UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission file numbers 33-84656 and 333-17773.
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Gray Communications Systems, Inc.
Capital Accumulation Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Gray Communications Systems, Inc.
126 N. Washington Street
Albany, Georgia 31701
<PAGE>
GRAY COMMUNICATIONS SYSTEMS, INC.
FORM 11-K
REQUIRED INFORMATION
(a) Financial Statements. Filed as part of this Report on form
11-K are the financial statements and the schedules thereto of
the Gray Communications Systems, Inc. Capital Accumulation
Plan as required by Form 11-K, together with the report
thereon of Ernst & Young LLP, independent auditors, dated June
18, 1998.
(b) Exhibits. A consent of Ernst & Young LLP dated June 24, 1998
is being filed as an exhibit to this report.
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Plan Administrator has duly caused this annual report to be signed
on its behalf by the undersigned hereunto duly authorized.
GRAY COMMUNICATIONS SYSTEMS, INC.
CAPITAL ACCUMULATION PLAN
Date: June 26, 1998 By: /S/ Frederick J. Erickson
--------------------------
Frederick J. Erickson
Interim Chief Financial Officer
Plan Administrator
<PAGE>
GRAY COMMUNICATIONS SYSTEMS, INC.
FORM 11-K
EXHIBIT INDEX
Exhibit Page
Number Exhibit Number
- ------ ------- ------
23 Consent of Ernst & Young LLP to 13
incorporation of its report by
reference in Gray Communications
Systems, Inc. Registration Statement
on Form S-8, No. 33-84656 and No. 333-17773.
<PAGE>
Audited Financial Statements and Schedules
Gray Communications Systems, Inc.
Capital Accumulation Plan
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Audited Financial Statements and Schedules
Years ended December 31, 1997 and 1996
Contents
Report of Independent Auditors................................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits...............................2
Statements of Changes in Net Assets Available for Benefits....................3
Notes to Financial Statements.................................................4
Supplemental Schedules
Line 27a - Schedule of Assets Held for Investment Purposes...................10
Line 27d - Schedule of Reportable Transactions...............................11
<PAGE>
Report of Independent Auditors
Benefit Committee
Gray Communications Systems, Inc.
We have audited the accompanying statements of net assets available for benefits
of the Gray Communications Systems, Inc. Capital Accumulation Plan as of
December 31, 1997 and 1996, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1997 and 1996 and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of Assets Held for Investment Purposes as of December 31, 1997 and Reportable
Transactions for the year ended December 31, 1997, are presented for purposes of
complying with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Ernst & Young LLP
Columbus, Georgia
June 18, 1998
1
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
<S> <C>
December 31
1997 1996
-----------------------------------------
Assets
Investments (Notes 2 and 4):
Collective trust mutual funds $ 2,268,935 $ 1,313,528
Sponsor's common stock fund 1,851,627 894,600
Participant loans receivable 37,151 10,343
-----------------------------------------
4,157,713 2,218,471
Sponsor contributions receivable 33,392 20,395
Participant contributions receivable 80,673 46,666
-----------------------------------------
114,065 67,061
-----------------------------------------
Net assets available for benefits $ 4,271,778 $ 2,285,532
=========================================
</TABLE>
See accompanying notes.
2
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Statements of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
<S> <C>
Year ended December 31
1997 1996
-------------------------------------------
Additions
Participant contributions $ 1,020,712 $ 675,985
Sponsor contributions 419,546 263,356
Rollover contributions 117,556 333,704
Investment income:
Interest and dividend income 5,506 3,620
Net realized and unrealized appreciation of
investments 800,118 129,692
---------------------- -------------------
805,624 133,312
---------------------- -------------------
Total additions 2,363,438 1,406,357
Deductions
Withdrawals by participants (357,765) (212,127)
Administrative and other expenses (19,427) (11,363)
---------------------- -------------------
Total deductions (377,192) (223,490)
---------------------- -------------------
Net increase in assets available for benefits 1,986,246 1,182,867
Net assets available for benefits at
beginning of period 2,285,532 1,102,665
---------------------- -------------------
Net assets available for benefits at end of period $ 4,271,778 $ 2,285,532
===========================================
</TABLE>
See accompanying notes.
3
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements
December 31, 1997
1. Description of the Plan
The following brief description of the Gray Communications Systems, Inc. Capital
Accumulation Plan (the "Plan") is provided for general information purposes
only. Participants should refer to the Plan Document for more complete
information.
The Plan was established effective October 1, 1994 for the benefit of eligible
employees of Gray Communications Systems, Inc., and of its subsidiaries and
affiliates that subsequently adopt the Plan.
