ 497 $ 149 $ (96 ) $ 53

Total intangibles
$ 2,345,082 $ (140,083 ) $ 2,204,999 $ 2,345,082 $ (129,495 ) $ 2,215,587 $ 5,714 $ (207 ) $ 5,507 $ 2,344 $ (149 ) $ 2,195

Amortization expense for the ~~six-months~~six-months ended June 30, ~~2018~~ 2019 and ~~2017~~2018 was ~~$10.6~~$57 million and ~~$12.2~~$11 million, respectively. Based on the current amount of intangible assets subject to amortization, we expect that amortization expense for the remainder of ~~2018~~2019 will be approximately ~~$10.0~~$56 million, and, for the succeeding five years, amortization expense will be approximately as follows: ~~2019, $15.4~~2020, $99 million; ~~2020, $12.4~~2021, $95 million; ~~2021, $8.3~~2022, $91 million; ~~2022, $4.8~~2023, $85 million; and ~~2023, $2.9~~2024, $22 million. If and when acquisitions and dispositions occur in the future, actual amounts may vary materially from these estimates.

Impairment of goodwill and broadcast licenses

Our intangible assets are primarily comprised of broadcast licenses. There were no triggering events that required a test of our goodwill or intangible assets for impairment during the ~~six-month~~six-month period ended June 30, ~~2018.~~2019.

10
13.~~Income Taxes~~
Income Taxes

For the ~~three-month~~three-month and ~~six-month~~six-month periods ended June 30, ~~2018~~ 2019 and ~~2017,~~2018, our income tax expense and effective income tax rates were as follows (dollars in ~~thousands)~~millions):

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

2018

2017

2018

2017

2019

2018

2019

2018

Income tax expense
$ 14,856 $ 47,893 $ 21,256 $ 55,222 $ 18 $ 15 $ 21 $ 21
Effective income tax rate
26.7 % 40.4 % 26.0 % 40.5 % 29 % 27 % 45 % 26 %

We estimate our differences between taxable income or loss and recorded income or loss on an annual basis. Our tax provision for each quarter is based upon these full year projections, which are revised each reporting period. These projections incorporate estimates of permanent differences between U.S. GAAP income or loss and taxable income or loss, state income taxes and adjustments to our liability for unrecognized tax benefits to adjust our statutory Federal income tax rate of ~~21.0% in 2018 and 35.0% in 2017~~21% to our effective income tax rate. For the ~~six-month period~~six-months ended June 30, ~~2018,~~ 2019, these estimates increased or decreased our statutory Federal income tax rate ~~of 21.0%~~ to our effective income tax rate of ~~26.0%~~45% as follows: state income taxes added ~~4.7%~~5%, permanent differences between our U.S. GAAP income and taxable income resulted in an increase of 3%. Restricted stock vesting resulted in an decrease of 1%. Divestiture of component 2 goodwill resulted in a increase of 17%. For the six-months ended June 30, 2018, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 26% as follows: state income taxes added 5%, permanent differences between our U.S. GAAP income and taxable income added ~~1.0%~~1%, and a discrete share-based compensation adjustment resulted in a reduction of ~~0.7%~~1%. ~~For~~

We have approximately $770 million of federal operating loss carryforwards, that expire during the ~~six-month period ended June 30, 2017, these estimates increased or decreased our statutory Federal income tax rate of 35.0%~~years 2021 through 2037. We expect to ~~our effective income tax rate of 40.5% as follows: state income taxes added 4.3% and permanent differences between our U.S. GAAP income and~~have federal taxable income ~~added 1.3%, and discrete share-based compensation adjustments resulted~~ in ~~a reduction of 0.1%.~~
~~We made income tax payments (net of refunds)~~the carryforward periods, therefore we believe that it is more likely than not that these federal operating loss carryforwards will be fully utilized. Additionally, we have an aggregate of approximately ~~$12.0~~$858 million ~~and $0.9 million during~~of various state operating loss carryforwards, of which we expect that the ~~six-months ended June 30, 2018 and 2017, respectively.~~majority will be utilized.

14.
Segment information
The Company operates in two business segments: broadcasting and production companies. The broadcasting segment operates television stations located across 93 local markets in the United States. The production companies segment includes the production of television and event content. Costs identified as other are primarily corporate and administrative expenses. The following tables present certain financial information concerning the Company’s operating segments (in millions):

Production

As of and for the six months ended June 30, 2019:

Broadcast

Companies

Other

Consolidated

Revenue (less agency commissions)
$ 980 $ 46 $ - $ 1,026
Operating expenses before depreciation, amortization and (gain) loss on disposal of assets, net:
670 44 69 783
Depreciation and amortization
90 6 1 97
(Gain) loss on disposal of assets, net
(13 ) - - (13 )
Operating expenses
747 50 70 867
Operating income
$ 233 $ (4 ) $ (70 ) $ 159

