Gray Communications Systems

Third Quarter Financial Highlights

Gray Communications Systems, Inc.

Financial Highlights

(in thousands, except per share data)

Three Months Ended September 30,***

Historical

Pro Forma*

1999

1998

% Change

1999

1998

% Change

OPERATING REVENUES

Broadcasting

$ 21,554

$ 22,347

(4)%

$ 21,554

$ 22,560

(4)%

Publishing

9,686

7,378

31 %

9,686

8,573

13 %

Paging

2,290

2,120

8 %

2,290

2,120

8 %

TOTAL OPERATING REVENUES

33,530

31,845

5 %

33,530

33,253

1 %

EXPENSES

Broadcasting

13,846

13,447

3 %

13,846

13,778

0 %

Publishing

7,260

6,023

21 %

7,260

6,947

5 %

Paging

1,567

1,499

5 %

1,567

1,499

5 %

Corporate and administrative

870

811

7 %

870

811

7 %

Depreciation and amortization

5,697

5,045

13 %

5,697

5,681

0 %

TOTAL EXPENSES

29,240

26,825

9 %

29,240

28,716

2 %

4,290

5,020

(15)%

4,290

4,537

(5)%

Gain on exchange of television station

-0-

72,646

NA

-0-

-0-

NA

Valuation adjustment of goodwill and other assets

-0-

(2,074)

NA

-0-

(2,074)

NA

Miscellaneous income (expense)

104

(35)

NA

104

(8)

NA

4,394

75,557

(94)%

4,394

2,455

79 %

Interest expense

7,116

6,625

7 %

7,116

7,832

(9)%

INCOME (LOSS) BEFORE INCOME TAXES

(2,722)

68,932

(104)%

(2,722)

(5,377)

(49)%

Income tax expense (benefit)

(755)

27,102

(103)%

(755)

(1,795)

(58)%

NET INCOME (LOSS)

(1,967)

41,830

(105)%

(1,967)

(3,582)

(45)%

Preferred dividends

253

346

(27)%

253

346

(27)%

NET INCOME ( LOSS) AVAILABLE

TO COMMON STOCKHOLDERS

$ (2,220)

$ 41,484

(105)%

$ (2,220)

$ (3,928)

(43)%

Media Cash Flow**:

Broadcasting

$ 7,835

$ 9,088

(14)%

$ 7,835

$ 8,998

(13)%

Publishing

2,443

1,375

78 %

2,443

1,647

48 %

Paging

728

629

16 %

728

629

16 %

Consolidated

$ 11,006

$ 11,092

(1)%

$ 11,006

$ 11,274

(2)%

Media Cash Flow** margins:

Broadcasting

36 %

41 %

36 %

40 %

Publishing

25 %

19 %

25 %

19 %

Paging

32 %

30 %

32 %

30 %

Consolidated

33 %

35 %

33 %

34 %

Income (loss) per share available

to common stockholders:

Basic

$ (0.19)

$ 3.48

$ (0.19)

$ (0.33)

Diluted

$ (0.19)

$ 3.31

$ (0.19)

$ (0.33)

Weighted average shares outstanding:

Basic

11,979

11,931

0 %

11,979

11,931

0 %

Diluted

11,979

12,526

(4)%

11,979

11,931

0 %

Gray Communications Systems, Inc.
Financial Highlights
(in thousands, except per share data)
				Nine Months Ended September 30,***
				Historical			Pro Forma*
				1999	1998	% Change	1999	1998	% Change
OPERATING REVENUES
	Broadcasting			$ 65,860	$ 64,548	2 %	$ 65,860	$ 69,319	(5)%
	Publishing			27,244	21,295	28 %	27,926	24,791	13 %
	Paging			6,847	6,045	13 %	6,847	6,045	13 %
			TOTAL OPERATING REVENUES	99,951	91,888	9 %	100,633	100,155	0 %

EXPENSES
	Broadcasting			40,519	38,227	6 %	40,519	40,618	(0)%
	Publishing			20,970	17,464	20 %	21,556	20,149	7 %
	Paging			4,805	4,082	18 %	4,805	4,082	18 %
	Corporate and administrative			2,557	2,128	20 %	2,557	2,128	20 %
	Depreciation and amortization			16,816	12,888	30 %	16,980	16,200	5 %
			TOTAL EXPENSES	85,667	74,789	15 %	86,417	83,177	4 %
				14,284	17,099	(16)%	14,216	16,978	(16)%
Gain on exchange of television station				-0-	72,646	NA	-0-	-0-	NA
Valuation adjustment of goodwill and other assets				-0-	(2,074)	NA	-0-	(2,074)	NA
Miscellaneous income (expense)				560	(349)	NA	572	(284)	NA
				14,844	87,322	(83)%	14,788	14,620	1 %
Interest expense				20,891	18,592	12 %	21,112	23,498	(10)%
			INCOME (LOSS) BEFORE INCOME TAXES	(6,047)	68,730	(109)%	(6,324)	(8,878)	(29)%
Income tax expense (benefit)				(1,439)	27,546	(105)%	(1,533)	(2,473)	(38)%
			NET INCOME (LOSS)	(4,608)	41,184	(111)%	(4,791)	(6,405)	(25)%
Preferred dividends				758	1,064	(29)%	758	1,064	(29)%
			NET INCOME (LOSS) AVAILABLE
			TO COMMON STOCKHOLDERS	$ (5,366)	$ 40,120	(113)%	$ (5,549)	$ (7,469)	(26)%