General
The Plan is a voluntary defined contribution plan for salaried and non-salaried
employees of Gray Communications Systems, Inc. and its subsidiaries (the
"Sponsor") who have completed one eligibility year of service as defined in the
Plan document. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
While the Sponsor has not expressed any intent to do so, the Benefit Committee
retains the right to terminate the Plan at any time, subject to the provisions
of ERISA. In the event a decision is made by the Benefit Committee to terminate
the Plan, all participants shall receive full distribution of the balance in
their account.
Trust Agreement
Assets of the Plan are held for safekeeping and investment by INVESCO Trust
Company (the "Trustee") as part of a trust agreement between the Sponsor and the
Trustee.
Contributions
Each active Plan participant may make contributions up to a maximum of 16% of
their compensation on a before-tax basis and up to a maximum of 16% on an
after-tax basis, as long as the sum of the before-tax and after-tax percentages
does not exceed 16%. Participant contributions made on a before-tax basis under
Section 401(k) of the Internal Revenue Code (the "Code") can not exceed the
elective contribution limit of $9,500 during the years ended 1997 and 1996,
respectively. Contributions by highly compensated employees are subject to
additional restrictions.
The Sponsor shall contribute to the Plan a percentage, as determined by a
declaration of its Board of Directors before the beginning of any Plan year, of
the eligible contributions of plan participants not to exceed 6% of eligible
compensation as defined in the Plan document. The matching percentage was 50%
for the years ended December 31, 1997 and 1996, respectively. The Sponsor's
matching contributions can be made either in shares of Gray Communications
Systems, Inc. Class B common stock or in cash. Any forfeitures of Sponsor
contributions are used to reduce future Sponsor contributions. Forfeitures of
nonvested amounts were approximately $33,200 and $32,400 for the years ended
December 31, 1997 and 1996, respectively.
4
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Vesting
Participants are fully vested with regard to their contributions. Participants
vest in the Sponsor's contributions after completing five years of service, as
defined in the Plan document.
Withdrawals
A participant may withdraw all or part of their after-tax contributions for any
reason, subject to the suspension of such participant's rights to make after tax
contributions for six months.
Hardship withdrawals may be available as defined by the Plan document. A
participant making a hardship withdrawal is ineligible to contribute to the Plan
for the next twelve months from the date of receipt of the withdrawal and is
prohibited from making any elective or employee contributions to all other plans
of the Sponsor, including, but not limited to, any stock option, stock purchase
or similar plan maintained by the Sponsor.
Distributions
A participant, following termination of employment, can elect to have Plan
benefits paid in a single lump-sum distribution, in installments or in a
combination of the two methods.
Approximately $74,500 and $20,400 of the net assets available for benefits at
December 31, 1997 and 1996, respectively, were allocated to the accounts of
persons who had withdrawn from participation in the Plan, but had not been paid.
Such amounts are recorded as benefits payable for purposes of the Plan's Form
5500.
Loans
The Plan provides for participant loans at rates of interest established by the
Sponsor's Benefit Committee. Such loans are limited as defined by the Plan
document.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared based on the accrual
method of accounting with investments carried at fair values as described below.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
5
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Investments
The collective trust mutual funds are valued at their redemption prices (fair
values) as established by the Trustee. Generally, the fair values are based on
national stock exchange closing prices or other published sources. Investments
traded on a national securities exchange are valued at the last reported sales
price on the last business day of the Plan year. Securities traded in the
over-the-counter market are valued at the last reported sales price on the last
business day of the Plan year.
Purchases and sales of securities are reflected on the trade dates. Dividend
income is recorded on the ex-dividend date. Income from other investments is
recorded as earned.
Administrative Expenses
All administrative and investment expenses, except for fund management fees, are
paid by the Sponsor. Administrative and investment expenses paid by the Sponsor
were approximately $13,600 and $13,700 for the years ended December 31, 1997 and
1996, respectively.
3. Income Tax Status
The Internal Revenue Service ruled on October 25, 1995, that the Plan qualifies
under Section 401(a) and 401(k) of the Internal Revenue Code ("IRC") and,
therefore, the related trust is not subject to tax under present income tax law.
The Plan is required to operate in conformity with Section 401(a) of the Code to
maintain its qualification. Management of the Plan is not aware of any course of
action or series of events that have occurred that might adversely affect the
Plan's qualified status.