Interest expense
$ - $ - $ 116 $ 116
Capital expenditures (excluding business combinations)
$ 39 $ - $ 5 $ 44
Goodwill
$ 1,412 $ 40 $ - $ 1,452
Total Assets
$ 6,505 $ 131 $ 365 $ 7,001

For the six months ended June 30, 2018:

Revenue (less agency commissions)
$ 477 $ - $ - $ 477
Operating expenses before depreciation, amortization and (gain) loss on disposal of assets, net:
292 - 19 311
Depreciation and amortization
37 - 1 38
(Gain) loss on disposal of assets, net
(2 ) - - (2 )
Operating expenses
327 - 20 347
Operating income
$ 150 $ - $ (20 ) $ 130

Interest expense
$ - $ - $ 49 $ 49
Capital expenditures (excluding business combinations)
$ 20 $ - $ - $ 20

As of December 31, 2018:

Goodwill
$ 612 $ - $ - $ 612
Total Assets
$ 3,242 $ - $ 971 $ 4,213

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of operations of Gray Television, 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 unaudited condensed consolidated financial statements and notes thereto included elsewhere herein, as well as with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (the ~~“2017~~“2018 Form 10-K”) filed with the SEC.

We are a television broadcast company headquartered in Atlanta, Georgia, that ~~owns and operates~~is the largest owner of top-rated local television stations and ~~leading~~ digital assets in ~~markets throughout~~ the United States. ~~As of June 30, 2018,~~Currently, we ~~owned and operated~~own television stations and locally focused digital platforms in 5793 television markets broadcasting over ~~200~~400 separate programming streams, including ~~over 100~~approximately 150 affiliates of the ~~CBS/NBC/ABC/FOX~~Big Four TV networks.

In addition to a primary broadcast channel, each of our stations can also broadcast additional secondary digital channels within a market by utilizing the same bandwidth, but with different programming from the primary channel. In addition to affiliations with ABC, CBS and FOX, our secondary channels are affiliated with numerous smaller networks and program services including, among others, the CW, MY, MeTV, This TV, Ant.,Telemundo, Cozi, Heroes and Icons and MOVIES! networks. Certain of our secondary digital channels are affiliated with more than one network simultaneously. We also broadcast local news/weather channels in some markets. Our ~~combined TV~~ station ~~group~~portfolio reaches approximately ~~10.4%~~24% of total United States television households. We also own video program production, marketing, and digital businesses including Raycom Sports, Tupelo-Raycom, and RTM Studios, the producer of PowerNation programs and content which we refer to collectively as the “production companies”.

~~Based on the consolidated results of the four Nielsen “sweeps” periods in~~Between December 2017 and November 2018, our television stations achieved the #1 ranking in overall audience in 4269 of our ~~57 markets and the #1 ranking in local news audience in 38 of our~~93 markets. In addition, our stations achieved the #1 or #2 ranking in ~~both~~ overall audience ~~and news audience~~ in ~~all 57~~87 of our ~~57 markets.~~93 markets among all local television stations.

Over the last several years, the television broadcasting industry has been characterized by a high number of transactions resulting in continued industry consolidation. We believe that there continues to be a number of television stations, and various station groups, that have attractive operating profiles and characteristics, and that share our commitment to local news coverage in the communities in which they operate and to creating high-quality and locally-driven content. In addition, at June 30, 2018,On January 2, 2019, we have a pending acquisition of KDLT-TV (NBC), a television station serving the Sioux Falls, South Dakota market (DMA 110) which we expect to close in the third quarter of 2018, and the Raycom Merger, described below. We expect to continue to evaluate other opportunities for the acquisition of additional television stations or station groups that fit our strategic and operational objectives, and where we believe that we can improve revenue, efficiencies and cash flow through active management and cost controls. As we consider potential acquisitions, we evaluate, among other things, potential station audience and revenue shares and the extent to which the acquisition target would positively impact our existing station operations. Consistent with this strategy, from October 31, 2013 through December 31, 2017, we completed 23 acquisition transactions and three divestiture transactions. These transactions added a net total of 51 television stations in 31 television markets, including 26 new television markets, to our operations including eight stations acquired in 2017 (excluding certain television stations we began operating in 2016, and subsequently acquired in 2017, in the Clarksburg, West Virginia market, the “2017 Acquisitions”).

