##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 (Mark
One)
 ý
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year 
ended December 31, 2010 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the 
transition period from  to .
 Commission File Number 1-13796
 
 GRAY TELEVISION, INC.
  Georgia
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    58-0285030
(I.R.S. Employer
Identification No.)4370 Peachtree Road, NE Atlanta, GA
(Address of Principal Executive Offices)
    
    30319
(Zip Code)
 (404) 504-9828
 
  Title of each class
    
    Name of each exchange on which registeredClass A Common Stock (no par value) 
Common Stock (no par value)
    
    New York Stock Exchange
New York Stock Exchange
 NONE
 
 o ý
 o ý
 ý o
 o o
 ý
  Large accelerated filer o
    
    Accelerated filer ý
    
    Non-accelerated filer o
    
    Smaller Reporting Company o(do not check if a smaller reporting company)
 o ý
 Class A and Common Stock; no
par value $121,275,294.
 Class A Common Stock; no par value  shares; Common Stock, no par value
 shares.
 DOCUMENTS INCORPORATED BY REFERENCE




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##### 



Gray Television Inc.
 INDEX
 PART OR ITEM
    

DESCRIPTION
    
    PAGEPART IItem 1.
    
    Business.
    
    
    3Item 1A.
    
    Risk Factors.
    
    
    15Item 1B.
    
    Unresolved Staff Comments.
    
    
    24Item 2.
    
    Properties.
    
    
    24Item 3.
    
    Legal Proceedings.
    
    
    24Item 4.
    
    Reserved.
    
    
    24Executive Officers of the Registrant.
    
    
    24PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
    
    
    26Item 6.
    
    Selected Financial Data.
    
    
    30Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations.
    
    
    31Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk.
    
    
    56Item 8.
    
    Financial Statements and Supplementary Data.
    
    
    57Item 9.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
    
    
    105Item 9A.
    
    Controls and Procedures.
    
    
    105Item 9B.
    
    Other Information.
    
    
    105PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance.
    
    
    106Item 11.
    
    Executive Compensation.
    
    
    106Item 12.
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
    
    
    106Item 13.
    
    Certain Relationships and Related Transactions,
and Director Independence.
    
    
    108Item 14.
    
    Principal Accountant Fees and Services.
    
    
    108PART IVItem 15.
    
    Exhibits, Financial Statement Schedules.
    
    
    108SIGNATURES
    
    
    111EX-10.8EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART 1
 
 Item 1. Business.
 We were incorporated under the laws of the state of Georgia in 1897. In this Annual Report,
unless otherwise indicated, the words Gray, we, us, and our refer to Gray Television, Inc.
and its subsidiaries. Our discussion of the television (or TV) stations that we own and operate
does not include our interest in the television and radio stations owned by Sarkes Tarzian, Inc.,
(Tarzian). Our fiscal year ends on December 31 of each respective year.
 Our common stock, no par value, and our Class A common stock, no par value, have been listed
and traded on The New York Stock Exchange (the NYSE) since September 24, 1996 and June 30, 1995,
respectively. The ticker symbols are GTN for our common stock and GTN.A for our Class A common
stock.
 Unless otherwise indicated, all station rank, in-market share and television household data
herein are derived from reports prepared by A.C. Nielsen Company (Nielsen). While we believe this
data to be accurate and reliable, we have not independently verified such data.
 General
  Acquisitions
  3




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Television Industry Background
    Revenues and Cyclicality
    4




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Our Stations and Their Markets
   Primary ChannelsDMA
    
    
    
    
    
    
    
    
    Primary
    
    Secondary
    
    Broadcast
    
    Station
    
    NewsRank
    
    
    
    
    
    
    
    
    Channels
    
    Channels

    
    License

    
    Rank in

    
    Rank in(a)
    
    
    Market
    
    Station

    
    Affil.(b)

    
    Exp. (c)

    
    Affil.(b)

    
    Exp. (c)
    
    Expiration
    
    DMA (d)
    
    DMA (e)59
    
    
    Knoxville, TN
    
    WVLT
    
    CBS
    
    
    12/31/14
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    08/01/05
    (i)
    
    
    2
    
    
    
    263
    
    
    Lexington, KY
    
    WKYT
    
    CBS
    
    
    12/31/14
    
    
    CW
    
    
    09/17/14
    
    
    
    08/01/05
    (i)
    
    
    1
    
    
    
    164
    
    
    Charleston/Huntington, WV
    
    WSAZ
    
    NBC
    
    
    01/01/12
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    10/01/12
    
    
    
    1
    
    
    
    168
    
    
    Wichita/Hutchinson, KS
    
    KAKE
    
    ABC
    
    
    12/31/13
    
    
    NA
    
    NA
    
    
    06/01/06
    (i)
    
    
    2
    
    
    
    2(Colby, KS)
    
    KLBY
    (f)
    ABC
    
    
    12/31/13
    
    
    NA
    
    NA
    
    
    06/01/06
    (i)
    
    
    2
    
    
    
    2(Garden City, KS)
    
    KUPK
    (f)
    ABC
    
    
    12/31/13
    
    
    NA
    
    NA
    
    
    06/01/06
    (i)
    
    
    2
    
    
    
    276
    
    
    Omaha, NE
    
    WOWT
    
    NBC
    
    
    01/01/12
    
    
    Univ.
    
    
    12/31/11
    
    
    
    06/01/06
    (i)
    
    
    1
    
    
    
    185
    
    
    Madison, WI
    
    WMTV
    
    NBC
    
    
    01/01/12
    
    
    News
    
    NA
    
    
    12/01/05
    (i)
    
    
    1
    
    
    
    189
    
    
    Waco-Temple-Bryan, TX
    
    KWTX
    
    CBS
    
    
    12/31/14
    
    
    CW
    
    
    08/31/14
    
    
    
    08/01/06
    (i)
    
    
    1
    
    
    
    1(Bryan, TX)
    
    KBTX
    (g)
    CBS
    
    
    12/31/14
    
    
    CW
    
    
    08/31/14
    
    
    
    08/01/06
    (i)
    
    
    1
    
    
    
    192
    
    
    Colorado Springs, CO
    
    KKTV
    
    CBS
    
    
    12/31/14
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    04/01/06
    (i)
    
    
    2
    
    
    
    293
    
    
    South Bend, IN
    
    WNDU
    
    NBC
    
    
    01/01/12
    
    
    NA
    
    NA
    
    
    08/01/13
    
    
    
    1
    
    
    
    1101
    
    
    Greenville/New Bern/Washington, NC
    
    WITN
    
    NBC
    
    
    01/01/12
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    12/01/04
    (i)
    
    
    1
    
    
    
    1105
    
    
    Tallahassee, FL/Thomasville, GA
    
    WCTV
    
    CBS
    
    
    12/31/14
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    04/01/13
    
    
    
    1
    
    
    
    1106
    
    
    Lincoln/Hastings/Kearney, NE
    
    KOLN
    
    CBS
    
    
    12/31/14
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    06/01/06
    (i)
    
    
    1
    
    
    
    1Grand Island, NE
    
    KGIN
    (h)
    CBS
    
    
    12/31/14
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    06/01/06
    (i)
    
    
    1
    
    
    
    1108
    
    
    Reno, NV
    
    KOLO
    
    ABC
    
    
    12/31/13
    
    
    Univ.
    
    
    01/09/11
    
    
    
    10/01/06
    (i)
    
    
    2
    
    
    
    1114
    
    
    Augusta, GA
    
    WRDW
    
    CBS
    
    
    12/31/14
    
    
    MyNet
    
    
    10/04/11
    
    
    
    04/01/13
    
    
    
    1
    
    
    
    1TCN
    
    
    01/14/13115
    
    
    Lansing, MI
    
    WILX
    
    NBC
    
    
    01/01/12
    
    
    News
    
    NA
    
    
    10/01/05
    (i)
    
    
    1
    
    
    
    1128
    
    
    La Crosse/Eau Claire, WI
    
    WEAU
    
    NBC
    
    
    01/01/12
    
    
    News
    
    NA
    
    
    12/01/05
    (i)
    
    
    1
    
    
    
    1134
    
    
    Rockford, IL
    
    WIFR
    
    CBS
    
    
    12/31/14
    
    
    News
    
    NA
    
    
    12/01/05
    (i)
    
    
    1
    
    
    
    1135
    
    
    Wausau/Rhinelander, WI
    
    WSAW
    
    CBS
    
    
    12/31/14
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    12/01/05
    (i)
    
    
    1
    
    
    
    2News
    
    NA136
    
    
    Topeka, KS
    
    WIBW
    
    CBS
    
    
    12/31/14
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    06/01/06
    (i)
    
    
    1
    
    
    
    1147
    
    
    Albany, GA
    
    WSWG
    
    CBS
    
    
    12/31/14
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    04/01/13
    
    
    
    3
    
    
    NA (j)CW
    
    
    08/31/15156
    
    
    Panama City, FL
    
    WJHG
    
    NBC
    
    
    01/01/12
    
    
    CW
    
    
    09/17/12
    
    
    
    02/01/05
    (i)
    
    
    1
    
    
    
    1MyNet.
    
    
    10/04/11
 5




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Primary ChannelsDMA
    
    
    
    
    
    
    
    
    Primary
    
    Secondary
    
    Broadcast
    
    Station
    
    NewsRank
    
    
    
    
    
    
    
    
    Channels
    
    Channels

    
    License

    
    Rank in

    
    Rank in(a)
    
    
    Market
    
    Station

    
    Affil.(b)

    
    Exp. (c)

    
    Affil.(b)

    
    Exp. (c)
    
    Expiration
    
    DMA (d)
    
    DMA (e)161
    
    
    Sherman,TX/Ada, OK
    
    KXII
    
    CBS
    
    
    12/31/14
    
    
    FOX
    
    
    06/30/11
    
    
    
    08/01/06
    (i)
    
    
    1
    
    
    
    1MyNet.
    
    
    10/04/11169
    
    
    Dothan, AL
    
    WTVY
    
    CBS
    
    
    12/31/14
    
    
    CW
    
    
    09/01/12
    
    
    
    04/01/13
    
    
    
    1
    
    
    
    1MyNet.
    
    
    10/04/11177
    
    
    Harrisonburg, VA
    
    WHSV
    
    ABC
    
    
    12/31/13
    
    
    ABC
    
    
    12/31/13
    
    
    
    10/01/12
    
    
    
    1
    
    
    
    1FOX
    
    
    06/30/11MyNet.
    
    
    10/04/11181
    
    
    Bowling Green, KY
    
    WBKO
    
    ABC
    
    
    12/31/13
    
    
    FOX
    
    
    06/30/11
    
    
    
    08/01/05
    (i)
    
    
    1
    
    
    
    1CW
    
    
    08/31/13183
    
    
    Charlottesville, VA
    
    WCAV
    
    CBS
    
    
    12/31/14
    
    
    News
    
    NA
    
    
    10/01/12
    
    
    
    2
    
    
    
    2WVAW
    
    ABC
    
    
    12/31/13
    
    
    NA
    
    NA
    
    
    10/01/12
    
    
    
    3
    
    
    
    4WAHU
    
    FOX
    
    
    06/30/11
    
    
    MyNet.
    
    
    10/04/11
    
    
    
    10/01/12
    
    
    
    4
    
    
    
    3184
    
    
    Grand Junction, CO
    
    KKCO
    
    NBC
    
    
    01/01/16
    
    
    NA
    
    NA
    
    
    04/01/06
    (i)
    
    
    1
    
    
    
    1185
    
    
    Meridian, MS
    
    WTOK
    
    ABC
    
    
    12/31/13
    
    
    CW
    
    
    09/15/12
    
    
    
    06/01/05
    (i)
    
    
    1
    
    
    
    1MyNet.
    
    
    10/04/11193
    
    
    Parkersburg, WV
    
    WTAP
    
    NBC
    
    
    01/01/12
    
    
    FOX
    
    
    06/30/11
    
    
    
    10/01/04
    (i)
    
    
    1
    
    
    
    1MyNet.
    