4. Net Assets Available for Benefits
Participant contributions may be invested in collective investment trust mutual
funds offered by the Trustee or in a fund invested primarily in the Sponsor's
Class A and Class B common stock. Descriptions of the various funds are as
follows: (a) Principal Protection Fund, which is 80% invested in short term
money market instruments, intermediate government and corporate bond funds, and
20% in common stocks; (b) Intermediate Return Fund, which is 40% invested in
short term money market instruments, 20% in intermediate government and
corporate bond funds, and 40% in common stock funds; (c) Growth and Income Fund,
which is 20% invested in short term money market instruments, 20% in
intermediate government and corporate bond funds and 60% in common stock funds;
(d) Maximum Appreciation Fund, which is 20% invested in short term money market
instruments and intermediate government and corporate bond funds and 80%
invested in common stock funds; and/or (e) Gray Communications Systems, Inc.
Common Stock Fund, which is invested primarily in Gray Communications Systems,
Inc. Class A and Class B common stock. Participants elect the percentage
invested in each fund in multiples of 10%. Contributions to the Gray
Communications Systems, Inc. Common Stock Fund are temporarily invested in a
Retirement Trust Liquid Asset Fund until used to purchase Gray Communications
Systems, Inc. common stock. Participants cannot elect to participate in the
Retirement Trust Liquid Asset Fund.
6
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
4. Net Assets Available for Benefits (continued)
The following represents the net assets available for benefits, by fund, as
of December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Gray
Principal Intermediate Growth and Maximum Communications
Protection Return Income Appreciation Common Stock
Fund Fund Fund Fund (Class A)
-------------------------------------------------------------------
Investments:
INVESCO Trust Company
collective trust mutual
funds:
Money market $ -0- $ -0- $ -0- $ -0- $ -0-
funds
Equity funds 150,571 291,425 817,765 1,004,668 -0-
Common Stock
of Sponsor -0- -0- -0- -0- 1,213,020
Participant
notes -0- -0- -0- -0- -0-
receivable
-------------------------------------------------------------------
150,571 291,425 817,765 1,004,668 1,213,020
Sponsor
contributions -0- -0- -0- -0- -0-
receivable
Participant
contributions 4,462 8,187 24,109 31,492 -0-
receivable
===================================================================
$155,033 $ 299,612 $ 841,874 $ 1,036,160 $ 1,213,020
===================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Gray
Communications Participant Retirement
Common Stock Loans Trust Liquid
(Class B) Receivable Assets Total
-----------------------------------------------------
Investments:
INVESCO Trust Company
collective trust mutual
funds:
Money market $ -0- $ - 0- $ 4,506 $ 4,506
funds
Equity funds -0- -0- -0- 2,264,429
Common Stock
of Sponsor 638,607 -0- -0- 1,851,627
Participant
notes -0- 37,151 -0- 37,151
receivable
-----------------------------------------------------
638,607 37,151 4,506 4,157,713
Sponsor
contributions 33,392 -0- -0- 33,392
receivable
Participant
contributions 12,423 -0- -0- 80,673
receivable
=====================================================
$ 684,422 $37,151 $ 4,506 $4,271,778
=====================================================
</TABLE>
The changes in net assets available for benefits by fund for the year ended
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Gray
Principal Intermediate Growth and Maximum Communications
Protection Return Income Appreciation Common Stock
Fund Fund Fund Fund (Class A)
-------------------------------------------------------------------
Contributions $ 44,500 $ 89,551 $ 289,011 $ 355,280 $ -0-
invested
Contributions 4,462 8,187 24,109 31,492 -0-
receivable
Rollover from 8,238 6,414 27,510 50,735 -0-
other plans
Interest and
dividend 106 204 494 493 -0-
income
Net realized
and
unrealized
appreciation 19,880 35,546 109,647 147,813 345,916
of
investments
Withdraws paid
to (92,494) (25,360) (52,766) (72,508) (97,891)
participants
Participant
loans/ (4,310) (4,220) (13,944) (9,749) (3,513)
repayments
(net)
Administrative
and other (1,254) (2,424) (6,399) (7,585) (581)
expenses
Interfund 1,276 (1,927) 13,012 12,702 43,179
transfers
-------------------------------------------------------------------
$(19,596) $105,971 $390,674 $ 508,673 $287,110
===================================================================
Active
participants
at December
31, 1997 101 168 340 345 492
===================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Gray
Communications Participant Retirement
Common Stock Loans Trust Liquid
(Class B) Receivable Assets Total
----------------------------------------------------
Contributions $ 493,458 $ -0- $54,393 $1,326,193