~~On June 23, 2018, we entered into~~ the Raycom Merger. ~~Upon completion~~Net of ~~the Raycom Merger, Raycom is expected to become a direct wholly owned subsidiary of Gray and, prior to any~~ station divestitures due to market overlaps, ~~we will own and/or operate 142 full-power~~this transaction added television stations ~~serving 92~~in 34 new markets. At that time, our station portfolio would reach approximately 24 percent of U.S. television households through nearly 400 separate program streams including approximately 165 affiliates of the ABC/ NBC/CBS/FOX networks, and over 100 affiliates of CW, MyNetwork, and MeTV. These stations were ranked number-one in all day Nielsen ratings in 62 of the combined markets, and in 92% of the combined markets were the number-one or number-two ranked television station. In addition to the high quality television stations acquired as part of the Raycom Merger, we ~~expect to acquire additional Raycom~~also acquired businesses that provide sports marketing and production ~~and digital signage~~ services ~~resulting~~that we believe has resulted in ~~our~~us becoming a more diversified media company. The Raycom Merger completed our transformation from a small, regional broadcaster to a leading media company with nationwide scale based on high-quality stations with exceptional talent in attractive markets. By combining these two companies, we now own and operate television stations and leading digital properties in television markets from Alaska and Hawaii to Maine and Florida.

Upon consummation of the Raycom Merger, ~~is subject~~all outstanding shares of Raycom capital stock, and options and warrants to purchase Raycom capital stock, were cancelled, and all outstanding indebtedness was repaid, in exchange for aggregate consideration consisting of: (i) 11.5 million shares of the Company’s common stock then valued at $170 million, for which we filed a registration statement in January 2019, covering the resale of the shares issued; (ii) $2.84 billion in cash; and (iii) 650,000 shares of Series A Preferred Stock of the Company, with a stated face value of $1,000 per share or $650 million, issued to holders of warrants to purchase shares of Raycom. The Series A Preferred Stock accrues dividends at 8% per annum payable in cash or 8.5% per annum payable in the form of additional Series A Preferred Stock, at the election of Gray. The holders of Series A Preferred Stock are not entitled to vote on any matter submitted to the ~~satisfaction or waiver of certain customary conditions, including: (i) the receipt of approval from the Federal Communications Commission, (ii) the expiration or early termination~~stockholders of the ~~waiting period applicable~~Company for a vote, except as required by Georgia law. Upon a liquidation of the Company, holders of the Series A Preferred Stock will be entitled to receive a liquidation preference equal to $1,000 per share plus all accrued and unpaid dividends.

On May 1, 2019, we acquired the assets of WWNY-TV (CBS) and WNYF-CD (FOX) in Watertown, New York (DMA 178) and KEYC-TV (CBS/FOX) in Mankato, Minnesota (DMA 199) from United Communications Corporation (the “United Acquisition” and, together with the Raycom Merger, the “2019 Acquisitions”) for an adjusted purchase price of $48 million, excluding transaction related expenses. We began operating those stations on March 1, 2019 under a local programming and marketing agreement, and increased the ~~Hart-Scott-Rodino Antitrust Improvements Act~~total number of ~~1976, as amended, (iii) the absence of certain legal impediments~~our markets to 93.

The 2019 Acquisitions have materially affected our operations, liquidity and capital expenditures. In addition to the ~~consummation~~effects on our balance sheet from the financing transactions described below, our results of operations and cash flows have increased substantially. We also expect that the 2019 Acquisitions will create opportunities to reduce or eliminate redundancies in our combined operations, and that these synergies will be implemented in phases over several years. Please see Note 3 “Acquisitions and Divestitures” and Note 4 “Long-term Debt” of our condensed consolidated financial statements included elsewhere herein for additional information on the Raycom Merger ~~and (iv) the receipt of certain customary third-party consents. We believe that the Raycom Merger will be~~including on any financing transaction completed during the fourth quarter of 2018. Either party may terminate the Merger Agreement if it is not consummated on or before June 30, 2019, with an automatic extension to September 30, 2019 if necessary to obtain regulatory approval under the circumstances specified in ~~the Merger Agreement.~~connection therewith.

Our operating revenues are derived primarily from broadcast and internet advertising and retransmission consent fees and, to a lesser extent, from other sources such as production of ~~commercials,~~sporting events and related television content, tower rentals and management fees.

Broadcast advertising is sold for placement either 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, as measured by Nielsen.~~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 internet advertising on our stations’ websites. These advertisements may be sold as banner advertisements, pre-roll advertisements or video and other types of advertisements or sponsorships.

Our broadcast and internet advertising revenues are affected by several factors that we consider to be seasonal in nature. These factors include:

Automotive advertisers have traditionally accounted for a significant portion of our revenue. For the ~~six- months~~six-months ended June 30, ~~2018~~2019 and ~~2017,~~2018, we derived approximately 24% ~~and 25%~~, ~~respectively,~~in each period, of our total broadcast advertising revenue from customers in the automotive industry. Strong demand for our advertising inventory from political advertisers can require significant use of available inventory, which in turn can lower our advertising revenue from our non-political advertising revenue categories in the even numbered “on-year” of the ~~two year~~two-year election cycle. These temporary declines are expected to reverse themselves in the following “off-year” of the ~~two year~~two-year election cycle.