    
    10/04/11(k
    )
    
    Hazard, KY
    
    WYMT
    
    CBS
    
    
    12/31/14
    
    
    NA
    
    NA
    
    
    08/01/05
    (i)
    
    
    1
    
    
    
    1
 NA Not applicable(a)
    
    Designated market area (DMA) rank based on data published by Nielsen or other public
sources for the 2010-2011 television season.(b)
    
    Indicates network affiliations. The majority of our stations are affiliated with a
network. We also have independent stations and stations broadcasting local news and
weather. Such stations are identified as News.(c)
    
    Indicates approximate expiration dates of network affiliation agreements.(d)
    
    Based on the average of Nielsen data for the February, May, July and November 2010
rating periods, Sunday to Saturday, 6 a.m. to 2 a.m.(e)
    
    Based on our review of Nielsen data for the February, May, July and November 2010
rating periods for various news programs.(f)
    
    KLBY-TV and KUPK-TV are satellite stations of KAKE-TV under FCC rules. KLBY-TV and
KUPK-TV retransmit the signal of the primary station and may offer some locally originated
programming, such as local news.(g)
    
    KBTX-TV is a satellite station of KWTX-TV under FCC rules. KBTX-TV retransmits the
signal of the primary station and may offer some locally originated programming, such as
local news.(h)
    
    KGIN-TV is a satellite station of KOLN-TV under FCC rules. KGIN-TV retransmits the
signal of the primary station and may offer some locally originated programming, such as
local news.(i)
    
    We have filed a license renewal application with the FCC, and renewal is pending. We
anticipate that all pending applications will be renewed in due course.(j)
    
    This station does not currently broadcast local news that is specific to the Albany,
Georgia market.
 6




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(k)
    
    The rankings shown for WYMT-TV are based on Nielsen data for the trading area for the
four most recent reporting periods, which are May 2009, November 2009, February 2010 and
May 2010.
 Station Network Affiliations
        7




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Seasonality
  Competition
  Audience
     Programming
 Two And A Half Men Jeopardy
 8




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Advertising
  Federal Regulation of the Television Broadcast Industry
 General
  License Grant and Renewal
  Broadcast Ownership Rules
  9




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Local TV Ownership Rules
  Cross-Media Limits
  National Television Station Ownership Rule
  10




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Attribution Rules
   Alien Ownership Restrictions
   Programming and Operations
  11




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EEO Rules
  12




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Cable and Satellite Transmission of Local Television Signals
    Digital Television Service
   13




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Broadcast Spectrum
   14




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Employees
  Available Information
   
 Item 1A. Risk Factors.
 Risks Related to Our Business
 We depend on advertising revenues, which are seasonal and cyclical, and also fluctuate as a result
of a number of factors.
  
    
    economic conditions in the areas where our stations are located and in the
nation as a whole;
    
    the popularity of our programming;
    
    changes in the population demographics in the areas where our stations are
located;
    
    local and national advertising price fluctuations, which can be affected by the
availability of programming, the popularity of programming, and the relative supply of
and demand for commercial advertising;
    
    our competitors activities, including increased competition from other
advertising-based mediums, particularly cable television, direct satellite television
and internet;
    
    the duration and extent of any network preemption of regularly scheduled
programming for any reason and decisions by advertisers to withdraw or delay planned
advertising expenditures for any reason; and
    
    other factors beyond our control including labor disputes or other disruptions
at major national advertisers, programming providers or networks.
 15




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Continued uncertain financial and economic conditions may have an adverse impact on our industry,
business, results of operations or financial condition.
  We are a holding company with no material independent assets or operations and we depend on our
subsidiaries for cash.
  We have substantial debt and have the ability to incur additional debt. The principal and interest
payment obligations on such debt may restrict our future operations and impair our ability to meet
our obligations.
  16




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
    
    make it more difficult for us to satisfy our financial obligations;
    
    increase our vulnerability to changes in general economic and industry conditions;
    
    require us to dedicate a substantial portion of any cash flow from operations to the
payment of interest and principal due under our debt, which will reduce funds available
for other business purposes, including capital expenditures and acquisitions;
    
    place us at a competitive disadvantage compared with some of our competitors that
may have less debt and better access to capital resources;
    
    expose us to fluctuations in the interest rate environment because the interest
rates on borrowings under our senior credit facility are variable; and
    
    limit our ability to obtain additional financing required to fund working capital
and capital expenditures and for other general corporate purposes.
  The agreements governing our various debt obligations impose restrictions on our business and limit
our ability to undertake certain corporate actions.
  
    
    incur additional debt;
    
    declare or pay dividends, redeem stock or make other distributions to stockholders;
    
    make investments or acquisitions;
    
    create liens or use assets as security in other transactions;
    
    issue guarantees;
    
    merge or consolidate, or sell, transfer, lease or dispose of substantially all of
our assets;
    
    amend our articles of incorporation or bylaws;
    
    engage in transactions with affiliates; and
    
    purchase, sell or transfer certain assets.
  17




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Servicing our debt and other obligations requires a significant amount of cash, and our ability to
generate sufficient cash depends on many factors, some of which are beyond our control.
  The Company has a significant amount of indebtedness and other obligations that become due over a
relatively short period of time.
 1 2
 18




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Our variable rate indebtedness subjects us to interest rate risk, which could cause our annual debt
service obligations to increase significantly.
  Our operating and financial flexibility is limited by the terms of our Series D Perpetual Preferred
Stock.
  
    
    additional indebtedness;
    
    liens;
    
    amendments to our by-laws and articles of incorporation;
    
    our ability to issue equity securities having liquidation preferences senior or
equivalent to the liquidation preferences of the Series D Perpetual Preferred Stock;
    
    mergers and the sale of assets;
    
    guarantees;
    
    investments and acquisitions;
    
    payment of dividends and the redemption of our capital stock; and
    
    related-party transactions.
  We do not currently pay cash dividends on either class of our common stock, and have not paid
certain accumulated dividends under our Series D Perpetual Preferred Stock. To the extent a
potential investor ascribes value to a dividend paying stock, the value of our stock may be
correspondingly reduced.
    19




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We must purchase television programming in advance but cannot predict whether a particular show
will be popular enough to cover its cost.
  We are highly dependent upon our network affiliations, and may lose a large amount of television
programming if a network (i) terminates its affiliation with us, (ii) significantly changes the
economic terms and conditions of any future affiliation agreements with us or (iii) significantly
changes the type, quality or quantity of programming provided to us under an affiliation agreement.
   20




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We operate in a highly competitive environment. Competition occurs on multiple levels (for
audiences, programming and advertisers) and is based on a variety of factors. If we are not able
to successfully compete in all relevant aspects, our revenues will be materially adversely
affected.
    Our dependence upon a limited number of advertising categories could adversely affect our business.
  21




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The transition to digital operations will continue to require us to incur significant capital
expenditures.
  Any potential hostilities or terrorist attacks, or similar events leading to broadcast
interruptions, may affect our revenues and results of operations.
  Risks Related to Regulatory Matters
 Federal broadcasting industry regulations limit our operating flexibility.
   The FCCs duopoly restrictions limit our ability to own and operate multiple television stations in
the same market.
  The FCCs National Television Station Ownership Rule limits the maximum number of households we can
reach.
  22




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The FCCs National Broadband Plan could result in the reallocation of broadcast spectrum for
wireless broadband use, which could materially impair our ability to provide competitive services.
  Our ability to successfully negotiate future retransmission consent agreements may be hindered by
the interests of networks with whom we are affiliated and by potential legislative or regulatory
changes to the framework under which these agreements are negotiated.
    23




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Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
    
 Item 3. Legal Proceedings.
  
 Item 4. Removed and Reserved.
 
 Executive Officers of the Registrant.
  Hilton H. Howell, Jr.,
 24




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Robert S. Prather, Jr.,
 James C. Ryan,
 Robert A. Beizer,
 25




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
   Common Stock

    
    Class A Common StockCash Dividends

    
    
    
    
    
    
    
    
    
    Cash DividendsDeclared Per

    
    
    
    
    
    
    
    
    
    Declared PerHigh

    
    Low

    
    Share

    
    High

    
    Low

    
    Share2010:First Quarter
    
    $
    2.80
    
    
    $
    1.52
    
    
    $
    -
    
    
    $
    2.88
    
    
    $
    1.57
    
    
    $
    -Second Quarter
    
    
    4.88
    
    
    
    2.31
    
    
    
    -
    
    
    
    4.73
    
    
    
    2.24
    
    
    
    -Third Quarter
    
    
    2.99
    
    
    
    1.83
    
    
    
    -
    
    
    
    2.90
    
    
    
    1.63
    
    
    
    -Fourth Quarter
    
    
    2.19
    
    
    
    1.44
    
    
    
    -
    
    
    
    2.04
    
    
    
    1.45
    
    
    
    -2009:First Quarter
    
    $
    0.55
    
    
    $
    0.28
    
    
    $
    -
    
    
    $
    1.30
    
    
    $
    0.39
    
    
    $
    -Second Quarter
    
    
    0.92
    
    
    
    0.32
    
    
    
    -
    
    
    
    1.42
    
    
    
    0.53
    
    
    
    -Third Quarter
    
    
    3.57
    
    
    
    0.38
    
    
    
    -
    
    
    
    3.55
    
    
    
    0.58
    
    
    
    -Fourth Quarter
    
    
    2.90
    
    
    
    0.89
    
    
    
    -
    
    
    
    2.75
    
    
    
    1.12
    
    
    
    -
  pari passu
   26




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27




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##### Table of Contents



Stock Performance Graph
 The following stock performance graphs do not constitute soliciting material and should not be
deemed filed or incorporated by reference into any other filing by us under the Securities Act of
1933 or the Exchange Act, except to the extent we specifically incorporate these graphs by
reference therein.
   Common Stock
Comparison of Cumulative Total Return
of One or More Companies, Peer Groups, Industry Indices and/or
Broad Markets
 
 Fiscal Year EndedCompany/Index/Market
    
    12/31/2006

    
    12/31/2007

    
    12/31/2008

    
    12/31/2009

    
    12/31/2010Gray Television Common
    
    $
    86.84
    
    
    $
    96.31
    
    
    $
    4.95
    
    
    $
    18.57
    
    
    $
    23.15NYSE Market Index
    
    $
    120.47
    
    
    $
    131.15
    
    
    $
    79.67
    
    
    $
    102.20
    
    
    $
    115.88TV Broadcasting Stations Index
    
    $
    123.56
    
    
    $
    121.15
    
    
    $
    63.20
    
    
    $
    97.28
    
    
    $
    105.72
 28




---



##### Table of Contents



Class A Common Stock
Comparison of Cumulative Total Return
of One or More Companies, Peer Groups, Industry Indices and/or
Broad Markets
 
 Fiscal Year EndedCompany/Index/Market
    
    12/31/2006

    
    12/31/2007

    
    12/31/2008

    
    12/31/2009

    
    12/31/2010Gray Television Class A
    
    $
    92.38
    
    
    $
    96.80
    
    
    $
    6.74
    
    
    $
    17.44
    
    
    $
    20.58NYSE Market Index
    
    $
    120.47
    
    
    $
    131.15
    
    
    $
    79.67
    
    
    $
    102.20
    
    
    $
    115.88TV Broadcasting Stations Index
    
    $
    123.56
    
    
    $
    121.15
    
    
    $
    63.20
    
    
    $
    97.28
    
    
    $
    105.72
 29




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##### Table of Contents



Item 6. Selected Financial Data.
  Year Ended December 31,2010
    
    2009
    
    2008
    
    2007
    
    2006(1)(in thousands, except per share data)Statements of Operations Data:Revenue (2)
    
    $
    346,058
    
    
    $
    270,374
    
    
    $
    327,176
    
    
    $
    307,288
    
    
    $
    332,137Impairment of goodwill and
and broadcast licenses (3)
    
    
    -
    
    
    
    -
    
    
    
    338,681
    
    
    
    -
    
    
    
    -Operating income (loss)
    
    
    106,960
    
    
    
    43,079
    
    
    
    (258,895
    )
    
    
    53,376
    
    
    
    87,991Loss on early extinguishment of debt (4)
    
    
    (349
    )
    
    
    (8,352
    )
    
    
    -
    
    
    
    (22,853
    )
    
    
    (347
    )Net income (loss)
    
    
    23,163
    
    
    
    (23,047
    )
    
    
    (202,016
    )
    
    
    (23,151
    )
    
    
    11,711Net income (loss) available to common
stockholders
    
    
    8,581
    
    
    
    (40,166
    )
    
    
    (208,609
    )
    
    
    (24,777
    )
    
    
    8,464Net income (loss) available to common
stockholders per common share:Basic
    
    
    0.16
    
    
    
    (0.83
    )
    
    
    (4.32
    )
    
    
    (0.52
    )
    
    
    0.17Diluted
    
    
    0.16
    
    
    
    (0.83
    )
    
    
    (4.32
    )
    
    
    (0.52
    )
    
    
    0.17Cash dividends declared per common
share (5)
    
    
    -
    
    
    
    -
    
    
    
    0.09
    
    
    
    0.12
    
    
    
    0.12Balance Sheet Data (at end of period):Total assets
    
    $
    1,242,293
    
    
    $
    1,245,739
    
    
    $
    1,278,265
    
    
    $
    1,625,969
    
    
    $
    1,628,287Long-term debt (including current
portion)
    
    
    826,704
    
    
    
    791,809
    
    
    
    800,380
    
    
    
    925,000
    
    
    
    851,654Long-term accrued facility fee (6)
    
    
    -
    
    
    
    18,307
    
    
    
    -
    
    
    
    -
    
    
    
    -Preferred stock (7)
    
    
    37,181
    
    
    
    93,386
    
    
    
    92,183
    
    
    
    -
    
    
    
    37,451Total stockholders equity
    
    
    129,407
    
    
    
    93,620
    
    
    
    117,107
    
    
    
    337,845
    
    
    
    379,754
 
 (1)
    
    Reflects the acquisition of WNDU-TV on March 3, 2006 as of the acquisition date. For
further information concerning this acquisition, see Part I, Item 1. Business included in
this Annual Report.(2)
    
    Our revenue fluctuates significantly between years, consistent with, among other
things, increased political advertising expenditures in even-numbered years.(3)
    
    As of December 31, 2008, we recorded a non-cash impairment expense of $338.7 million
resulting from a write down of $98.6 million in the carrying value of our goodwill and a
write down of $240.1 million in the carrying value of our broadcast licenses. The
write-down of our goodwill and broadcast licenses related to seven stations and 23
stations, respectively. As of this testing date, we believe events had occurred and
circumstances changed that more likely than not reduce the fair value of our broadcast
licenses and goodwill below their carrying amounts. These 30




