UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark one)
| | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended |
| | 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:
| Gray Television, Inc. |
| (Exact name of registrant as specified in its charter) |
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
| | | |
| (Address of principal executive offices) | (Zip code) |
| ( |
| (Registrant's telephone number, including area code) |
| Not Applicable |
| (Former name, former address and former fiscal year, if changed since last report.) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each Class | Trading Symbol(s) | Name of each exchange on which registered |
| | | |
| | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | Accelerated filer ☐ |
| Non-accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.
| Common Stock (No Par Value) | Class A Common Stock (No Par Value) | |
| | |
INDEX
GRAY TELEVISION, INC.
| PART I. |
FINANCIAL INFORMATION |
PAGE |
| Item 1. |
Financial Statements |
|
| Condensed consolidated balance sheets (Unaudited) - June 30, 2022 and December 31, 2021 |
3 |
|
| Condensed consolidated statements of operations (Unaudited) - three-months and six-months ended June 30, 2022 and 2021 |
5 |
|
| Condensed consolidated statements of stockholders' equity (Unaudited) - three-months and six-months ended June 30, 2022 and 2021 |
6 |
|
| Condensed consolidated statements of cash flows (Unaudited) - six-months ended June 30, 2022 and 2021 |
7 |
|
| Notes to condensed consolidated financial statements (Unaudited) |
8 |
|
| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
22 |
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
29 |
| Item 4. |
Controls and Procedures |
29 |
| PART II. |
OTHER INFORMATION |
|
| Item 1A. |
Risk Factors |
31 |
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
31 |
| Item 6. |
Exhibits |
32 |
| SIGNATURES |
33 |
| PART I |
FINANCIAL INFORMATION |
| Item 1. |
Financial Statements |
| GRAY TELEVISION, INC. |
|||
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
|||
| (in millions) |
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, less allowance for credit losses of and , respectively | ||||||||
| Current portion of program broadcast rights, net | ||||||||
| Income tax refunds receivable | ||||||||
| Prepaid income taxes | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating leases right of use asset | ||||||||
| Broadcast licenses | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Investments in broadcasting and technology companies | ||||||||
| Other | ||||||||
| Total assets | $ | $ | ||||||
See notes to condensed consolidated financial statements.
| GRAY TELEVISION, INC. |
|||
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
|||
| (in millions, except for share data) |
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Liabilities and stockholders’ equity: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Employee compensation and benefits | ||||||||
| Accrued interest | ||||||||
| Accrued network programming fees | ||||||||
| Other accrued expenses | ||||||||
| Federal and state income taxes | ||||||||
| Current portion of program broadcast obligations | ||||||||
| Deferred revenue | ||||||||
| Dividends payable | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Current portion of long-term debt | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, less current portion and deferred financing costs | ||||||||
| Program broadcast obligations, less current portion | ||||||||
| Deferred income taxes | ||||||||
| Accrued pension costs | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Other | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Series A Perpetual Preferred Stock, par value; cumulative; redeemable; designated shares, issued and outstanding shares at each date and aggregate liquidation value at each date | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, par value; authorized shares, issued shares and shares, respectively, and outstanding shares and shares, respectively | ||||||||
| Class A common stock, par value; authorized shares, issued shares and shares, respectively, and outstanding shares and shares, respectively | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss, net of income tax benefit | ( | ) | ( | ) | ||||
| Treasury stock at cost, common stock, shares and shares, respectively | ( | ) | ( | ) | ||||
| Treasury stock at cost, Class A common stock, shares and shares, respectively | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See notes to condensed consolidated financial statements.