While our total revenues have increased in recent years as a result of our acquisitions, they have also experienced a gradual improvement as a result of improvements in general economic conditions. However, revenue remains under pressure from ~~competitors~~the internet as a competitor for advertising ~~spending, including the internet and other non-traditional forms of advertising.~~spending. We continue to enhance and market our internet websites in an effort to generate additional revenue. Our aggregate internet revenue is derived from both advertising and sponsorship opportunities directly on our websites.

Our primary broadcasting operating expenses are employee compensation, related benefits and programming costs. In addition, ~~our~~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.

Set forth below are the principal types of revenue, less agency commissions, earned by us for the periods indicated and the percentage contribution of each type of revenue to our total revenue (dollars in ~~thousands)~~millions):

Georgia		58-0285030
(State or other jurisdiction of		~~(I.R.S. Employer~~
incorporation or organization)		(I.R.S. Employer Identification Number)


4370 Peachtree Road, NE, Atlanta, Georgia		30319
(Address of principal executive offices)		~~30319~~
~~(Address of principal executive offices)~~		(Zip code)

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐ ~~(do not check if a smaller reporting company)~~	Smaller reporting company ☐
Emerging growth company ☐

Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock (no par value)	GTN.A	New York Stock Exchange
common stock (no par value)	GTN	New York Stock Exchange

Common Stock (No Par Value)		Class A Common Stock (No Par Value)
~~82,022,500~~94,285,366 shares outstanding as of July 31, 20189		~~6,729,035~~6,881,192 shares outstanding as of July 31, 20189


PART I.	FINANCIAL INFORMATION	PAGE

Item 1.	Financial Statements

	Condensed consolidated balance sheets (Unaudited) - June 30, ~~2018~~2019 and December 31, ~~2017~~2018	3

	Condensed consolidated statements of operations (Unaudited) - ~~three months~~three-months and six-months ended June 30, ~~2018~~2019 and ~~2017~~2018	5

	Condensed consolidated ~~statement~~statements of stockholders' equity (Unaudited) - six-months ended June 30, 2019 and 2018	6

	Condensed consolidated statements of cash flows (Unaudited) - six-months ended June 30, ~~2018~~2019 and ~~2017~~2018	7

	Notes to condensed consolidated financial statements (Unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2229

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3036

Item 4.	Controls and Procedures	3036

PART II.	OTHER INFORMATION

Item 1A.	Risk Factors	3036

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3036

Item 6.	Exhibits	3137

SIGNATURES		3238

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)

	June 30,		December 31,
	2019		2018
Assets:
Current assets:
Cash	$	251	$	667
Accounts receivable trade, less allowance for doubtful accounts of $9 and $5, respectively		390		184
Current portion of program broadcast rights, net		9		15
Prepaid and other current assets		33		7
Total current assets		683		873

Property and equipment, net		686		363
Operating leases right of use asset		66		-
Broadcast licenses		3,558		1,530
Goodwill		1,452		612
Other intangible assets, net		497		53
Investments in broadcasting and technology companies		17		17
Restricted cash		-		752
Other		42		13
Total assets	$	7,001	$	4,213

GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in ~~thousands)~~millions, except for share data)

~~GRAY TELEVISION, INC.~~
~~CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)~~
~~(in thousands except for share data)~~

GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in ~~thousands~~millions, except for per share data)

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2018			2017			2018			2017			2019			2018			2019			2018

Revenue (less agency commissions)	$	250,344		$	226,681		$	476,602		$	430,142
Broadcasting													$	499		$	250		$	980		$	477
Production companies														9			-			46			-
Total revenue (less agency commissions)														508			250			1,026			477
Operating expenses before depreciation, amortization and loss (gain) on disposal of assets, net:
Broadcast		141,919			133,683			291,573			267,239			314			142			670			292
Production companies														9			-			44			-
Corporate and administrative		10,833			8,432			19,093			16,142			21			11			69			19
Depreciation		13,543			12,841			27,237			25,470			20			13			40			27
Amortization of intangible assets		5,153			6,657			10,589			12,224			28			5			57			11
Gain on disposals of assets, net		(794	)		(77,326	)		(1,615	)		(76,799	)		(3	)		(1	)		(13	)		(2	)
Operating expenses		170,654			84,287			346,877			244,276			389			170			867			347
Operating income		79,690			142,394			129,725			185,866			119			80			159			130
Other income (expense):
Miscellaneous income, net		702			162			1,262			255			1			1			4			1
Interest expense		(24,831	)		(23,791	)		(49,081	)		(46,982	)		(58	)		(25	)		(116	)		(49	)
Loss from early extinguishment of debt		-			(311	)		-			(2,851	)
Income before income taxes		55,561			118,454			81,906			136,288			62			56			47			82
Income tax expense		14,856			47,893			21,256			55,222			18			15			21			21
Net income	$	40,705		$	70,561		$	60,650		$	81,066			44			41			26			61
Preferred stock dividends														13			-			26			-
Net income attributable to common stockholders													$	31		$	41		$	-		$	61