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##### Table of Contents



events, which accelerated in the
fourth quarter of 2008, included: (i) the continued decline of the price of our common
stock and Class A common stock; (ii) the decline in the selling prices of television
stations; (iii) the decline in local and national advertising revenues excluding political
advertising revenue; and (iv) the decline in the operating profit margins of some of our
stations.(4)
    
    In 2010 and 2009, we recorded a loss on early extinguishment of debt related to
amendments to our senior credit facility. In 2007, we recorded a loss on early
extinguishment of debt related to the refinancing of our senior credit facility and the
redemption of our 9.25% Senior Subordinated Notes (9.25% Notes). In 2006, we recorded a
loss on early extinguishment of debt related to the repurchase of a portion of our 9.25%
Notes.(5)
    
    Cash dividends for 2007 and 2006 include a cash dividend of $0.03 per share approved in
the fourth quarters of 2007 and 2006, respectively, and paid in the first quarters of 2008
and 2007, respectively.(6)
    
    On March 31, 2009, we amended our senior credit facility. Effective on that date, we
began to incur an annual facility fee equal to 3% multiplied by the outstanding balance
under our senior credit facility. Effective as of April 29, 2010, the accrued facility fee
was reduced to 0.75%. See Note 3. Long-term Debt and Accrued Facility Fee of our notes
to our audited consolidated financial statements included elsewhere herein for further
information regarding our accrued facility fee.(7)
    
    On May 22, 2007, we redeemed all outstanding shares of our Series C Preferred Stock.During 2008, we issued 1,000 shares of our Series D Perpetual Preferred Stock, no par value.
The issuance of the Series D Perpetual Preferred Stock generated net cash proceeds of
approximately $91.6 million, after a 5.0% original issue discount, transaction fees and
expenses. The $8.4 million of original issue discount, transaction fees and expenses are
being accreted over a seven-year period ending June 30, 2015. We used a majority of the net
proceeds from these issuances to reduce our outstanding debt balance by $88.0 million during
2008. The Series D Perpetual Preferred Stock has a liquidation value of $100,000 per share.On April 29, 2010, we repurchased $60.7 million in face amount of our Series D Perpetual
Preferred Stock, and $14.9 million in accrued dividends thereon, in exchange for $50.0
million in cash, using net proceeds from the sale of debt, and 8.5 million shares of our
common stock. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Executive Overview
 Introduction
  Overview
  31




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32




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Revenue
  Year Ended December 31,2010
    
    2009
    
    2008Percent

    
    
    
    
    
    Percent

    
    
    
    
    
    PercentAmount
    
    of Total
    
    Amount
    
    of Total
    
    Amount
    
    of TotalRevenues:Local
    
    $
    183,177
    
    
    
    52.9
    %
    
    $
    170,813
    
    
    
    63.2
    %
    
    $
    186,492
    
    
    
    57.0
    %National
    
    
    57,649
    
    
    
    16.7
    %
    
    
    53,892
    
    
    
    19.9
    %
    
    
    68,417
    
    
    
    20.9
    %Internet
    
    
    13,401
    
    
    
    3.9
    %
    
    
    11,413
    
    
    
    4.2
    %
    
    
    11,859
    
    
    
    3.6
    %Political
    
    
    57,552
    
    
    
    16.6
    %
    
    
    9,976
    
    
    
    3.7
    %
    
    
    48,455
    
    
    
    14.8
    %Retransmission consent
    
    
    18,774
    
    
    
    5.4
    %
    
    
    15,645
    
    
    
    5.8
    %
    
    
    3,046
    
    
    
    0.9
    %Production and other
    
    
    7,446
    
    
    
    2.2
    %
    
    
    7,119
    
    
    
    2.6
    %
    
    
    8,155
    
    
    
    2.5
    %Network compensation
    
    
    562
    
    
    
    0.2
    %
    
    
    653
    
    
    
    0.2
    %
    
    
    752
    
    
    
    0.3
    %Consulting revenue
    
    
    7,497
    
    
    
    2.1
    %
    
    
    863
    
    
    
    0.4
    %
    
    
    -
    
    
    
    0.0
    %Total
    
    $
    346,058
    
    
    
    100.0
    %
    
    $
    270,374
    
    
    
    100.0
    %
    
    $
    327,176
    
    
    
    100.0
    %
 33




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##### Table of Contents



Risk Factors
  Results of Operations
 Year Ended December 31, 2010 (2010) Compared to Year Ended December 31, 2009 (2009)
 Revenue
  Broadcast expenses
  34




---



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Corporate and administrative expenses
  Depreciation
  Amortization of intangible assets
  Gain on disposal of assets
  35




---



##### Table of Contents



Interest expense
 1 2
  Loss from early extinguishment of debt
  36




---



##### Table of Contents



Income tax expense or benefit
  Year Ended December 31,2010

    
    2009Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %Current year permanent items
    
    
    1.7
    %
    
    
    (0.6
    )%State and local taxes, net of federal taxes
    
    
    5.4
    %
    
    
    2.6
    %Change in valuation allowance
    
    
    (4.3
    )%
    
    
    (4.5
    )%Reserve for uncertain tax positions
    
    
    (1.4
    )%
    
    
    1.1
    %Other items, net
    
    
    0.3
    %
    
    
    (0.8
    )%Effective income tax rate
    
    
    36.7
    %
    
    
    32.8
    %
 Preferred stock dividends
  Year Ended December 31, 2009 ( 2009) Compared to Year Ended December 31, 2008 (2008)
 Revenue
  37




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Broadcast expenses
  Corporate and administrative expenses
  Depreciation
  38




---



##### Table of Contents



Amortization of intangible assets
  Impairment of goodwill and broadcast licenses
  Gain on disposal of assets
  Interest expense
  Loss from early extinguishment of debt
  39




---



##### Table of Contents



Income tax expense or benefit
  Year Ended December 31,2009

    
    2008Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %Current year permanent items
    
    
    (0.6
    )%
    
    
    0.0
    %State and local taxes, net of federal taxes
    
    
    2.6
    %
    
    
    3.7
    %Change in valuation allowance
    
    
    (4.5
    )%
    
    
    0.1
    %Reserve for uncertain tax positions
    
    
    1.1
    %
    
    
    (0.2
    )%Goodwill impairment
    
    
    0.0
    %
    
    
    (3.0
    )%Other items, net
    
    
    (0.8
    )%
    
    
    (0.1
    )%Effective income tax rate
    
    
    32.8
    %
    
    
    35.5
    %
 40




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##### Table of Contents



Liquidity and Capital Resources
 General
  Year Ended December 31,2010
    

    2009Net cash provided by operating activities
    
    $
    38,126
    
    
    $
    18,903Net cash used in investing activities
    
    
    (19,506
    )
    
    
    (17,531
    )Net cash used in financing activities
    
    
    (29,189
    )
    
    
    (16,021
    )Decrease in cash
    
    $
    (10,569
    )
    
    $
    (14,649
    )December 31,2010
    
    
    2009Cash
    
    $
    5,431
    
    
    $
    16,000Long-term debt including current portion
    
    $
    826,704
    
    
    $
    791,809Long-term accrued facility fee
    
    $
    -
    
    
    $
    18,307Preferred stock, excluding unamortized original issue discount
    
    $
    37,181
    
    
    $
    93,386Borrowing availability under our senior credit facility
    
    $
    40,000
    
    
    $
    31,681Certain covenant ratios as defined under our senior credit facility:First lien leverage ratio - actual (1)
    
    
    4.46
    
    
    
    -First lien leverage ratio - maximum allowed (1)
    
    
    7.00
    
    
    
    -Fixed charge coverage ratio - actual (1)
    
    
    1.27
    
    
    
    -Fixed charge coverage ratio - minimum allowed (1)
    
    
    0.90
    
    
    
    -
  Senior Credit Facility
  41




---



##### Table of Contents



Amendment of Senior Credit Facility and Issuance of the Notes
       42




---



##### Table of Contents



As Amended and AfterIssuance of Notes and Related$300 Million Repayment of theDescription
    
    Term LoanAnnual interest rate on outstanding term loan balance (1)
    
    LIBOR plus 3.50%

or Base rate plus 2.50%Annual interest rate on outstanding revolving loan balance (1)
    
    LIBOR plus 3.50%

or Base rate plus 2.50%Annual facility fee rate
    
    0.75% with a potential for

reductions in future periods.Annual commitment fee on undrawn revolving loan balance
    
    
    0.50
    %Revolving loan commitment
    
    $40 millionMaximum first lien leverage ratio at:December 31, 2010 through June 29, 2011
    
    7.00 to 1.00June 30, 2011 through December 30, 2011
    
    6.75 to 1.00December 31, 2011 and thereafter
    
    6.50 to 1.00Minimum fixed charge coverage ratio at:December 31, 2010 through June 30, 2011
    
    0.90 to 1.00July 1, 2011 and thereafter
    
    1.00 to 1.00Maximum cash balance that can be deducted from total debt to
calculate net debt in the first lien leverage ratio test
    
    $15.0 million
 
 (1)
    As of December 31, 2010, the London Interbank Offered Rate (LIBOR) and the Base rate,
which is generally equal to the lenders prime rate, applicable to our outstanding
principal balance was 0.27% and 3.25%, respectively.   43




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##### Table of Contents



Collateral, Covenants and Restrictions
   Series D Perpetual Preferred Stock
   44




---



##### Table of Contents



Income Taxes
  Net Cash Provided By Operating, Investing and Financing Activities
  45




---



##### Table of Contents



Retirement Plans
    46




---



##### Table of Contents



Capital Expenditures
  Off-Balance Sheet Arrangements
 Operating Commitments
  Jeopardy Two And A Half Men
 Sports Marketing Agreement
   47




---



##### Table of Contents



Tabular Disclosure of Contractual Obligations as of December 31, 2010
  Payment due by periodLess than
    
    
    
    
    
    
    
    
    
    
    More than1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsContractual Obligations
    
    Total
    
    
    2011
    
    
    2012-2013
    
    
    2014-2015
    
    
    after 2015Contractual obligations
recorded in our balance
sheet as of December 31, 2010:Long-term debt obligations (1)
    
    $
    832,791
    
    
    $
    4,823
    
    
    $
    9,646
    
    
    $
    818,322
    
    
    $
    -Dividends currently accrued (2)
    
    
    14,118
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    14,118Programming obligations
currently accrued (3)
    
    
    16,180
    
    
    
    14,822
    
    
    
    1,290
    
    
    
    68
    
    
    
    -Acquisition-related liabilities(4)
    
    
    1,121
    
    
    
    899
    
    
    
    222
    
    
    
    -
    
    
    
    -Off-balance sheet arrangements
as of December 31, 2010:Cash interest on long-term
debt obligations (5)
    
    
    244,837
    
    
    
    59,267
    
    
    
    117,883
    
    
    
    67,687
    
    
    
    -Operating lease obligations (6)
    
    
    7,617
    
    
    
    1,341
    
    
    
    1,833
    
    
    
    1,100
    
    
    
    3,343Dividends not currently accrued (7)
    
    
    33,410
    
    
    
    6,682
    
    
    
    13,364
    
    
    
    13,364
    
    
    unknownPurchase obligations not currently
accrued (8)
    
    
    910
    
    
    
    910
    
    
    
    -
    
    
    
    -
    
    
    
    -Programming obligations
not currently accrued (9)
    
    
    33,133
    
    
    
    3,420
    
    
    
    18,560
    
    
    
    11,153
    
    
    
    -Obligation to UK (10)
    
    
    37,663
    
    
    
    7,888
    
    
    
    16,475
    
    
    
    13,300
    
    
    
    -Total
    
    $
    1,221,780
    
    
    $
    100,052
    
    
    $
    179,273
    
    
    $
    924,994
    
    
    $
    17,461
 
 (1)
    
    Long-term debt obligations represent current and all future payment principal obligations
under our senior credit facility and our Notes. These amounts are recorded as liabilities as
of the current balance sheet date net of the unamortized original issue discount on the Notes
in the amount of $6.1 million. As of December 31, 2010, the interest rate on the balance
outstanding under the senior credit facility was 4.5%. As of December 31, 2010, the coupon
interest rate and the yield on the Notes were 10.5% and 11.0%, respectively. The yield of the
Notes exceeds the coupon interest rate because the Notes were issued with original issue
discount.(2)
    
    Dividends currently accrued represent Series D Perpetual Preferred Stock dividends accrued
as of the current balance sheet date and payable in subsequent periods.(3)
    
    Programming obligations currently accrued represent obligations for syndicated television
programming whose license period has begun and the product is available. These amounts are
recorded as liabilities as of the current balance sheet date. 48




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##### Table of Contents



(4)
    
    Acquisition related liabilities represent certain obligations associated with acquisitions
of television stations that were completed in prior years. These amounts are recorded as
liabilities as of the current balance sheet date.(5)
    
    Cash interest on long-term debt obligations includes estimated interest expense on
long-term debt obligations based upon debt balances as of December 31, 2010 and required
future principal reductions under those obligations. As of December 31, 2010, the interest
rate on the balance outstanding under the senior credit facility was 4.5%. As of December 31,
2010, the coupon interest rate and the yield on the Notes were 10.5% and 11.0%, respectively.
The yield of the Notes exceeds the coupon interest rate because the Notes were originally
issued with original issue discount. We used interest rates of 4.5% and 10.5% for our senior
credit facility and our Notes, respectively, to estimate cash interest on long-term debt
obligations. Our senior credit facility and our Notes will mature on December 31, 2014 and
June 29, 2015, respectively. This estimate of cash interest on long-term debt obligations
assumes that the principal obligations underlying these interest estimates will not be
replaced by other long-term obligations upon their maturity.(6)
    