| GRAY TELEVISION, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
| (in millions, except for per share data) |
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenue (less agency commissions): |
||||||||||||||||
| Broadcasting |
$ | $ | $ | $ | ||||||||||||
| Production companies |
||||||||||||||||
| Total revenue (less agency commissions) |
||||||||||||||||
| Operating expenses before depreciation, amortization and gain on disposal of assets, net: |
||||||||||||||||
| Broadcasting |
||||||||||||||||
| Production companies |
||||||||||||||||
| Corporate and administrative |
||||||||||||||||
| Depreciation |
||||||||||||||||
| Amortization of intangible assets |
||||||||||||||||
| Gain on disposal of assets, net |
( |
) | ( |
) | ( |
) | ||||||||||
| Operating expenses |
||||||||||||||||
| Operating income |
||||||||||||||||
| Other expense: |
||||||||||||||||
| Miscellaneous expense, net |
( |
) | ( |
) | ( |
) | ||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income before income taxes |
||||||||||||||||
| Income tax expense |
||||||||||||||||
| Net income |
||||||||||||||||
| Preferred stock dividends |
||||||||||||||||
| Net income attributable to common stockholders |
$ | $ | $ | $ | ||||||||||||
| Basic per share information: |
||||||||||||||||
| Net income attributable to common stockholders |
$ | $ | $ | $ | ||||||||||||
| Weighted-average shares outstanding |
||||||||||||||||
| Diluted per share information: |
||||||||||||||||
| Net income attributable to common stockholders |
$ | $ | $ | $ | ||||||||||||
| Weighted-average shares outstanding |
||||||||||||||||
| Dividends declared per common share |
$ | $ | $ | $ | ||||||||||||
See notes to condensed consolidated financial statements.
| GRAY TELEVISION, INC. |
| CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) |
| (in millions, except for number of shares) |
| Accumulated |
|||||||||||||||||||||||||||||||||||||||||||||
| Class A |
Class A |
Common |
Other |
||||||||||||||||||||||||||||||||||||||||||
| Common Stock |
Common Stock |
Retained |
Treasury Stock |
Treasury Stock |
Comprehensive |
||||||||||||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Earnings |
Shares |
Amount |
Shares |
Amount |
Loss |
Total |
|||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Net income |
- | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
- | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Common stock dividends |
- | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock: |
|||||||||||||||||||||||||||||||||||||||||||||
| 401(k) Plan |
|||||||||||||||||||||||||||||||||||||||||||||
| 2017 Equity and Incentive Compensation Plan: |
|||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||
| Restricted stock unit awards |
( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
- | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Net income |
- | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
- | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Common stock dividends |
- | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock: |
|||||||||||||||||||||||||||||||||||||||||||||
| 401(k) Plan |
|||||||||||||||||||||||||||||||||||||||||||||
| 2017 Equity and Incentive Compensation Plan: |
|||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards |
( |
) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
- | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Balance at December 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Net income |
- | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
- | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Common stock dividends |
- | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock: |
|||||||||||||||||||||||||||||||||||||||||||||
| 401(k) Plan |
|||||||||||||||||||||||||||||||||||||||||||||
| 2017 Equity and Incentive Compensation Plan: |
|||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||
| Restricted stock unit awards |
( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
- | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Net income |
- | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
- | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Common stock dividends |
- | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock: |
|||||||||||||||||||||||||||||||||||||||||||||
| 2017 Equity and Incentive Compensation Plan: |
|||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards |
( |
) | |||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock |
( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
- | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements.
| GRAY TELEVISION, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
| (in millions) |
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of deferred loan costs | ||||||||
| Amortization of restricted stock awards | ||||||||
| Amortization of program broadcast rights | ||||||||
| Payments on program broadcast obligations | ( | ) | ( | ) | ||||
| Common stock contributed to 401(k) plan | ||||||||
| Deferred income taxes | ||||||||
| Gain on disposal of assets, net | ( | ) | ( | ) | ||||
| Other | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Income taxes receivable or prepaid | ( | ) | ( | ) | ||||
| Other current assets | ||||||||
| Accounts payable | ||||||||
| Employee compensation, benefits and pension cost | ( | ) | ||||||
| Accrued network fees and other expenses | ( | ) | ||||||
| Accrued interest | ||||||||
| Income taxes payable | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Investing activities: | ||||||||
| Acquisitions of television businesses and licenses, net of cash acquired | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from asset sales | ||||||||
| Proceeds from Repack reimbursement (Note 1) | ||||||||
| Investment in broadcast, production and technology companies | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Repayments of borrowings on long-term debt | ( | ) | ||||||
| Repurchase of common stock | ( | ) | ||||||
| Payment of common stock dividends | ( | ) | ( | ) | ||||
| Payment of preferred stock dividends | ( | ) | ( | ) | ||||
| Deferred and other loan costs | ( | ) | ||||||
| Payment of taxes related to net share settlement of equity awards | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net (decrease) increase in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
See notes to condensed consolidated financial statements.