Basic per share information:
Net income	$	0.46		$	0.98		$	0.69		$	1.13
Net income attributable to common stockholders													$	0.31		$	0.46		$	-		$	0.69
Weighted-average shares outstanding		87,765			71,821			88,408			71,849			100			88			100			88

Diluted per share information:
Net income	$	0.46		$	0.97		$	0.68		$	1.12
Net income attributable to common stockholders													$	0.31		$	0.46		$	-		$	0.68
Weighted-average shares outstanding		88,305			72,501			88,937			72,510			101			88			100			89

Dividends declared per common share	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-

																									Accumulated
	Class A												Class A						Common						Other																															Accumulated
	Common Stock				Common Stock						Retained		Treasury Stock						Treasury Stock						Comprehensive						Class A													Class A						Common						Other
	Shares		Amount		Shares			Amount			Earnings		Shares			Amount			Shares			Amount			Loss			Total			Common Stock				Common Stock						Retained			Treasury Stock						Treasury Stock						Comprehensive
																															Shares		Amount		Shares			Amount			Earnings			Shares			Amount			Shares			Amount			Loss			Total

Balance at December 31, 2017		8,349,069	$	24,644		88,788,664		$	902,518		$	161,694		(1,750,692	)	$	(24,232	)		(5,535,076	)	$	(49,562	)	$	(22,165	)	$	992,897			8,349,069	$	25		88,788,664		$	902		$	162			(1,750,692	)	$	(24	)		(5,535,076	)	$	(50	)	$	(22	)	$	993

Net income		-		-		-			-			60,650		-			-			-			-			-			60,650			-		-		-			-			20			-			-			-			-			-			20

Issuance of common stock:
2017 Equity and Incentive Compensation Plan :
Restricted stock awards		220,080		-		391,836			-			-		(89,422	)		(1,252	)		(107,456	)		(1,757	)		-			(3,009	)		220,080		-		318,196			-			-			(89,422	)		(1	)		(107,456	)		(2	)		-			(3	)
Restricted stock unit awards		-		-		209,500			-			-		-			-			(82,201	)		(1,344	)		-			(1,344	)		-		-		209,500			-			-			-			-			(82,201	)		(1	)		-			(1	)

Forfeiture of restricted stock awards		-		-		(91,057	)		(528	)		-		-			-			-			-			-			(528	)

Repurchase of common stock		-		-		-			-			-		-			-			(1,551,710	)		(19,607	)		-			(19,607	)		-		-		-			-			-			-			-			(1,551,710	)		(20	)		-			(20	)

Stock-based compensation		-		1,018		-			2,881			-		-			-			-			-			-			3,899			-		-		-			2			-			-			-			-			-			-			2

Balance at March 31, 2018																																8,569,149	$	25		89,316,360		$	904		$	182			(1,840,114	)	$	(25	)		(7,276,443	)	$	(73	)	$	(22	)	$	991

Net income																																-		-		-			-			41			-			-			-			-			-			41

Issuance of common stock:
2017 Equity and Incentive Compensation Plan:
Restricted stock awards																																-		-		73,640			-			-			-			-			-			-			-			-

Forfeiture of restricted stock awards																																-		-		(91,057	)		(1	)		-			-			-			-			-			-			(1	)

Stock-based compensation																																-		1		-			1			-			-			-			-			-			-			2

Balance at June 30, 2018		8,569,149	$	25,662		89,298,943		$	904,871		$	222,344		(1,840,114	)	$	(25,484	)		(7,276,443	)	$	(72,270	)	$	(22,165	)	$	1,032,958			8,569,149	$	26		89,298,943		$	904		$	223			(1,840,114	)	$	(25	)		(7,276,443	)	$	(73	)	$	(22	)	$	1,033


Balance at December 31, 2018																																8,569,149	$	27		89,298,943		$	907		$	372			(1,840,114	)	$	(26	)		(7,276,443	)	$	(72	)	$	(21	)	$	1,187

Net loss																																-		-		-			-			(18	)		-			-			-			-			-			(18	)

Preferred stock dividends																																-		-		-			-			(13	)		-			-			-			-			-			(13	)

Issuance of common stock:
Acquisitions of television businesses and licenses																																-		-		11,499,945			170			-			-			-			-			-			-			170
401(k) Plan																																-		-		196,509			4			-			-			-			-			-			-			4
2017 Equity and Incentive Compensation Plan -
Restricted stock awards																																199,810		-		677,602			-			-			(47,653	)		-			(123,167	)		(3	)		-			(3	)

Stock-based compensation																																-		-		-			2			-			-			-			-			-			-			2

Adoption of ASU 2018-02																																-		-		-			-			2			-			-			-			-			(2	)		-

Balance at March 31, 2019																																8,768,959	$	27		101,672,999		$	1,083		$	343			(1,887,767	)	$	(26	)		(7,399,610	)	$	(75	)	$	(23	)	$	1,329