    Operating lease obligations represent payment obligations under non-cancelable lease
agreements classified as operating leases. These amounts are not recorded as liabilities as
of the current balance sheet date.(7)
    
    Dividends not currently accrued represent Series D Perpetual Preferred Stock dividends for
future periods and assumes that all Series D Perpetual Preferred Stock outstanding as of
December 31, 2010 remains outstanding in future periods with a dividend rate of 17%. For the
column headed More than 5 years, after 2015, we cannot estimate a dividend amount due to the
perpetual nature of our Series D Perpetual Preferred Stock and its holders having the right
to request that we repurchase such Series D Perpetual Preferred Stock on or after June 30,
2015.(8)
    
    Purchase obligations not currently accrued generally represent payment obligations for
equipment. It is our policy to accrue for these obligations when the equipment is received
and the vendor has completed the work required by the purchase agreement. These amounts are
not recorded as liabilities as of the current balance sheet date because we had not yet
received the equipment.(9)
    
    Programming obligations not currently accrued represent obligations for syndicated
television programming whose license period has not yet begun or the product is not yet
available. These amounts are not recorded as liabilities as of the current balance sheet date.(10)
    
    Obligation to UK represents total obligations, excluding any potential revenues, under the
UK Agreement. These amounts are not recorded as liabilities as of the current balance sheet
date. See Off-Balance Sheet Arrangements immediately preceding this table for additional
information concerning this obligation.  49




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##### Table of Contents



Inflation
  Other
  Critical Accounting Policies
  Annual Impairment Testing of Broadcast Licenses and Goodwill
   50




---



##### Table of Contents



.
  51




---



##### Table of Contents



As of December 31,2010
    
    
    2009(dollars in millions)Pre-tax impairment charge:Broadcast licenses
    
    $
    -
    
    
    $
    -Goodwill
    
    $
    -
    
    
    $
    -Significant assumptions:Forecast period
    
    10 years
    
    
    10 yearsIncrease or (decrease) in market advertising revenue
for projection year 1 compared to latest historical
period (1)
    
    (5.5)% to (0.9)%
    
    
    (4.4)% to 8.9%Positive or (negative) advertising revenue
compound growth rate for forecast period
    
    (0.1)% to 3.7%
    
    
    (0.3)% to 3.7%Operating cash flow margin:Broadcast licenses
    
    8.3% to 50.0%
    
    
    8.3% to 50.0%Goodwill
    
    (4.8)% to 52.9%
    
    
    11.1% to 50.0%Discount rate:Broadcast licenses
    
    
    9.00%
    
    
    
    9.50%Goodwill
    
    
    10.50%
    
    
    
    10.50%
 
 (1)
    
    Depending on whether the first year of the respective projection period is an even- or
odd-numbered year, assumptions relating to market advertising growth rates will vary
significantly reflecting the significant cyclical impact of political advertising revenue
in even-numbered years. The fiscal 2010 analysis generally anticipated a decrease in
revenues for fiscal 2011.  52




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##### Table of Contents



HypotheticalImpairment ChargeAs of December 31, 2010BroadcastLicenses
    
    
    Goodwill(in millions)Hypothetical change:A 100 basis point decrease in advertising revenue
growth rate throughout the forecast period
    
    $
    3.3
    
    
    $
    -A 100 basis point decrease in operating cash flow
margin throughout the forecast period
    
    $
    -
    
    
    $
    -A 100 basis point increase in the applicable
discount rate
    
    $
    4.0
    
    
    $
    -A 5% reduction in the fair value of broadcast
licenses and enterprise values
    
    $
    -
    
    
    $
    -A 10% reduction in the fair value of broadcast
licenses and enterprise values
    
    $
    1.2
    
    
    $
    -
   Valuation of Network Affiliation Agreements
   53




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##### Table of Contents



Percentage of TotalValue Reassigned toNetworkAs
    
    
    Affiliation AgreementsReported
    
    
    50%
    
    
    25%Balance Sheet (As of December 31, 2010):Broadcast licenses
    
    $
    818,981
    
    
    $
    262,598
    
    
    $
    540,789Other intangible assets, net (including network
affiliation agreements)
    
    
    837
    
    
    
    184,868
    
    
    
    92,853Statement of Operations
(For the year ended December 31, 2010):Amortization of intangible assets
    
    
    479
    
    
    
    36,528
    
    
    
    18,504Operating income
    
    
    106,960
    
    
    
    70,911
    
    
    
    88,935Net income
    
    
    23,163
    
    
    
    1,173
    
    
    
    12,168Net income (loss) available to common stockholders
    
    
    8,581
    
    
    
    (13,409
    )
    
    
    (2,414
    )Net income (loss) available to common stockholders,
per share-basic and diluted
    
    $
    0.16
    
    
    $
    (0.25
    )
    
    $
    (0.04
    )
  54




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##### Table of Contents



Market Capitalization
  Income Taxes
   Recent Accounting Pronouncements
  Cautionary Statements for Purposes of the Safe Harbor Provisions of the Federal Securities Laws
  55




---



##### Table of Contents



Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
    
    managing current and forecasted interest rate risk while maintaining financial
flexibility and solvency;
    
    proactively managing our cost of capital to ensure that we can effectively manage
operations and execute our business strategy, thereby maintaining a competitive
advantage and enhancing shareholder value; and
    
    complying with covenant requirements in our financing agreements.
    56




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##### Table of Contents



Item 8.
    
    Financial Statements and Supplementary Data.
 PageManagements Report on Internal Control Over Financial Reporting
    
    
    58Report of Independent Registered Public Accounting Firm
    
    
    59Consolidated Balance Sheets at December 31, 2010 and 2009
    
    
    61Consolidated Statements of Operations for the years ended December
31, 2010, 2009 and 2008
    
    
    63Consolidated Statements of Stockholders Equity and Comprehensive
Income (Loss) for the years ended December 31, 2010, 2009 and 2008
    
    
    64Consolidated Statements of Cash Flows for the years ended December
31, 2010, 2009 and 2008
    
    
    67Notes to Consolidated Financial Statements
    
    
    68
 57




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
    Internal Control  Integrated Framework
   58




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control Integrated Framework
  (a) (b) (c)
  59




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##### Table of Contents



Internal ControlIntegrated
Framework
 
 60




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##### Table of Contents



GRAY TELEVISION, INC.
 
 CONSOLIDATED BALANCE SHEETS
  December 31,2010
    
    2009Assets:Current assets:Cash
    
    $
    5,431
    
    
    $
    16,000Accounts receivable, less allowance for doubtful accounts
of $1,051 and $1,092, respectively
    
    
    64,487
    
    
    
    57,179Current portion of program broadcast rights, net
    
    
    9,815
    
    
    
    10,220Deferred tax asset
    
    
    2,565
    
    
    
    1,597Prepaid and other current assets
    
    
    2,393
    
    
    
    1,788Total current assets
    
    
    84,691
    
    
    
    86,784Property and equipment, net
    
    
    137,148
    
    
    
    148,092Deferred loan costs, net
    
    
    12,334
    
    
    
    1,619Broadcast licenses
    
    
    818,981
    
    
    
    818,981Goodwill
    
    
    170,522
    
    
    
    170,522Other intangible assets, net
    
    
    837
    
    
    
    1,316Investment in broadcasting company
    
    
    13,599
    
    
    
    13,599Other
    
    
    4,181
    
    
    
    4,826Total assets
    
    $
    1,242,293
    
    
    $
    1,245,739
  61




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##### Table of Contents



GRAY TELEVISION, INC.
CONSOLIDATED BALANCE SHEETS
 December 31,2010
    
    2009Liabilities and stockholders equity:Current liabilities:Accounts payable
    
    $
    5,609
    
    
    $
    6,047Employee compensation and benefits
    
    
    12,362
    
    
    
    9,675Accrued interest
    
    
    7,831
    
    
    
    13,531Other accrued expenses
    
    
    4,201
    
    
    
    4,814Interest rate hedge derivatives
    
    
    -
    
    
    
    6,344Federal and state income taxes
    
    
    3,802
    
    
    
    4,206Current portion of program broadcast obligations
    
    
    14,822
    
    
    
    15,271Acquisition related liabilities
    
    
    899
    
    
    
    863Deferred revenue
    
    
    4,197
    
    
    
    6,241Current portion of long-term debt
    
    
    4,823
    
    
    
    8,080Total current liabilities
    
    
    58,546
    
    
    
    75,072Long-term debt, less current portion
    
    
    821,881
    
    
    
    783,729Long-term accrued facility fee
    
    
    -
    
    
    
    18,307Program broadcast obligations, less current portion
    
    
    1,358
    
    
    
    1,531Deferred income taxes
    
    
    157,929
    
    
    
    142,204Long-term deferred revenue
    
    
    1,754
    
    
    
    2,638Long-term accrued dividends
    
    
    14,118
    
    
    
    18,917Accrued pension costs
    
    
    18,624
    
    
    
    13,969Other
    
    
    1,495
    
    
    
    2,366Total liabilities
    
    
    1,075,705
    
    
    
    1,058,733Commitments and contingencies (Note 11)Preferred stock, no par value; cumulative; redeemable; designated
1.00 shares, issued and outstanding 0.39 shares and 1.00 shares,
($39,307 and $100,000 aggregate liquidation value, respectively)
    
    
    37,181
    
    
    
    93,386Stockholders equity:Common stock, no par value; authorized 100,000 shares,
issued 56,043 shares and 47,530 shares, respectively
    
    
    479,704
    
    
    
    453,824Class A common stock, no par value; authorized 15,000 shares,
issued 7,332 shares
    
    
    15,321
    
    
    
    15,321Accumulated deficit
    
    
    (295,117
    )
    
    
    (303,698
    )Accumulated other comprehensive loss, net of income tax benefit
    
    
    (7,988
    )
    
    
    (9,314
    )191,920
    
    
    
    156,133Treasury stock at cost, common stock, 4,655 shares
    
    
    (40,115
    )
    
    
    (40,115
    )Treasury stock at cost, Class A common stock, 1,579 shares
    
    
    (22,398
    )
    
    
    (22,398
    )Total stockholders equity
    
    
    129,407
    
    
    
    93,620Total liabilities and stockholders equity
    
    $
    1,242,293
    
    
    $
    1,245,739
  62




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##### Table of Contents



GRAY TELEVISION, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Year Ended December 31,2010
    
    2009
    
    2008Revenue (less agency commissions)
    
    $
    346,058
    
    
    $
    270,374
    
    
    $
    327,176Operating expenses before depreciation, amortization,
impairment, and gain on disposal of assets, net:Broadcast
    
    
    196,353
    
    
    
    187,583
    
    
    
    199,572Corporate and administrative
    
    
    13,545
    
    
    
    14,168
    
    
    
    14,097Depreciation
    
    
    30,630
    
    
    
    32,595
    
    
    
    34,561Amortization of intangible assets
    
    
    479
    
    
    
    577
    
    
    
    792Impairment of goodwill and broadcast licenses
    
    
    -
    
    
    
    -
    
    
    
    338,681Gain on disposals of assets, net
    
    
    (1,909
    )
    
    
    (7,628
    )
    
    
    (1,632
    )Operating expenses
    
    
    239,098
    
    
    
    227,295
    
    
    
    586,071Operating income (loss)
    
    
    106,960
    
    
    
    43,079
    
    
    
    (258,895
    )Other income (expense):Miscellaneous income (expense), net
    
    
    44
    
    
    
    54
    
    
    
    (53
    )Interest expense
    
    
    (70,045
    )
    
    
    (69,088
    )
    
    
    (54,079
    )Loss from early extinguishment of debt
    
    
    (349
    )
    
    
    (8,352
    )
    
    
    -Income (loss) before income taxes
    
    
    36,610
    
    
    
    (34,307
    )
    
    
    (313,027
    )Income tax expense (benefit)
    
    
    13,447
    
    
    
    (11,260
    )
    
    
    (111,011
    )Net income (loss)
    
    
    23,163
    
    
    
    (23,047
    )
    
    
    (202,016
    )Preferred stock dividends (includes accretion of issuance
costs of $4,489, $1,202 and $576, respectively)
    
    
    14,582
    
    
    
    17,119
    
    
    
    6,593Net income (loss) available to common stockholders
    
    $
    8,581
    
    
    $
    (40,166
    )
    
    $
    (208,609
    )Basic per share information:Net income (loss) available to common stockholders
    
    $
    0.16
    
    
    $
    (0.83
    )
    
    $
    (4.32
    )Weighted average shares outstanding
    
    
    54,322
    
    
    
    48,510
    
    
    
    48,302Diluted per share information:Net income (loss) available to common stockholders
    
    $
    0.16
    
    
    $
    (0.83
    )
    
    $
    (4.32
    )Weighted average shares outstanding
    
    
    54,324
    
    
    
    48,510
    
    
    
    48,302Dividends declared per share
    
    $
    -
    
    
    $
    -
    
    
    $
    0.09
  63




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GRAY TELEVISION, INC.
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
  AccumulatedClass A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Class A
    