GRAY TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated balance sheet of Gray Television, Inc. (and its consolidated subsidiaries, except as the context otherwise provides, “Gray,” the “Company,” “we,” “us,” and “our”) as of December 31, 2021, which was derived from the Company’s audited financial statements as of December 31, 2021, and our accompanying unaudited condensed consolidated financial statements as of June 30, 2022 and for the periods ended June 30, 2022 and 2021, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. We manage our business on the basis of operating segments: broadcasting and production companies. Unless otherwise indicated, all station rank, in-market share and television household data herein are derived from reports prepared by Comscore, Inc. (“Comscore”). While we believe this data to be accurate and reliable, we have not independently verified such data nor have we ascertained the underlying assumptions relied upon therein and cannot guarantee the accuracy or completeness of such data. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). Our financial condition as of, and operating results for the three and six-months ended June 30, 2022, are not necessarily indicative of the financial condition or results that may be expected for any future interim period or for the year ending December 31, 2022.
Overview. We are a multimedia company headquartered in Atlanta, Georgia. We are the nation’s largest owner of top-rated local television stations and digital assets in the United States. Our television stations serve 113 television markets that collectively reach approximately 36 percent of US television households. This portfolio includes
Investments in Broadcasting, Production and Technology Companies. We have investments in several television, production and technology companies. We account for all material investments in which we have significant influence over the investee under the equity method of accounting. Upon initial investment, we record equity method investments at cost. The amounts initially recognized are subsequently adjusted for our appropriate share of the net earnings or losses of the investee. We record any investee losses up to the carrying amount of the investment plus advances and loans made to the investee, and any financial guarantees made on behalf of the investee. We recognize our share in earnings and losses of the investee as miscellaneous (expense) income, net in our consolidated statements of operations. Investments are also increased by contributions made to and decreased by the distributions from the investee. The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired.
Investments in non-public businesses that do not have readily determinable pricing, and for which the Company does not have control or does not exert significant influence, are carried at cost less impairments, if any, plus or minus changes in observable prices for those investments. Gains or losses resulting from changes in the carrying value of these investments are included as miscellaneous (expense) income, net in our consolidated statements of operations. These investments are reported together as a non-current asset on our consolidated balance sheets.
Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our actual results could differ materially from these estimated amounts. Our most significant estimates are our allowance for credit losses in receivables, valuation of goodwill and intangible assets, amortization of program rights and intangible assets, pension costs, income taxes, employee medical insurance claims, useful lives of property and equipment and contingencies.
Earnings Per Share. We compute basic earnings per share by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the relevant period. The weighted-average number of common shares outstanding does not include restricted shares. These shares, although classified as issued and outstanding, are considered contingently returnable until the restrictions lapse and, in accordance with U.S. GAAP, are not included in the basic earnings per share calculation until the shares vest. Diluted earnings per share is computed by including all potentially dilutive common shares, including restricted shares, in the diluted weighted-average shares outstanding calculation, unless their inclusion would be antidilutive.
The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding for the three and six-month periods ended June 30, 2022 and 2021, respectively (in millions):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Weighted-average shares outstanding-basic | ||||||||||||||||
| Common stock equivalents for stock options and restricted shares | ||||||||||||||||
| Weighted-average shares outstanding-diluted | ||||||||||||||||
Accumulated Other Comprehensive Loss. Our accumulated other comprehensive loss balances as of June 30, 2022 and December 31, 2021, consist of adjustments to our pension liability and the related income tax effect. Our comprehensive income for the six-month periods ended June 30, 2022 and 2021 consisted solely of our net income. As of June 30, 2022 and December 31, 2021 the balances were as follows (in millions):
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Accumulated balances of items included in accumulated other comprehensive loss: | ||||||||
| Increase in pension liability | $ | ( | ) | $ | ( | ) | ||
| Income tax benefit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | $ | ( | ) | $ | ( | ) | ||
Property and Equipment. Property and equipment are carried at cost, or in the case of acquired businesses, at fair value. Depreciation is computed principally by the straight-line method. The following table lists the components of property and equipment by major category (dollars in millions):
| Estimated | |||||||||||||
| June 30, | December 31, | Useful Lives | |||||||||||
| 2022 | 2021 | (in years) | |||||||||||
| Property and equipment: | |||||||||||||
| Land | $ | $ | |||||||||||
| Buildings and improvements | to | ||||||||||||
| Equipment | to | ||||||||||||
| Construction in progress | |||||||||||||
| Accumulated depreciation | ( | ) | ( | ) | |||||||||
| Total property and equipment, net | $ | $ | |||||||||||
Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. The cost of any assets divested, sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is reflected in income or expense for the period.