Net income																																-		-		-			-			44			-			-			-			-			-			44

Preferred stock dividends																																-		-		-			-			(13	)		-			-			-			-			-			(13	)

Issuance of common stock:
2017 Equity and Incentive Compensation Plan -
Restricted stock awards																																-		-		41,181			-			-			-			-			(29,204	)		-			-			-

Stock-based compensation																																-		-		-			3			-			-			-			-			-			-			3

Adoption of ASU 2018-02																																-		-		-			-			3			-			-			-			-			(3	)		-

Balance at June 30, 2019																																8,768,959	$	27		101,714,180		$	1,086		$	377			(1,887,767	)	$	(26	)		(7,428,814	)	$	(75	)	$	(26	)	$	1,363

GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
~~(in thousands)~~(in millions)

							Estimated
	June 30,			December 31,			Useful Lives
	2018			2017			(in years)
Property and equipment:
Land	$	51,946		$	50,458
Buildings and improvements		157,667			156,924			7	to	40
Equipment		528,442			511,878			3	to	20
		738,055			719,260
Accumulated depreciation		(395,059	)		(368,602	)
Total property and equipment, net	$	342,996		$	350,658

	Total
	Cash
	Consideration		Television
Purchaser	Received		Station	Location	DMA

Lockwood Broadcasting, Inc.	$	67	WTNZ	Knoxville, TN		60
			WFXG	Augusta, GA		105
			WPGX	Panama City, FL		150
			WDFX	Dothan, AL		173

Scripps Media, Inc.		55	KXXV	Waco-Temple-Bryan, TX		89
			KRHD	Waco-Temple-Bryan, TX		89
			WTXL	Tallahassee, FL		112

TEGNA, Inc.		109	WTOL	Toledo, OH		71
			KWES	Odessa - Midland, TX		142
Total	$	231

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Market and service type:
Advertising:
Local	$	112,921	$	117,917	$	218,390	$	220,514
National		29,873		30,981		54,385		55,795
Political		18,070		3,708		23,845		5,029
Total advertising		160,864		152,606		296,620		281,338
Retransmission consent		85,307		69,371		170,858		136,944
Other		4,173		4,704		9,124		11,860
Total revenue	$	250,344	$	226,681	$	476,602	$	430,142

Sales channel:
Direct	$	135,302	$	120,292	$	268,724	$	234,814
Advertising agency intermediary		115,042		106,389		207,878		195,328
Total revenue	$	250,344	$	226,681	$	476,602	$	430,142

				KYOU
				and		Net
	Raycom			WUPV		Consideration

Purchase Price	$	3,660		$	17	$	3,677
Less - consideration allocated to all assets acquired and net of liabilites assumed for the Raycom overlap market stations which were also divested on January 2, 2019		(234	)		-		(234	)
Purchase consideration for assets acquired and liabilities assumed net of divestitures	$	3,426		$	17	$	3,443

	Raycom			United		Total
Cash	$	116		$	-	$	116
Accounts receivable, net		245			3		248
Program broadcast rights		12			-		12
Other current assets		8			-		8
Property and equipment		311			10		321
Operating lease right of use asset		52			-		52
Goodwill		836			3		839
Broadcast licenses		2,004			24		2,028
Other intangible assets		493			8		501
Other non-current assets		22			-		22
Accrued compensation and benefits		(29	)		-		(29	)
Program broadcast obligations		(16	)		-		(16	)
Other current liabilities		(60	)		-		(60	)
Income taxes payable		(12	)		-		(12	)
Deferred income taxes		(462	)		-		(462	)
Operating lease liabilities		(52	)		-		(52	)
Other long-term liabilities		(25	)		-		(25	)
Total	$	3,443		$	48	$	3,491

	June 30, 2019
	Three Months		Six Months
	Ended		Ended
Transaction Related Expenses by type:
Legal, consulting and other professional fees	$	1	$	23
Incentive compensation and other severance costs		-		18
Termination of sales representation agreements		1		29
Total transaction related expenses	$	2	$	70

Transaction Related Expenses by financial statement line item:
Operating expenses before depreciation, amortization and loss (gain) on disposal of assets, net:
Broadcast	$	1	$	37
Corporate and administrative		1		33
Total transaction related expenses	$	2	$	70

	Minimum Principal Maturities
Year	2019 Senior Credit Facility		2024 Notes		2026 Notes		2027 Notes		Total
Remainder of 2019	$	7	$	-	$	-	$	-	$	7
2020		14		-		-		-		14
2021		14		-		-		-		14
2022		14		-		-		-		14
2023		14		-		-		-		14
2024		609		525		-		-		1,134
Thereafter		1,316		-		700		750		2,766
Total	$	1,988	$	525	$	700	$	750	$	3,963