    
    Common
    
    
    OtherCommon Stock

    
    Common Stock

    
    Accumulated

    
    Treasury Stock

    
    Treasury Stock

    
    ComprehensiveShares
    
    Amount
    
    Shares
    
    Amount
    
    Deficit
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Income (Loss)
    
    TotalBalance at December 31, 2007
    
    
    7,331,574
    
    
    $
    15,321
    
    
    
    46,173,347
    
    
    $
    448,459
    
    
    $
    (50,560
    )
    
    
    (1,578,554
    )
    
    $
    (22,398
    )
    
    
    (3,771,550
    )
    
    $
    (39,930
    )
    
    $
    (13,047
    )
    
    $
    337,845Net loss
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (202,016
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Loss on derivatives, net of
income tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,262
    )
    
    
    -Adjustment to pension liability,
net of income tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (7,149
    )
    
    
    -Comprehensive loss
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (213,427
    )Common stock cash dividends
($0.09) per share
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,363
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,363
    )Preferred stock dividends
(including accretion of
original issuance costs )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (6,593
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (6,593
    )Issuance of common stock:401(k) plan
    
    
    -
    
    
    
    -
    
    
    
    950,601
    
    
    
    2,380
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    2,380Directors restricted stock plan
    
    
    -
    
    
    
    -
    
    
    
    55,000
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Repurchase of common stock
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (883,200
    )
    
    
    (185
    )
    
    
    -
    
    
    
    (185
    )Share-based compensation
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,450
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,450Balance at December 31, 2008
    
    
    7,331,574
    
    
    $
    15,321
    
    
    
    47,178,948
    
    
    $
    452,289
    
    
    $
    (263,532
    )
    
    
    (1,578,554
    )
    
    $
    (22,398
    )
    
    
    (4,654,750
    )
    
    $
    (40,115
    )
    
    $
    (24,458
    )
    
    $
    117,107
  64




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##### Table of Contents



GRAY TELEVISION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS) (Continued)
 AccumulatedClass A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Class A
    
    
    Common
    
    
    OtherCommon Stock
    
    Common Stock
    
    Accumulated
    
    Treasury Stock
    
    Treasury Stock
    
    ComprehensiveShares
    
    Amount
    
    Shares
    
    Amount
    
    Deficit
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Income(Loss)
    
    TotalBalance at December 31, 2008
    
    
    7,331,574
    
    
    $
    15,321
    
    
    
    47,178,948
    
    
    $
    452,289
    
    
    $
    (263,532
    )
    
    
    (1,578,554
    )
    
    $
    (22,398
    )
    
    
    (4,654,750
    )
    
    $
    (40,115
    )
    
    $
    (24,458
    )
    
    $
    117,107Net loss
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (23,047
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Gain on derivatives, net of
Income tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    11,143
    
    
    
    -Adjustment to pension liability,
net of income tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    4,001
    
    
    
    -Comprehensive loss
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (7,903
    )Preferred stock dividends (including
accretion of original issuance costs )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (17,119
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (17,119
    )Issuance of common stock:401(k) plan
    
    
    -
    
    
    
    -
    
    
    
    350,554
    
    
    
    147
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    147Share-based compensation
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,388
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,388Balance at December 31, 2009
    
    
    7,331,574
    
    
    $
    15,321
    
    
    
    47,529,502
    
    
    $
    453,824
    
    
    $
    (303,698
    )
    
    
    (1,578,554
    )
    
    $
    (22,398
    )
    
    
    (4,654,750
    )
    
    $
    (40,115
    )
    
    $
    (9,314
    )
    
    $
    93,620
  65




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##### Table of Contents



GRAY TELEVISION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS) (Continued)
 AccumulatedClass A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Class A
    
    
    Common
    
    
    OtherCommon Stock
    
    Common Stock
    
    Accumulated
    
    Treasury Stock
    
    Treasury Stock
    
    ComprehensiveShares
    
    Amount
    
    Shares
    
    Amount
    
    Deficit
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Income (Loss)
    
    TotalBalance at December 31, 2009
    
    
    7,331,574
    
    
    $
    15,321
    
    
    
    47,529,502
    
    
    $
    453,824
    
    
    $
    (303,698
    )
    
    
    (1,578,554
    )
    
    $
    (22,398
    )
    
    
    (4,654,750
    )
    
    $
    (40,115
    )
    
    $
    (9,314
    )
    
    $
    93,620Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    23,163
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Gain on derivatives, net of
income tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    3,870
    
    
    
    -Adjustment to pension liability,
net of income tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (2,544
    )
    
    
    -Comprehensive loss
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    24,489Preferred stock dividends (including
accretion of original issuance costs )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (14,582
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (14,582
    )Issuance of common stock:Exchange of preferred stock
    
    
    -
    
    
    
    -
    
    
    
    8,500,000
    
    
    
    25,518
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    25,518401(k) plan
    
    
    -
    
    
    
    -
    
    
    
    13,815
    
    
    
    30
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    30Share-based compensation
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    332
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    332Balance at December 31, 2010
    
    
    7,331,574
    
    
    $
    15,321
    
    
    
    56,043,317
    
    
    $
    479,704
    
    
    $
    (295,117
    )
    
    
    (1,578,554
    )
    
    $
    (22,398
    )
    
    
    (4,654,750
    )
    
    $
    (40,115
    )
    
    $
    (7,988
    )
    
    $
    129,407
  66




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##### Table of Contents



GRAY TELEVISION, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2010
    
    2009
    
    2008Operating activitiesNet income (loss)
    
    $
    23,163
    
    
    $
    (23,047
    )
    
    $
    (202,016
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation
    
    
    30,630
    
    
    
    32,595
    
    
    
    34,561Amortization of intangible assets
    
    
    479
    
    
    
    577
    
    
    
    792Amortization of deferred loan costs
    
    
    2,051
    
    
    
    329
    
    
    
    475Amortization of Notes original issue discount
    
    
    902
    
    
    
    -
    
    
    
    -Amortization of restricted stock and stock option awards
    
    
    332
    
    
    
    1,388
    
    
    
    1,450Loss from early extinguishment of debt
    
    
    349
    
    
    
    8,352
    
    
    
    -(Payment) accrual of long-term accrued facility fee, net
    
    
    (18,307
    )
    
    
    18,307
    
    
    
    -Impairment of goodwill and broadcast licenses
    
    
    -
    
    
    
    -
    
    
    
    338,681Amortization of program broadcast rights
    
    
    15,410
    
    
    
    15,130
    
    
    
    16,070Payments on program broadcast obligations
    
    
    (15,473
    )
    
    
    (15,287
    )
    
    
    (13,968
    )Common stock contributed to 401(k) Plan
    
    
    30
    
    
    
    147
    
    
    
    2,380Deferred revenue, network compensation
    
    
    (758
    )
    
    
    (617
    )
    
    
    (604
    )Deferred income taxes
    
    
    13,910
    
    
    
    (11,219
    )
    
    
    (110,990
    )Gain on disposals of assets, net
    
    
    (1,909
    )
    
    
    (7,628
    )
    
    
    (1,632
    )Other
    
    
    319
    
    
    
    2,574
    
    
    
    257Changes in operating assets and liabilities:Accounts receivable
    
    
    (7,309
    )
    
    
    (2,483
    )
    
    
    8,385Other current assets
    
    
    (111
    )
    
    
    3,208
    
    
    
    3,387Accounts payable
    
    
    (438
    )
    
    
    (4,238
    )
    
    
    2,162Employee compensation, benefits and pension costs
    
    
    2,687
    
    
    
    72
    
    
    
    (2,017
    )Accrued expenses
    
    
    (750
    )
    
    
    (2,288
    )
    
    
    870Accrued interest
    
    
    (5,700
    )
    
    
    3,654
    
    
    
    (6,001
    )Income taxes payable
    
    
    (404
    )
    
    
    (168
    )
    
    
    (282
    )Deferred revenue other, including current portion
    
    
    (977
    )
    
    
    (455
    )
    
    
    1,715Net cash provided by operating activities
    
    
    38,126
    
    
    
    18,903
    
    
    
    73,675Investing activitiesPurchases of property and equipment
    
    
    (19,395
    )
    
    
    (17,756
    )
    
    
    (15,019
    )Proceeds from asset sales
    
    
    284
    
    
    
    104
    
    
    
    199Equipment transactions related to spectrum reallocation, net
    
    
    278
    
    
    
    697
    
    
    
    (766
    )Payments on acquisition related liabilities
    
    
    (670
    )
    
    
    (805
    )
    
    
    (779
    )Other
    
    
    (3
    )
    
    
    229
    
    
    
    25Net cash used in investing activities
    
    
    (19,506
    )
    
    
    (17,531
    )
    
    
    (16,340
    )Financing activitiesProceeds from borrowings on long-term debt
    
    
    358,010
    
    
    
    -
    
    
    
    16,000Repayments of borrowings on long-term debt
    
    
    (324,018
    )
    
    
    (8,571
    )
    
    
    (140,621
    )Deferred and other loan costs
    
    
    (13,114
    )
    
    
    (7,450
    )
    
    
    -Dividends paid, net of accreted preferred stock dividend
    
    
    (14,892
    )
    
    
    -
    
    
    
    (8,825
    )Proceeds from issuance of common stock
    
    
    25,518
    
    
    
    -
    
    
    
    -Proceeds from issuance of preferred stock
    
    
    -
    
    
    
    -
    
    
    
    91,607Purchase of common stock
    
    
    -
    
    
    
    -
    
    
    
    (185
    )Repurchase of preferred stock
    
    
    (60,693
    )
    
    
    -
    
    
    
    -Net cash used in financing activities
    
    
    (29,189
    )
    
    
    (16,021
    )
    
    
    (42,024
    )Net (decrease) increase in cash and cash equivalents
    
    
    (10,569
    )
    
    
    (14,649
    )
    
    
    15,311Cash at beginning of period
    
    
    16,000
    
    
    
    30,649
    
    
    
    15,338Cash at end of period
    
    $
    5,431
    
    
    $
    16,000
    
    
    $
    30,649
  67




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##### Table of Contents



GRAY TELEVISION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.    Description of Business and Summary of Significant Accounting Policies
 Description of Business
  Principles of Consolidation
  Revenue Recognition
   68




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##### Table of Contents



Barter Transactions
  Year Ended December 31,2010

    
    2009

    
    2008Trade barter revenue
    
    $
    1,481
    
    
    $
    1,289
    
    
    $
    1,850Trade barter expense
    
    
    (1,354
    )
    
    
    (1,324
    )
    
    
    (1,892
    )Net trade barter income (expense)
    
    $
    127
    
    
    $
    (35
    )
    
    $
    (42
    )
  Advertising Expense
  Use of Estimates
  Allowance for Doubtful Accounts
  Program Broadcast Rights
  69




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##### Table of Contents



Property and Equipment
  December 31,2010
    
    
    2009Property and equipment:Land
    
    $
    23,397
    
    
    $
    23,046Buildings and improvements
    
    
    51,773
    
    
    
    51,606Equipment
    
    
    299,915
    
    
    
    291,682375,085
    
    
    
    366,334Accumulated depreciation
    
    
    (237,937
    )
    
    
    (218,242
    )Total property and equipment, net
    
    $
    137,148
    
    
    $
    148,092
 Deferred Loan Costs
  Asset Retirement Obligations
  70




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##### Table of Contents



Concentration of Credit Risk
   Risk of Loss of Cash Deposits
  Earnings Per Share
  Year Ended December 31,2010

    
    2009

    
    2008Weighted-average shares outstanding  basic
    
    
    54,322
    
    
    
    48,510
    
    
    
    48,302Stock options and restricted stock
    
    
    2
    
    
    
    -
    
    
    
    -Weighted-average shares outstanding - diluted
    
    
    54,324
    
    
    
    48,510
    
    
    
    48,302
  71




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##### Table of Contents



Year Ended December 31,2010

    
    2009

    
    2008Potentially dilutive securities outstanding at end of period:Employee stock options
    
    
    1,005
    
    
    
    1,476
    
    
    
    1,949Unvested restricted stock
    
    
    33
    
    
    
    66
    
    
    
    100Subtotal
    
    
    1,038
    
    
    
    1,542
    
    
    
    2,049Less dilutive securites included in weighted-average
shares outstanding -diluted
    
    
    (2
    )
    
    
    -
    
    
    
    -Potentially dilutive securities outstanding at end of period
which were excluded from weighted-average shares
outstanding - diluted
    
    
    1,036
    
    
    
    1,542
    
    
    
    2,049
 Investment in Broadcasting Company
  Valuation of Broadcast Licenses, Goodwill and Other Intangible Assets
   72




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##### Table of Contents



Annual Impairment Testing of Intangible Assets
    73




---



##### Table of Contents



Market Capitalization
  Certain Related Party Transactions
 emeritus
 Accumulated Other Comprehensive Loss
  December 31,2010

    
    2009Accumulated
balances of items included in accumulated other comprehensive loss:Loss on derivatives, net of income tax
    
    $
    -
    
    
    $
    (3,870
    )Pension liability adjustments, net of income tax
    
    
    (7,988
    )
    
    
    (5,444
    )Accumulated other comprehensive loss
    
    $
    (7,988
    )
    