In April 2017, the Federal Communications Commission (“FCC”) began the process of requiring certain television stations to change channels and/or modify their transmission facilities (“Repack”). The majority of our costs associated with Repack qualify for capitalization, rather than expense. Upon receipt of funds reimbursing us for our Repack costs, we record those proceeds as a component of our (gain) loss on disposal of assets, net.
The following tables provide additional information related to gain on disposal of assets, net included in our condensed consolidated statements of operations and purchases of property and equipment included in our condensed consolidated statements of cash flows (in millions):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Gain on disposal of assets, net: | ||||||||||||||||
| Proceeds from sale of assets | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Proceeds from FCC - Repack | ( | ) | ( | ) | ( | ) | ||||||||||
| Net book value of assets disposed | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Purchase of property and equipment: | ||||||||||||||||
| Recurring purchases - operations | $ | $ | ||||||||||||||
| Assembly Atlanta development | ||||||||||||||||
| Repack | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
Accounts Receivable and Allowance for Credit Losses. We record accounts receivable from sales and service transactions in our condensed consolidated balance sheets at amortized cost adjusted for any write-offs and net of allowance for credit losses. We are exposed to credit risk primarily through sales of broadcast and digital advertising with a variety of direct and agency-based advertising customers, retransmission consent agreements with multichannel video program distributors and program production sales and services.
Our allowance for credit losses is an estimate of expected losses over the remaining contractual life of our receivables based on an ongoing analysis of collectability, historical collection experience, current economic and industry conditions and reasonable and supportable forecasts. The allowance is calculated using a historical loss rate applied to the current aging analysis. We may also apply additional allowance when warranted by specific facts and circumstances. We generally write off account receivable balances when the customer files for bankruptcy or when all commonly used methods of collection have been exhausted.
The following table provides a roll-forward of the allowance for credit losses. The allowance is deducted from the amortized cost basis of accounts receivable in our condensed consolidated balance sheets (in millions):
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Provision for credit losses | ( | ) | ||||||
| Amounts written off | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
Recent Accounting Pronouncements. In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848). In January 2021, the FASB issued an amendment to ASU 2020-04, ASU 2021-01, Reference Rate Reform (Topic 848), in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”). The amendments in this ASU apply to all entities that elect to apply the optional guidance in Topic 848. An entity may elect to apply the amendments in this ASU on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final standard, up to the date that financial statements are available to be issued. We are currently evaluating the applicability of this guidance.
In addition to the accounting standard described above, once implemented, certain amounts in our disclosures of revenues have been reclassified to conform to the current presentation. Beginning in 2022, we present our “Core” advertising revenue. In prior periods, we had presented separate line items of local advertising revenue and national advertising revenue and these amounts are now combined into Core advertising revenue.
2. Revenue
Revenue Recognition. We recognize revenue when we have completed a specified service and effectively transferred the control of that service to a customer in return for an amount of consideration we expect to be entitled to receive. The amount of revenue recognized is determined by the amount of consideration specified in a contract with our customers. We have elected to exclude taxes assessed by a governmental authority on transactions with our customers from our revenue. Any unremitted balance is included in current liabilities on our balance sheets.
We record a deposit liability for cash deposits received from our customers that are to be applied as payment once the performance obligation arises and is satisfied. These deposits are recorded as deposit liabilities on our balance sheets. When we invoice our customers for completed performance obligations, we are unconditionally entitled to receive payment of the invoiced amounts. Therefore, we record invoiced amounts in accounts receivable on our balance sheets. We generally require amounts payable under advertising contracts with our political advertising customers to be paid for in advance. We record the receipt of this cash as a deposit liability. Once the advertisement has been broadcast, the revenue is earned, and we record the revenue and reduce the balance in this deposit liability account. We recorded $
Disaggregation of Revenue. Revenue from our production companies segment is generated through our direct sales channel. Revenue from our broadcast and other segment is generated through both our direct and advertising agency intermediary sales channels. The following table presents our revenue from contracts with customers disaggregated by type of service and sales channel (in millions):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Market and service type: | ||||||||||||||||
| Broadcast Advertising: | ||||||||||||||||
| Core advertising | $ | $ | $ | $ | ||||||||||||
| Political | ||||||||||||||||