	Six Months Ended										Six Months Ended
	June 30, 2018					June 30, 2017					June 30, 2019					June 30, 2018
				Weighted-					Weighted-					Weighted-					Weighted-
				average					average					average					average
				Grant Date					Grant Date					Grant Date					Grant Date
	Number of			Fair Value		Number of			Fair Value		Number of			Fair Value		Number of			Fair Value
	Shares			Per Share		Shares			Per Share		Shares			Per Share		Shares			Per Share
Restricted stock - common:
Outstanding - beginning of period		503,685		$	11.14		396,033		$	12.06		578,894		$	13.14		503,685		$	11.14
Granted		391,836		$	14.63		307,943		$	10.40		718,783		$	16.08		391,836		$	14.63
Vested		(225,570	)	$	11.21		(200,291	)	$	11.82		(352,810	)	$	12.98		(225,570	)	$	11.21
Forfeited		(91,057	)	$	13.27		-		$	-		-		$	0.00		(91,057	)	$	13.27
Outstanding - end of period		578,894		$	13.14		503,685		$	11.14		944,867		$	15.44		578,894		$	13.14

Restricted stock - Class A common:
Outstanding - beginning of period		462,632		$	10.63		415,082		$	10.15		407,786		$	11.82		462,632		$	10.63
Granted (1)		220,080		$	12.65		275,076		$	10.84
Granted												199,810		$	15.36		220,080		$	12.65
Vested		(274,926	)	$	10.48		(227,526	)	$	10.00		(158,312	)	$	11.38		(274,926	)	$	10.48
Restricted stock - end of period		407,786		$	11.82		462,632		$	10.63
Outstanding - end of period												449,284		$	13.55		407,786		$	11.82

Restricted stock units - common stock:
Outstanding - beginning of period		209,500		$	15.70							-		$	0.00		209,500		$	15.70
Granted												398,000		$	18.21		-		$	0.00
Vested		(209,500	)	$	15.70							-		$	0.00		(209,500	)	$	15.70
Outstanding - end of period		-		$	-							398,000		$	18.21		-		$	0.00

Year ending December 31,	Operating Leases
2019	$	5
2020		10
2021		9
2022		9
2023		9
Thereafter		53
Total lease payments		95
Less: Imputed interest		(28	)
Present value of lease liabilties	$	67

	Net Balance at												Net Balance at
	December 31,												June 30,
	2018		Additions		Dispositions			Impairments		Amortization			2019

Goodwill	$	612	$	1,069	$	(229	)	$	-	$	-		$	1,452
Broadcast licenses		1,530		2,028		-			-		-			3,558
Finite-lived intangible assets		53		501		-			-		(57	)		497
Total intangible assets net of accumulated amortization	$	2,195	$	3,598	$	(229	)	$	-	$	(57	)	$	5,507

	As of										As of
	December 31,										June 30,
	2018			Additions		Dispositions			Impairments		2019

Goodwill, gross	$	711		$	1,069	$	(229	)	$	-	$	1,551
Accumulated goodwill impairmant		(99	)		-		-			-		(99	)
Goodwill, net	$	612		$	1,069	$	(229	)	$	-	$	1,452

	As of June 30, 2018							As of December 31, 2017							As of June 30, 2019							As of December 31, 2018
			Accumulated							Accumulated							Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net		Gross		Amortization			Net		Gross		Amortization			Net
Intangible assets not currently subject to amortization:
Broadcast licenses	$	1,584,402	$	(53,699	)	$	1,530,703	$	1,584,402	$	(53,699	)	$	1,530,703	$	3,612	$	(54	)	$	3,558	$	1,583	$	(53	)	$	1,530
Goodwill		611,100		-			611,100		611,100		-			611,100		1,452		-			1,452		612		-			612
	$	2,195,502	$	(53,699	)	$	2,141,803	$	2,195,502	$	(53,699	)	$	2,141,803	$	5,064	$	(54	)	$	5,010	$	2,195	$	(53	)	$	2,142

Intangible assets subject to amortization:
Network affiliation agreements	$	6,134	$	(4,842	)	$	1,292		6,134	$	(3,551	)	$	2,583	$	54	$	(11	)	$	43	$	6	$	(6	)	$	-
Other definite lived intangible assets		143,446		(81,542	)		61,904		143,446		(72,245	)		71,201		596		(142	)		454		143		(90	)		53
	$	149,580	$	(86,384	)	$	63,196	$	149,580	$	(75,796	)	$	73,784	$	650	$	(153	)	$	497	$	149	$	(96	)	$	53

Total intangibles	$	2,345,082	$	(140,083	)	$	2,204,999	$	2,345,082	$	(129,495	)	$	2,215,587	$	5,714	$	(207	)	$	5,507	$	2,344	$	(149	)	$	2,195

				Production
As of and for the six months ended June 30, 2019:	Broadcast			Companies			Other			Consolidated