    $
    (9,314
    )
 74




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##### Table of Contents



Recent Accounting Pronouncements
  2.    Marketable Securities
      75




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##### Table of Contents



3.  Long-term Debt and Accrued Facility Fee
  December 31,2010
    
    
    2009Long-term debt including current portion:Senior credit facility excluding long-term accrued facility fee
    
    $
    467,791
    
    
    $
    791,809101/2% senior secured second lien notes
    
    
    365,000
    
    
    
    -Total long-term debt at liquidation value
    
    
    832,791
    
    
    
    791,809Less unamortized discount on 101/2% senior secured second
lien notes
    
    
    (6,087
    )
    
    
    -Total long-term debt at recorded value
    
    
    826,704
    
    
    
    791,809Long-term accrued facility fee
    
    
    -
    
    
    
    18,307Total long-term debt and accrued facility fee at recorded value
    
    $
    826,704
    
    
    $
    810,116Borrowing availability under our senior credit facility
    
    $
    40,000
    
    
    $
    31,681Certain covenant ratios as defined under our senior credit facility:First lien leverage ratio-actual (1)
    
    
    4.46
    
    
    
    -First lien leverage ratio-maximum allowed (1)
    
    
    7.00
    
    
    
    -Fixed charge coverage ratio-actual (1)
    
    
    1.27
    
    
    
    -Fixed charge coverage ratio-minimum allowed (1)
    
    
    0.90
    
    
    
    -
 (1)    Gray was not required to comply with these ratios prior to June 30, 2010. Senior Credit Facility
   76




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##### Table of Contents



Amendment of Senior Credit Facility and Issuance of 101/2% Senior Secured Second Lien Notes due 2015
(the Notes)
      77




---



##### Table of Contents



As Amended and AfterIssuance of Notes and Related$300 Million Repayment of theDescription
    
    Term LoanAnnual interest rate on outstanding term loan balance (1)
    
    LIBOR plus 3.50% 
or Base rate plus 2.50%Annual interest rate on outstanding revolving loan balance (1)
    
    LIBOR plus 3.50% 
or Base rate plus 2.50%Annual facility fee rate
    
    0.75% with a potential for 
reductions in future periods.Annual commitment fee on undrawn revolving loan balance
    

    0.50%Revolving loan commitment
    
    $40 millionMaximum first lien leverage ratio at:December 31, 2010 through June 29, 2011
    

    7.00 to 1.00June 30, 2011 through December 30, 2011
    

    6.75 to 1.00December 31, 2011 and thereafter
    

    6.50 to 1.00Minimum
fixed charge coverage ratio at:December 31, 2010 through June 30, 2011
    

    0.90 to 1.00July 1, 2011 and thereafter
    

    1.00 to 1.00Maximum cash balance that can be deducted from total
debt to calculate net debt in the first lien leverage ratio test

    $15.0 million
 (1) As of December 31, 2010, the London Interbank Offered Rate (LIBOR) and the Base rate,
which is generally equal to the lenders prime rate, applicable to our outstanding
principal balance was 0.27% and 3.25%, respectively.   78




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##### Table of Contents



Collateral, Covenants and Restrictions
   Amendment to Our Senior Credit Facility in 2009 (the 2009 Amendment)
  79




---



##### Table of Contents



Leverage RatioMaximum AllowedAgreementAfter
    
    
    Agreementthe 2009
    
    
    Pre-2009Actual
    
    
    Amendment
    
    
    AmendmentLeverage ratios under our senior credit facility as of:March 31, 2009
    
    
    7.48
    
    
    
    8.00
    
    
    
    7.25June 30, 2009
    
    
    7.98
    
    
    
    8.25
    
    
    
    7.25September 30, 2009
    
    
    8.22
    
    
    
    8.50
    
    
    
    7.25December 31, 2009
    
    
    8.42
    
    
    
    8.75
    
    
    
    7.00
 Amendment of Senior Credit Facility and Issuance of 101/2%
Senior Secured Second Lien Notes due 2015.
 Maturities
  Minimum Principal MaturitiesSenior CreditYear
    
    Facility
    
    
    Notes
    
    
    Total2011
    
    $
    4,823
    
    
    $    -
    
    
    $
    4,8232012
    
    
    4,823
    
    
    
    -
    
    
    
    4,8232013
    
    
    4,823
    
    
    
    -
    
    
    
    4,8232014
    
    
    453,322
    
    
    
    -
    
    
    
    453,3222015
    
    
    -
    
    
    
    365,000
    
    
    
    365,000Total
    
    $
    467,791
    
    
    $
    365,000
    
    
    $
    832,791
 Interest Payments
  80




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##### Table of Contents



4.    Derivatives
 Risk Management Objective of Using Derivatives
  
    
    managing current and forecasted interest rate risk while maintaining financial
flexibility and solvency;
    
    proactively managing our cost of capital to ensure that we can effectively manage
operations and execute our business strategy, thereby maintaining a competitive
advantage and enhancing stockholder value; and
    
    complying with covenant requirements in our senior credit facility.
 Cash Flow Hedges of Interest Rate Risk
      81




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##### Table of Contents



Fair Values of Derivative InstrumentsAs of December 31, 2010
    
    
    As of December 31, 2009Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    FairLocation
    
    
    Value
    
    
    Location
    
    
    ValueDerivatives designated as hedging
instruments:Interest rate swap agreements
    
    Not Applicable
    
    $
    -
    
    
    Current liabilities
    
    $
    6,344
  Cash Flow Hedging Relationshipsfor the Year Ended December 31,2010
    
    
    2009
    
    
    2008Interest rate swap agreements:Liability at beginning of period
    
    $
    (6,344
    )
    
    $
    (24,611
    )
    
    $
    (17,625
    )Effective portion of (losses) or gains recognized in
other comprehensive income (loss)
    
    
    (5,936
    )
    
    
    35,497
    
    
    
    719Effective portion of gains or (losses) recorded in
accumulated other comprehensive income (loss)
and reclassified into interest expense
    
    
    12,280
    
    
    
    (17,230
    )
    
    
    (7,705
    )Liability at end of period
    
    $
    -
    
    
    $
    (6,344
    )
    
    $
    (24,611
    )
  82




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##### Table of Contents



Credit-risk Related Contingent Features
  5.    Fair Value Measurement
  Recurring Fair Value Measurements
  Recurring
Fair Value MeasurementsAs of December 31, 2010Level 1

    
    Level 2

    
    Level 3

    
    TotalLiabilities:Interest
rate swap agreements
    
    $
    -
    
    
    $
    -
    
    
    $
    -
    
    
    $
    -As of December 31, 2009Level 1

    
    Level 2

    
    Level 3

    
    TotalLiabilities:Interest rate
swap agreements
    
    $
    -
    
    
    $
    6,344
    
    
    $
    -
    
    
    $
    6,344
  83




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##### Table of Contents



Non-Recurring Fair Value Measurements
  Non-Recurring Fair Value Measurements
 Impairment LossAs of December 31, 2010

    
    For The Year EndedLevel 1

    
    Level 2

    
    Level 3

    
    Total

    
    December 31, 2010Assets:Property and equipment, net
    
    $
    -
    
    
    $
    -
    
    
    $
    137,148
    
    
    $
    137,148
    
    
    $
    -Program broadcast rights
    
    
    -
    
    
    
    -
    
    
    
    10,721
    
    
    
    10,721
    
    
    
    430Investment in broadcasting
company
    
    
    -
    
    
    
    -
    
    
    
    13,599
    
    
    
    13,599
    
    
    
    -Broadcast licenses
    
    
    -
    
    
    
    -
    
    
    
    818,981
    
    
    
    818,981
    
    
    
    -Goodwill
    
    
    -
    
    
    
    -
    
    
    
    170,522
    
    
    
    170,522
    
    
    
    -Other intangible assets, net
    
    
    -
    
    
    
    -
    
    
    
    837
    
    
    
    837
    
    
    
    -Total
    
    $
    -
    
    
    $
    -
    
    
    $
    1,151,808
    
    
    $
    1,151,808
    
    
    $
    430Impairment LossAs of December 31, 2009

    
    For The Year EndedLevel 1

    
    Level 2

    
    Level 3

    
    Total

    
    December 31, 2009Assets:Property and equipment, net
    
    $
    -
    
    
    $
    -
    
    
    $
    148,092
    
    
    $
    148,092
    
    
    $
    -Program broadcast rights
    
    
    -
    
    
    
    -
    
    
    
    11,265
    
    
    
    11,265
    
    
    
    177Investment in broadcasting
company
    
    
    -
    
    
    
    -
    
    
    
    13,599
    
    
    
    13,599
    
    
    
    -Broadcast licenses
    
    
    -
    
    
    
    -
    
    
    
    818,981
    
    
    
    818,981
    
    
    
    -Goodwill
    
    
    -
    
    
    
    -
    
    
    
    170,522
    
    
    
    170,522
    
    
    
    -Other intangible assets, net
    
    
    -
    
    
    
    -
    
    
    
    1,316
    
    
    
    1,316
    
    
    
    -Total
    
    $
    -
    
    
    $
    -
    
    
    $
    1,163,775
    
    
    $
    1,163,775
    
    
    $
    177
  84




---



##### Table of Contents



Fair Value of Other Financial Instruments
    6.    Stockholders Equity
    85




---



##### Table of Contents



7.    Preferred Stock
      86




---



##### Table of Contents



RedemptionPriceDate of Redemption
    
    Per ShareJanuary 1, 2011 through June 30, 2011
    
    $
    104,000July 1, 2011 through December 31, 2011
    
    $
    102,000January 1, 2012 and thereafter
    
    $
    100,000
 8.    Stock-Based Compensation
 Long Tem Incentive Plan
  Directors Restricted Stock Plan
  87




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##### Table of Contents



Stock-Based Compensation  Valuation Assumptions for Stock Options
   Expected term (in years)
    
    
    2.63Volatility
    
    
    36.71
    %Risk-free interest rate
    
    
    2.77
    %Dividend yield
    
    
    1.65
    %Expected forfeitures
    
    
    2.57
    %
  Stock Option and Restricted Share Activity
  88




---



##### Table of Contents



Year Ended December 31,2010
    
    
    2009
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceStock options outstanding -
beginning of period
    
    
    1,476
    
    
    $
    8.28
    
    
    
    1,949
    
    
    $
    8.31
    
    
    
    842
    
    
    $
    9.96Options granted
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,333
    
    
    
    7.49Options exercised
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Options forfeited
    
    
    (75
    )
    
    
    10.37
    
    
    
    (460
    )
    
    
    8.31
    
    
    
    (66
    )
    
    
    8.17Options expired
    
    
    (396
    )
    
    
    9.84
    
    
    
    (13
    )
    
    
    12.37
    
    
    
    (160
    )
    
    
    10.25Stock options outstanding -
end of period
    
    
    1,005
    
    
    $
    7.51
    
    
    
    1,476
    
    
    $
    8.28
    
    
    
    1,949
    
    
    $
    8.31Exercisable at end of period
    
    
    1,005
    
    
    $
    7.51
    
    
    
    498
    
    
    $
    9.93
    
    
    
    614
    
    
    $
    10.01
   As of December 31, 2010Number of
    
    
    Exercise
    
    
    RemainingOptions
    
    
    Price
    
    
    ContractualOutstanding
    
    
    Per Share
    
    
    Life(in thousands)
    
    
    
    
    
    
    (in years)35
    
    
    $
    8.61
    
    
    
    1.25
    
    
    
    9.46
    
    
    
    1.8925
    
    
    
    7.64
    
    
    
    2.130
    
    
    
    3.61
    
    
    
    2.410
    
    
    $
    2.10
    
    
    
    2.61,005
  89




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##### Table of Contents



WeightedNumber of
    
    
    AverageShares
    
    
    Fair Value(in thousands)Restricted Stock:Non-vested common restricted shares, December 31, 2009
    
    
    66
    
    
    $
    6.36Vested
    
    
    (33
    )
    
    
    6.97Non-vested common restricted shares, December 31, 2010
    
    
    33
    
    
    $
    5.74
  9.    Income Taxes
   90




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##### Table of Contents



Year Ended December 31,2010
    
    2009
    
    2008Current:Federal
    
    $
    (504
    )
    
    $
    -
    
    
    $
    -State and local
    
    
    554
    
    
    
    344
    
    
    
    354State and
local -  reserve for uncertain tax positions
    
    
    (513
    )
    
    
    (385
    )
    
    
    525Current income tax expense (benefit)
    
    
    (463
    )
    
    
    (41
    )
    
    
    879Deferred:Federal
    
    
    13,869
    
    
    
    (11,640
    )
    
    
    (99,510
    )State and local
    
    
    41
    
    
    
    421
    
    
    
    (12,380
    )Deferred income tax expense (benefit)
    
    
    13,910
    
    
    
    (11,219
    )
    
    
    (111,890
    )Total income tax expense (benefit)
    
    $
    13,447
    
    
    $
    (11,260
    )
    
    $
    (111,011
    )
 91




---



##### Table of Contents



December 31,2010
    
    2009Deferred tax liabilities:Net book value of property and equipment
    
    $
    13,366
    
    
    $
    16,800Broadcast licenses, goodwill and other intangibles
    
    
    258,715
    
    
    
    245,520Loan acquisition costs
    
    
    393
    
    
    
    -Liability for accrued bonus 481(a) adjustment
    
    
    203
    
    
    
    -Restricted stock
    
    
    7
    
    
    
    12Total deferred tax liabilities
    
    
    272,684
    
    
    