Media Cash Flow**:
	Broadcasting			$ 25,716	$ 26,634	(3)%	$ 25,716	$ 29,035	(11)%
	Publishing			6,344	3,888	63 %	6,439	4,700	37 %
	Paging			2,064	1,986	4 %	2,064	1,986	4 %
	Consolidated			$ 34,124	$ 32,508	5 %	$ 34,219	$ 35,721	(4)%

Media Cash Flow** margins:
	Broadcasting			39 %	41 %		39 %	42 %
	Publishing			23 %	18 %		23 %	19 %
	Paging			30 %	33 %		30 %	33 %
	Consolidated			34 %	35 %		34 %	36 %

Income (loss) per share available
	to common stockholders:
		Basic		$ (0.45)	$ 3.37		$ (0.46)	$ (0.63)
		Diluted		$ (0.45)	$ 3.23		$ (0.46)	$ (0.63)

Weighted average shares outstanding:
		Basic		11,967	11,910	0 %	11,967	11,910	0 %
		Diluted		11,967	12,431	(4)%	11,967	11,910	0 %

The following tables exclude political revenue from Gray's historical and pro forma financial information. These tables present certain financial results of Gray without the impact of cyclical political revenue. Excluding the impact of the political revenue, Gray's revenue and Media Cash Flow** increased over the prior year on a historical and pro forma basis

Gray Communications Systems, Inc.
Financial Highlights Excluding Political Revenue
(in thousands)

			Three Months Ended September 30,
			Historical (Excluding Political Revenues)			Pro Forma* (Excluding Political Revenues)
			1999	1998	% Change	1999	1998	% Change
OPERATING REVENUES - excluding political revenue
	Broadcasting - excluding political revenue		$ 21,519	$ 20,065	7 %	$ 21,519	$ 20,620	4 %
	Publishing		9,686	7,378	31 %	9,686	8,573	13 %
	Paging		2,290	2,120	8 %	2,290	2,120	8 %
		TOTAL OPERATING REVENUES - excluding political revenue	$ 33,495	$ 29,563	13 %	$ 33,495	$ 31,313	7 %


Media Cash Flow** - excluding political revenue
	Broadcasting - excluding political revenue		$ 7,800	$ 6,806	15 %	$ 7,800	$ 7,058	11 %
	Publishing		2,443	1,375	78 %	2,443	1,647	48 %
	Paging		728	629	16 %	728	629	16 %
	Consolidated - excluding political revenue		$ 10,971	$ 8,810	25 %	$ 10,971	$ 9,334	18 %

Media Cash Flow** margins: - excluding political revenue
	Broadcasting - excluding political revenue		36 %	34 %		36 %	34 %
	Publishing		25 %	19 %		25 %	19 %
	Paging		32 %	30 %		32 %	30 %
	Consolidated - excluding political revenue		33 %	30 %		33 %	30 %



			Nine Months Ended September 30,
			Historical (Excluding Political Revenues)			Pro Forma* (Excluding Political Revenues)
			1999	1998	% Change	1999	1998	% Change
OPERATING REVENUES - excluding political revenue
	Broadcasting - excluding political revenue		$ 65,636	$ 60,081	9 %	$ 65,636	$ 64,995	1 %
	Publishing		27,244	21,295	28 %	27,926	24,791	13 %
	Paging		6,847	6,045	13 %	6,847	6,045	13 %
		TOTAL OPERATING REVENUES - excluding political revenue	$ 99,727	$ 87,421	14 %	$ 100,409	$ 95,831	5 %


Media Cash Flow** - excluding political revenue
	Broadcasting - excluding political revenue		$ 25,492	$ 22,167	15 %	$ 25,492	$ 24,711	3 %
	Publishing		6,344	3,888	63 %	6,439	4,700	37 %
	Paging		2,064	1,986	4 %	2,064	1,986	4 %
	Consolidated - excluding political revenue		$ 33,900	$ 28,041	21 %	$ 33,995	$ 31,397	8 %

Media Cash Flow** margins: - excluding political revenue
	Broadcasting - excluding political revenue		39 %	37 %		39 %	38 %
	Publishing		23 %	18 %		23 %	19 %
	Paging		30 %	33 %		30 %	33 %
	Consolidated - excluding political revenue		34 %	32 %		34 %	33 %


* Gray Communications Systems, Inc. (the "Company") acquired the assets of The Goshen News on March 1, 1999. The Company also acquired Busse Broadcasting Corporation and disposed of WALB-TV, the NBC affiliate serving Albany, Georgia on July 31, 1998. The results of operations of these acquired businesses have been included in the Company�s historical financial statements since their respective acquisition dates. The pro forma results of operations of these acquired businesses have been included in the Company�s pro forma financial statements since the first day of the respective reporting period. The results of operations of WALB -TV have been excluded from the Company�s pro forma financial statements since the first day of the respective reporting period.
** Media Cash Flow is defined as operating income, plus depreciation, non-cash compensation, amortization (including amortization of program license rights), and corporate overhead, less payments for program license liabilities. The Company has included Media Cash Flow data because such data is commonly used as a measure of performance for media companies and is also used by investors to measure a company�s ability to service debt. Media Cash Flow is not, and should not, be used as an indicator or alternative to operating income, net income or cash flow as reflected in the Company�s consolidated financial statements. Media Cash Flow is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles.
*** Certain items reported for the prior year have been reclassified to conform to the 1999 format.