Revenue (less agency commissions)	$	980		$	46		$	-		$	1,026
Operating expenses before depreciation, amortization and (gain) loss on disposal of assets, net:		670			44			69			783
Depreciation and amortization		90			6			1			97
(Gain) loss on disposal of assets, net		(13	)		-			-			(13	)
Operating expenses		747			50			70			867
Operating income	$	233		$	(4	)	$	(70	)	$	159

Interest expense	$	-		$	-		$	116		$	116
Capital expenditures (excluding business combinations)	$	39		$	-		$	5		$	44
Goodwill	$	1,412		$	40		$	-		$	1,452
Total Assets	$	6,505		$	131		$	365		$	7,001

For the six months ended June 30, 2018:

Revenue (less agency commissions)	$	477		$	-		$	-		$	477
Operating expenses before depreciation, amortization and (gain) loss on disposal of assets, net:		292			-			19			311
Depreciation and amortization		37			-			1			38
(Gain) loss on disposal of assets, net		(2	)		-			-			(2	)
Operating expenses		327			-			20			347
Operating income	$	150		$	-		$	(20	)	$	130

Interest expense	$	-		$	-		$	49		$	49
Capital expenditures (excluding business combinations)	$	20		$	-		$	-		$	20

As of December 31, 2018:

Goodwill	$	612		$	-		$	-		$	612
Total Assets	$	3,242		$	-		$	971		$	4,213

	Three Months Ended June 30,										Six Months Ended June 30,
	2018					2017					2018					2017
			Percent					Percent					Percent					Percent
	Amount		of Total			Amount		of Total			Amount		of Total			Amount		of Total
Revenue:
Local (including internet/ digital/mobile)	$	112,921		45.	1%	$	117,917		52.	0%	$	218,390		45.	8%	$	220,514		51.	3%
National		29,873		11.	9%		30,981		13.	7%		54,385		11.	4%		55,795		13.	0%
Political		18,070		7.	2%		3,708		1.	6%		23,845		5.	0%		5,029		1.	2%
Retransmission consent		85,307		34.	1%		69,371		30.	6%		170,858		35.	8%		136,944		31.	8%
Other		4,173		1.	7%		4,704		2.	1%		9,124		2.	0%		11,860		2.	7%
Total	$	250,344		100.	0%	$	226,681		100.	0%	$	476,602		100.	0%	$	430,142		100.	0%

	Three Months Ended June 30,										Six Months Ended June 30,
	2019					2018					2019					2018
			Percent					Percent					Percent					Percent
	Amount		of Total			Amount		of Total			Amount		of Total			Amount		of Total
Revenue:
Local (including internet/ digital/mobile)	$	226		44.5	%	$	113		45.1	%	$	437		42.6	%	$	219		45.8	%
National		56		11.0	%		30		11.9	%		106		10.3	%		54		11.4	%
Political		5		1.0	%		18		7.2	%		8		0.8	%		24		5.0	%
Retransmission consent		201		39.6	%		85		34.1	%		405		39.5	%		171		35.8	%
Production companies		9		1.8	%		-		0.0	%		46		4.5	%		-		0.0	%
Other		11		2.1	%		4		1.7	%		24		2.3	%		9		2.0	%
Total	$	508		100.0	%	$	250		100.0	%	$	1,026		100.0	%	$	477		100.0	%

Exhibit Number		Description of Document

~~2.1~~		Agreement and Plan of Merger made and entered into as of June 23, 2018, by and among Gray Television, Inc., East Future Group Inc., Raycom Media, Inc. and Tara Advisors, LLC, solely in its capacity as the Stockholders’ Representative (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on June 25, 2018)
~~3.1~~		~~Restated Articles of Incorporation of Gray Television, Inc., as amended (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on May 8, 2018)~~
31.1		Rule 13(a) – 14(a) Certificate of Chief Executive Officer
31.2		Rule 13(a) – 14(a) Certificate of Chief Financial Officer
32.1		Section 1350 Certificate of Chief Executive Officer
32.2		Section 1350 Certificate of Chief Financial Officer
~~101.INS~~101.SCH		XBRL ~~Instance~~Taxonomy Extension Schema Document
~~101.SCH~~101.CAL		XBRL Taxonomy Extension ~~Schema~~Calculation Linkbase Document
~~101.CAL~~101.DEF		XBRL Taxonomy Extension ~~Calculation~~Definition Linkbase Document
~~101.DEF~~101.LAB		XBRL Taxonomy Extension ~~Definition~~Label Linkbase Document
~~101.LAB~~101.PRE		XBRL Taxonomy Extension ~~Label Linkbase Document~~
~~101.PRE~~		~~XBRL Taxonomy Extension~~ Presentation Linkbase Document

	GRAY TELEVISION, INC. (Registrant)



Date: August 7, ~~2018~~2019	By:~~/s/ James C. Ryan~~
	/s/ James C. Ryan
		James C. Ryan
		Executive Vice President and Chief Financial Officer