    262,332Deferred tax assets:Liability under supplemental retirement plan
    
    
    10
    
    
    
    14Liability for accrued vacation
    
    
    811
    
    
    
    763Liability for accrued bonus
    
    
    1,166
    
    
    
    -Allowance for doubtful accounts
    
    
    410
    
    
    
    426Liability under severance and purchase liabilities
    
    
    -
    
    
    
    18Liability under health and welfare plan
    
    
    526
    
    
    
    675Capital loss carryforwards
    
    
    281
    
    
    
    264Liability for pension plan
    
    
    7,254
    
    
    
    5,434Federal operating loss carryforwards
    
    
    95,276
    
    
    
    99,853State and local operating loss carryforwards
    
    
    13,285
    
    
    
    13,931Alternative minimum tax carryforwards
    
    
    386
    
    
    
    890Unearned income
    
    
    992
    
    
    
    1,150Network compensation
    
    
    914
    
    
    
    1,162Interest rate swap agreements
    
    
    -
    
    
    
    2,474Stock options
    
    
    589
    
    
    
    693Other
    
    
    291
    
    
    
    440Total deferred tax assets
    
    
    122,191
    
    
    
    128,187Valuation allowance for deferred tax assets
    
    
    (4,871
    )
    
    
    (6,462
    )Net deferred tax assets
    
    
    117,320
    
    
    
    121,725Deferred tax liabilities, net of deferred tax assets
    
    $
    155,364
    
    
    $
    140,607
   92




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##### Table of Contents



Year Ended December 31,2010
    
    2009
    
    2008Statutory federal rate applied to income (loss) before
income tax expense or benefit
    
    $
    12,814
    
    
    $
    (12,007
    )
    
    $
    (109,560
    )Current year permanent items
    
    
    618
    
    
    
    216
    
    
    
    239State and local taxes, net of federal tax benefit
    
    
    1,993
    
    
    
    (906
    )
    
    
    (11,584
    )Change in valuation allowance
    
    
    (1,591
    )
    
    
    1,553
    
    
    
    (306
    )Reserve for uncertain tax positions
    
    
    (513
    )
    
    
    (385
    )
    
    
    525Goodwill impairment
    
    
    -
    
    
    
    -
    
    
    
    9,301Other items, net
    
    
    126
    
    
    
    269
    
    
    
    374Income tax
expense (benefit) as recorded
    
    $
    13,447
    
    
    $
    (11,260
    )
    
    $
    (111,011
    )Effective income tax rate
    
    
    36.7
    %
    
    
    32.8
    %
    
    
    35.5
    %
     93




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##### Table of Contents



Year Ended December 31,2010
    
    2009
    
    2008Balance at beginning of period
    
    $
    2,828
    
    
    $
    3,227
    
    
    $
    2,949Change resulting from positions taken in prior periods:Increase
    
    
    -
    
    
    
    48
    
    
    
    23Decrease
    
    
    -
    
    
    
    -
    
    
    
    (153
    )Increase resulting from positions taken in current
period
    
    
    -
    
    
    
    -
    
    
    
    744Decrease as a result of settlements with taxing
authorities
    
    
    -
    
    
    
    -
    
    
    
    (51
    )Reduction in benefit from lapse in statute of limitations
    
    
    (486
    )
    
    
    (447
    )
    
    
    (285
    )Balance at end of period
    
    $
    2,342
    
    
    $
    2,828
    
    
    $
    3,227
   94




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##### Table of Contents



10.    Retirement Plans
  Gray Pension Plan
   December 31,2010
    
    2009Change in projected benefit obligation:Projected benefit obligation at beginning of year
    
    $
    39,517
    
    
    $
    37,998Service cost
    
    
    3,199
    
    
    
    3,248Interest cost
    
    
    2,658
    
    
    
    2,189Actuarial losses (gains)
    
    
    5,483
    
    
    
    (3,201
    )Benefits paid
    
    
    (802
    )
    
    
    (717
    )Projected benefit obligation at end of year
    
    $
    50,055
    
    
    $
    39,517Change in plan assets:Fair value of pension plan assets at beginning of year
    
    $
    26,716
    
    
    $
    20,901Actual return on plan assets
    
    
    2,939
    
    
    
    3,102Company contributions
    
    
    4,186
    
    
    
    3,430Benefits paid
    
    
    (802
    )
    
    
    (717
    )Fair value of pension plan assets at end of year
    
    
    33,039
    
    
    
    26,716Funded status of pension plan
    
    $
    (17,016
    )
    
    $
    (12,801
    )Amounts recognized in our balance sheets consist of:Accrued benefit cost
    
    $
    (5,317
    )
    
    $
    (4,721
    )Accumulated other comprehensive income
    
    
    (11,699
    )
    
    
    (8,080
    )Net liability recognized
    
    $
    (17,016
    )
    
    $
    (12,801
    )
  95




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##### Table of Contents



Year Ended December 31,2010
    
    2009Weighted-average assumptions used to determine net periodic
benefit cost for our active pension plan:Discount rate
    
    
    6.27
    %
    
    
    5.79
    %Expected long-term rate of return on pension plan assets
    
    
    7.00
    %
    
    
    7.00
    %Estimated rate of increase in compensation levels
    
    
    5.00
    %
    
    
    5.00
    %As of December 31,2010
    
    2009Weighted-average assumptions used to determine benefit obligations:Discount rate
    
    
    5.85
    %
    
    
    6.27
    %Estimated rate of increase in compensation levels
    
    
    5.00
    %
    
    
    5.00
    %
  Year Ended December 31,2010
    
    2009
    
    2008Components of net periodic pension cost:Service cost
    
    $
    3,199
    
    
    $
    3,248
    
    
    $
    2,917Interest cost
    
    
    2,658
    
    
    
    2,189
    
    
    
    1,925Expected return on plan assets
    
    
    (1,987
    )
    
    
    (1,558
    )
    
    
    (1,763
    )Recognized net actuarial loss
    
    
    912
    
    
    
    1,176
    
    
    
    98Net periodic pension cost
    
    $
    4,782
    
    
    $
    5,055
    
    
    $
    3,177
  Years
    
    Amount2011
    
    $
    1,1562012
    
    
    1,3822013
    
    
    1,5292014
    
    
    1,6562015
    
    
    1,8322016-2020
    
    
    13,228
 96




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##### Table of Contents



As of December 31,2010
    
    2009Asset category:Insurance general account
    
    
    34
    %
    
    
    37
    %Cash management accounts
    
    
    4
    %
    
    
    3
    %Equity accounts
    
    
    56
    %
    
    
    54
    %Fixed income account
    
    
    6
    %
    
    
    6
    %Total
    
    
    100
    %
    
    
    100
    %
  Target RangeAsset class:Large cap equities
    
    
    23
    %
    
    to
    
    
    91
    %Mid cap equities
    
    
    0
    %
    
    to
    
    
    15
    %Small cap equities
    
    
    0
    %
    
    to
    
    
    16
    %International equities
    
    
    5
    %
    
    to
    
    
    25
    %Fixed income
    
    
    0
    %
    
    to
    
    
    30
    %Cash
    
    
    0
    %
    
    to
    
    
    20
    %
  Fair Value of Active Pension Plan Assets
  97




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##### Table of Contents



Active Pension Plan Fair Value Measurements
 As of December 31, 2010Level 1
    
    Level 2
    
    Level 3
    
    TotalAssets:Insurance general account
    
    $
    -
    
    
    $
    11,434
    
    
    $
    -
    
    
    $
    11,434Cash management accounts
    
    
    -
    
    
    
    1,167
    
    
    
    -
    
    
    
    1,167Equity accounts
    
    
    -
    
    
    
    18,489
    
    
    
    -
    
    
    
    18,489Fixed income account
    
    
    -
    
    
    
    1,949
    
    
    
    -
    
    
    
    1,949Total
    
    $
    -
    
    
    $
    33,039
    
    
    $
    -
    
    
    $
    33,039
 As of December 31, 2009Level 1
    
    Level 2
    
    Level 3
    
    TotalAssets:Insurance general account
    
    $
    -
    
    
    $
    9,925
    
    
    $
    -
    
    
    $
    9,925Cash management accounts
    
    
    -
    
    
    
    687
    
    
    
    -
    
    
    
    687Equity accounts
    
    
    -
    
    
    
    14,386
    
    
    
    -
    
    
    
    14,386Fixed income account
    
    
    -
    
    
    
    1,719
    
    
    
    -
    
    
    
    1,719Total
    
    $
    -
    
    
    $
    26,717
    
    
    $
    -
    
    
    $
    26,717
 Acquired Pension Plans
  Contributions
  Capital Accumulation Plan
  98




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##### Table of Contents



Year Ended December 31,2010

    
    2009

    
    2008Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    AmountContributions to theCapital Accumulation PlanMatching contributions
    
    
    14
    
    
    $
    29
    
    
    
    351
    
    
    $
    147
    
    
    
    867
    
    
    $
    1,707Voluntary contributions
    
    
    -
    
    
    $
    -
    
    
    
    -
    
    
    $
    -
    
    
    
    84
    
    
    $
    673
 Employee Stock Purchase Plan
  99




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##### Table of Contents



11.    Commitments and Contingencies
   SyndicatedOperating
    
    
    TelevisionYear
    
    Equipment
    
    Lease
    
    Programming
    
    Total2011
    
    $
    910
    
    
    $
    1,341
    
    
    $
    3,420
    
    
    $
    5,6712012
    
    
    -
    
    
    
    1,016
    
    
    
    9,708
    
    
    
    10,7242013
    
    
    -
    
    
    
    817
    
    
    
    8,852
    
    
    
    9,6692014
    
    
    -
    
    
    
    582
    
    
    
    7,289
    
    
    
    7,8712015
    
    
    -
    
    
    
    518
    
    
    
    3,864
    
    
    
    4,382Thereafter
    
    
    -
    
    
    
    3,343
    
    
    
    -
    
    
    
    3,343Total
    
    $
    910
    
    
    $
    7,617
    
    
    $
    33,133
    
    
    $
    41,660
  Leases
  Sports Marketing Agreement
   100




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##### Table of Contents



Legal Proceedings and Claims
  12.    Goodwill and Intangible Assets
  Net Balance at

    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Balance atDecember 31,

    
    
    
    
    
    
    
    
    
    
    
    
    
    December 31,2009
    
    Adjustments
    
    Impairment
    
    Amortization
    
    2010Goodwill
    
    $
    170,522
    
    
    $
    -
    
    
    $
    -
    
    
    $
    -
    
    
    $
    170,522Broadcast licenses
    
    
    818,981
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    818,981Definite lived
intangible assets
    
    
    1,316
    
    
    
    -
    
    
    
    -
    
    
    
    (479
    )
    
    
    837Total intangible assets
net of accumulated
amortization
    
    $
    990,819
    
    
    $
    -
    
    
    $
    -
    
    
    $
    (479
    )
    
    $
    990,340
 Net Balance at

    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Balance atDecember 31,

    
    
    
    
    
    
    
    
    
    
    
    
    
    December 31,2008
    
    Adjustments
    
    Impairment
    
    Amortization
    
    2009Goodwill
    
    
    170,522
    
    
    $
    -
    
    
    $
    -
    
    
    $
    -
    
    
    $
    170,522Broadcast licenses
    
    
    818,981
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    818,981Definite lived
intangible assets
    
    
    1,893
    
    
    
    -
    
    
    
    -
    
    
    
    (577
    )
    
    
    1,316Total intangible assets
net of accumulated
amortization
    
    $
    991,396
    
    
    $
    -
    
    
    $
    -
    
    
    $
    (577
    )
    
    $
    990,819
 101




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##### Table of Contents



As of

    
    
    
    
    
    As ofDecember 31, 2009
    
    Impairment
    
    December 31, 2010Goodwill, gross
    
    $
    269,118
    
    
    $
    -
    
    
    $
    269,118Accumulated goodwill impairment
    
    
    (98,596
    )
    
    
    -
    
    
    
    (98,596
    )Goodwill, net
    
    $
    170,522
    
    
    $
    -
    
    
    $
    170,522As of

    
    
    
    
    
    As ofDecember 31, 2008
    
    Impairment
    
    December 31, 2009Goodwill, gross
    
    $
    269,118
    
    
    $
    -
    
    
    $
    269,118Accumulated goodwill impairment
    
    
    (98,596
    )
    
    
    -
    
    
    
    (98,596
    )Goodwill, net
    
    $
    170,522
    
    
    $
    -
    
    
    $
    170,522
  As of December 31, 2010

    
    As of December 31, 2009Accumulated
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    Amortization
    
    Net
    
    Gross
    
    Amortization
    
    NetIntangible assets not
currently subject to
amortization:Broadcast licenses
    
    $
    872,680
    
    
    $
    (53,699
    )
    
    $
    818,981
    
    
    $
    872,680
    
    
    $
    (53,699
    )
    
    $
    818,981Goodwill
    
    
    170,522
    
    
    
    -
    
    
    
    170,522
    
    
    
    170,522
    
    
    
    -
    
    
    
    170,522$
    1,043,202
    
    
    $
    (53,699
    )
    
    $
    989,503
    
    
    $
    1,043,202
    
    
    $
    (53,699
    )
    
    $
    989,503Intangible assets subject
to amortization:Network affiliation
agreements
    
    $
    1,264
    
    
    $
    (1,247
    )
    
    $
    17
    
    
    $
    1,264
    
    
    $
    (1,183
    )
    
    $
    81Other definite lived
intangible assets
    
    
    13,484
    
    
    
    (12,664
    )
    
    
    820
    
    
    
    13,484
    
    
    
    (12,249
    )
    
    
    1,235$
    14,748
    
    
    $
    (13,911
    )
    
    $
    837
    
    
    $
    14,748
    
    
    $
    (13,432
    )
    
    $
    1,316Total intangibles
    
    $
    1,057,950
    
    
    $
    (67,610
    )
    
    $
    990,340
    
    
    $
    1,057,950
    
    
    $
    (67,131
    )
    
    $
    990,819
 102




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##### Table of Contents



Impairment of goodwill and broadcast license
   103




---



##### Table of Contents



13.    Selected Quarterly Financial Data (Unaudited)
 Fiscal QuarterFirst
    
    Second
    
    Third
    
    Fourth(In thousands, except for per share data)Year Ended December 31, 2010:Operating revenues
    
    $
    70,482
    
    
    $
    75,636
    
    
    $
    85,345
    
    
    $
    114,595Operating income
    
    
    11,940
    
    
    
    18,136
    
    
    
    24,650
    
    
    
    52,234Loss on early extinguishment of debt
    
    
    (349
    )
    
    
    -
    
    
    
    -
    
    
    
    -Net (loss) income
    
    
    (4,743
    )
    
    
    534
    
    
    
    5,508
    
    
    
    21,864Net (loss) income available to common
stockholders
    
    
    (9,294
    )
    
    
    (5,919
    )
    
    
    3,719
    
    
    
    20,075Basic net (loss) income available to common
stockholders per share
    
    $
    (0.19
    )
    
    $
    (0.11
    )
    
    $
    0.07
    
    
    $
    0.35Diluted net (loss) income available to common
stockholders per share
    
    $
    (0.19
    )
    
    $
    (0.11
    )
    
    $
    0.07
    
    
    $
    0.35Year Ended December 31, 2009:Operating revenues
    
    $
    61,354
    
    
    $
    65,057
    
    
    $
    66,446
    
    
    $
    77,517Operating income
    
    
    4,766
    
    
    
    8,998
    
    
    
    10,630
    
    
    
    18,685Loss on early extinguishment of debt
    
    
    (8,352
    )
    
    
    -
    
    
    
    -
    
    
    
    -Net loss
    
    
    (8,920
    )
    
    
    (6,648
    )
    
    
    (5,520
    )
    
    
    (1,959
    )Net loss available to common
stockholders
    
    
    (12,970
    )
    
    
    (10,699
    )
    
    
    (9,988
    )
    
    
    (6,509
    )Basic net loss available to common
stockholders per share
    
    $
    (0.27
    )
    
    $
    (0.22
    )
    
    $
    (0.21
    )
    
    $
    (0.13
    )Diluted net loss available to common
stockholders per share
    
    $
    (0.27
    )
    
    $
    (0.22
    )
    
    $
    (0.21
    )
    
    $
    (0.13
    )
  104




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  Report on Internal Control Over Financial Reporting
  
 Item 9B. Other Information.
  105




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
  
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  106




---



##### Table of Contents



Equity Compensation Plan Information
  Equity
Compensation Plan InformationNumber of securities remainingNumber of securities to

    
    Weighted-average

    
    available for future issuancebe issued upon exercise

    
    exercise price of

    
    under equity compensationof outstanding options,

    
    outstanding options,

    
    plans (excluding securitiesPlan Category
    
    warrants and rights

    
    warrants and rights

    
    reflected in 1st column)(in thousands)

    
    
    
    
    
    (in thousands)Common Stock:Equity compensation
plans approved by
security holders (1) (2)
    
    
    1,005
    
    
    $
    7.51
    
    
    
    7,394Equity compensation
plans not approved
by security holders
    
    
    -
    
    
    $
    -
    
    
    
    -Total
    
    
    1,005
    
    
    
    
    
    
    
    7,394Class A Common Stock:Equity compensation
plans approved by
security holders (1)
    
    
    -
    
    
    $
    -
    
    
    
    1,000Equity compensation
plans not approved
by security holders
    
    
    -
    
    
    $
    -
    
    
    
    -Total
    
    
    -
    
    
    
    
    
    
    
    1,000
 (1)
    Under our 2007 Long-Term Incentive Plan, we are authorized to issue new awards of
options to acquire up to 4,995,250 shares of either our common stock or our Class A common
stock; however, of this amount, we can not grant options to acquire in excess of 1,000,000
shares of our Class A common stock. For purposes of this disclosure, we have assumed the
issuance of new awards of options to acquire 3,995,250 shares of our common stock and
1,000,000 shares of our Class A common stock.(2)
    Includes 1,629,034 shares of our common stock that are issuable under our Capital
Accumulation Plan, which is intended to meet the requirements of Section 401(k) of the
Internal Revenue Code, and 770,000 shares of our common stock that are issuable under our
Directors Restricted Stock Plan. 107




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accountant Fees and Services.
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules.
 (a)
    
    List of Financial Statements and Financial Statement Schedules.(1)
    
    Financial Statements.See Part II, Item 8 for the index of financial statements.(2)
    
    Financial statement schedules.
    (b) Exhibits.
 3.1
    
    Restated Articles of Incorporation of Gray Television, Inc. (incorporated by
reference to Exhibit 3.1 to our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009)3.2
    
    Bylaws of Gray Television, Inc. (incorporated by reference to Exhibit 3.2 to our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)4.1
    
    Exhibits 3.1 and 3.2 hereof (incorporated by reference herein) contain certain
provisions defining the rights of holders of our common stock, Class A common stock and
preferred stock4.2
    
    Indenture, dated April 29, 2010, by and among Gray Television, Inc., the
guarantors signatory thereto and U.S. Bank National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with
the Securities and Exchange Commission on April 30, 2010)
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4.3
    
    Form of 10.5% Senior Secured Second Lien Note due 2015 (incorporated by reference
to Exhibit B to Exhibit 4.1 to our Current Report on Form 8-K filed with the Securities
and Exchange Commission on April 30, 2010)10.1
    
    Director Restricted Stock Plan (incorporated by reference to Exhibit 10.12 to our
Annual Report on Form 10-K for the fiscal year ended December 31, 2002)*10.2
    
    Credit Agreement, dated as of March 19, 2007, by and among Gray Television, Inc.,
as Borrower, the Lenders referred to therein, as Lenders, Wachovia Bank, National
Association, as Administrative Agent for the Lenders, Bank of America, N. A., as
Syndication Agent, Goldman Sachs Credit Partners L.P., Deutsche Bank Trust Company
Americas and Bank of Scotland, each as a Documentation Agent, Wachovia Capital Markets,
LLC, as Sole Lead Arranger and Wachovia Capital Markets, LLC, Banc of America Securities
LLC and Goldman Sachs Credit Partners L.P. as Joint Bookrunners (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2007)10.3
    
    First Amendment to the Credit Agreement by and among Gray Television, Inc., certain
subsidiaries thereof, the Lenders party thereto pursuant to an authorization and Wachovia
Bank, National Association, as administrative agent, dated as of March 31, 2009
(incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2008)10.4
    
    Second Amendment to Credit Agreement by and among Gray Television, Inc., certain
subsidiaries thereof, the Lenders party thereto and Wells Fargo Bank, N.A.,
successor-by-merger to Wachovia Bank, National Association, as administrative agent,
dated as of March 31, 2010 (incorporated by reference to Exhibit 99.1 to our Current
Report on Form 8-K filed with the Securities and Exchange Commission on April 12, 2010)10.5
    
    Collateral Agreement, dated as of March 19, 2007, by and among Gray Television,
Inc. and certain of its Subsidiaries as Grantors, in favor of Wachovia Bank, National
Association, as Administrative Agent (incorporated by reference to Exhibit 10.2 to our
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007)10.6
    
    Guaranty Agreement, dated as of March 19, 2007, by and among certain Subsidiaries
of Gray Television, Inc., as Guarantors, in favor of Wachovia Bank, National Association,
as Administrative Agent (incorporated by reference to Exhibit 10.3 to our Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2007)10.7
    
    2007 Long Term Incentive Plan (incorporated by reference to Appendix A to our
definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange
Commission on April 3, 2007)*10.8
    
    Description of 2010 Annual Incentive Plan Structure*10.9
    
    Registration Rights Agreement, dated April 29, 2010, by and among Gray Television,
Inc., the guarantors party thereto, Bank of America Securities LLC, Wells Fargo
Securities, LLC and Citadel Securities LLC (incorporated by reference to Exhibit 10.1 to
our Current Report on Form 8-K filed with the Securities and Exchange Commission on April
30, 2010)
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##### Table of Contents



21.1
    
    Subsidiaries of the Registrant23.1
    
    Consent of McGladrey & Pullen, LLP31.1
    
    Rule 13a-14(a) Certificate of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certificate of Chief Financial Officer32.1
    
    Section 1350 Certificate of Chief Executive Officer32.2
    
    Section 1350 Certificate of Chief Financial Officer
 * Management contract or compensatory plan or arrangement (c)
    
    Financial Statement Schedules The response to this section is submitted as a part of Item
15 (a) (1) and (2).
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##### Table of Contents



SIGNATURES
  Gray Television, Inc.Date:    March 11, 2011
    By:
    /s/ Hilton H. Howell, Jr.Hilton H. Howell, Jr.,Vice-Chairman and Chief Executive Officer  Date:   March 11, 2011
    
    By:
    
    /s/ William E. Mayher, IIIWilliam E. Mayher, III,Chairman of the BoardDate:   March 11, 2011
    
    By:
    
    /s/ J. Mack RobinsonJ. Mack Robinson, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ Richard L. BogerRichard L. Boger, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ RAY M. DEAVERRay M. Deaver, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ T. L. ELDERT. L. Elder, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ Hilton H. Howell, Jr.Hilton H. Howell, Jr., Vice-Chairman and

Chief Executive Officer, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ Zell B. MillerZell B. Miller, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ Howell W. NewtonHowell W. Newton, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ Hugh E. NortonHugh E. Norton, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ Robert S. Prather, Jr.Robert S. Prather, Jr., Director
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##### Table of Contents



Date:   March 11, 2011
    
    By:
    
    /s/ Harriett J. RobinsonHarriett J. Robinson, DirectorDate:   March 11, 2011
    
    By:
    
    /s/ James C. RyanJames C. Ryan,Sr. Vice President & Chief Financial OfficerDate:   March 11, 2011
    
    By:
    
    /s/ Jackson S. Cowart, IVJackson S. Cowart, IV,Chief Accounting Officer
 112




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##### Table of Contents



GRAY TELEVISION, INC.
 SCHEDULE II   VALUATION AND QUALIFYING ACCOUNTS
 Col. A
    
    Col. B

    
    Col. C
    
    
    Col. D

    
    Col. EAdditions(1)

    
    (2)Balance at

    
    Charged to

    
    Charged to

    
    
    
    
    
    Balance atBeginning

    
    Costs and

    
    Other

    
    Deductions

    
    End ofDescription
    
    of Period

    
    Expenses

    
    Accounts

    
    (a)

    
    PeriodYear
Ended December 31, 2010:Allowance for doubtful
accounts
    
    $
    1,092
    
    
    
    746
    
    
    $
    -
    
    
    $
    (787
    )
    
    $
    1,051Valuation allowance for
deferred
tax assets
    
    $
    6,462
    
    
    $
    (922
    )
    
    $
    -
    
    
    $
    (669
    )
    
    $
    4,871Year
Ended December 31, 2009:Allowance for doubtful
accounts
    
    $
    1,543
    
    
    $
    925
    
    
    $
    -
    
    
    $
    (1,376
    )
    
    $
    1,092Valuation allowance for
deferred
tax assets
    
    $
    4,909
    
    
    $
    1,565
    
    
    $
    -
    
    
    $
    (12
    )
    
    $
    6,462Year
Ended December 31, 2008:Allowance for doubtful
accounts
    
    $
    1,303
    
    
    $
    1,790
    
    
    $
    -
    
    
    $
    (1,550
    )
    
    $
    1,543Valuation allowance for
deferred
tax assets
    
    $
    5,215
    
    
    $
    1,247
    
    
    $
    -
    
    
    $
    (1,553
    )
    
    $
    4,909
 
 (a)
    Amounts for allowance for doubtful accounts represent write-offs of receivable
balances not considered collectible. Amounts for valuation allowance for deferred tax
assets in 2009 and 2008, represent the expiration of certain net operating loss
carryforwards. In 2010 and 2008, the valuation allowance for deferred tax assets also
included deductions for the reversal of a state tax valuation allowance due to changes in
our filing structure. 113




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EXHIBIT INDEX
 ExhibitNumber
    

Description10.8
    
    
    Description of 2010 Annual Incentive Plan Structure21.1
    
    
    Subsidiaries of the Registrant23.1
    
    
    Consent of McGladrey & Pullen, LLP31.1
    
    
    Rule 13 a  14 (a) Certificate of the Chief Executive Officer31.2
    
    
    Rule 13 a  14 (a) Certificate of the Chief Financial Officer32.1
    
    
    Section 1350 Certificate of the Chief Executive Officer32.2
    
    
    Section 1350 Certificate of the Chief Financial Officer
 114