invested
Contributions 45,815 -0- -0- 114,065
receivable
Rollover from 3,750 -0- 20,909 117,556
other plans
Interest and
dividend -0- -0- 4,209 5,506
income
Net realized
and
unrealized
appreciation 141,316 -0- -0- 800,118
of
investments
Withdraws paid
to (10,675) (6,376) 305 (357,765)
participants
Participant
loans/ -0- 33,439 2,297 -0-
repayments
(net)
Administrative
and other (549) -0- (635) (19,427)
expenses
Interfund 11,307 (255) (79,294) -0-
transfers
----------------------------------------------------
$684,422 $26,808 $2,184 $1,986,246
====================================================
Active
participants
at December
31, 1997 442 27
=========================
</TABLE>
7
<PAGE>
Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
4. Net Assets Available for Benefits (continued)
The following represents the net assets available for benefits, by fund, as
of December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Principal Intermediate Growth and Maximum Gray
Protection Return Income Appreciation Communications
Fund Fund Fund Fund Common Stock
-------------------------------------------------------------------
Investments:
INVESCO Trust Company
collective trust mutual
funds:
Money market $ -0- $ -0- $ -0- $ -0- $ -0-
funds
Equity funds 171,086 188,271 437,590 514,259 -0-
Common Stock -0- -0- -0- -0- 894,600
of Sponsor
Participant -0- -0- -0- -0- -0-
notes
receivable -------------------------------------------------------------------
171,086 188,271 437,590 514,259 894,600
Sponsor -0- -0- -0- -0- 20,395
contributions
receivable
Participant 3,543 5,370 13,610 13,228 10,915
contributions
receivable ===================================================================
$174,629 $193,641 $451,200 $527,487 $ 925,910
===================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Participant Retirement
Loans Trust Liquid
Receivable Assets Total
------------------------------------------
Investments:
INVESCO Trust Company
collective trust mutual
funds:
Money market $ -0- $ 2,322 $ 2,322
funds
Equity funds -0- -0- 1,311,206
Common Stock
of Sponsor -0- -0- 894,600
Participant
notes
receivable 10,343 -0- 10,343
------------------------------------------
10,343 2,322 $ 2,218,471
Sponsor
contributions
receivable -0- -0- 20,395
Participant
contributions
receivable -0- -0- 46,666
------------------------------------------
$ 10,343 $ 2,322 $ 2,285,532
==========================================
</TABLE>
The changes in net assets available for benefits by fund for the year ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Principal Intermediate Growth and Maximum Gray Participant Retirement
Protection Return Income Appreciation Communications Loans Trust Liquid
Fund Fund Fund Fund Common Stock Receivable Assets
----------------------------------------------------------------------------------------------
Contributions $40,175 $69,324 $171,490 $188,483 $ 278,107 $ -0- $124,701
invested 872,280
Contributions 3,543 5,370 13,610 13,228 31,310 -0- -0-
receivable
Rollover from 94,649 38,595 84,965 109,975 5,520 -0- -0-
other plans
Interest and -0- 34 63 100 -0- -0- 3,423
dividend income
Net realized and
unrealized 7,762 13,822 40,103 54,910 13,095 -0- -0-
appreciation of
investments
Withdraws paid to
participants (5,861) (18,082) (46,246) (59,012) (82,812) -0- (114)
Participant loans/
repayments (net) (408) (260) (3,110) (2,869) (3,063) 9,380 330
Administrative and
other expenses (729) (1,553) (3,658) (4,163) (1,257) -0- (3)
Interfund transfers -0- 3,241 (7,897) (109) 133,277 -0- (128,512)
----------------------------------------------------------------------------------------------
$139,131 $110,491 $249,320 $300,543 $ 374,177 $ 9,380 $ (175)
==============================================================================================
Active
participants 80 124 241 219 477 8
at December 31,
1996 ============================================================================
<CAPTION>
Total
-----------
Contributions $ 872,280
invested
Contributions 67,061
receivable
Rollover from 333,704
other plans
Interest and 3,620
dividend income
Net realized and
unrealized 129,692
appreciation of
investments
Withdraws paid to
participants (212,127)
Participant loans/
repayments (net) -0-
Administrative and
other expenses (11,363)
Interfund transfers -0-
-----------
$ 1,182,867
===========
</TABLE>
8
<PAGE>
SUPPLEMENTAL SCHEDULES
9
<PAGE>
Plan Number: 003
EIN: 58-0285030
Gray Communications Systems, Inc.
Capital Accumulation Plan
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Current Historical
Identity of Issue No. of Units Value Cost
- -------------------------------------- ---------------------------- ---------------------- -------------------
INVESCO Trust Company
Collective Trust Mutual Funds *:
Liquid Assets Fund 4,506.100 units $ 4,506 $ 4,506
Principal Protection Fund 10,334.294 units 150,571 131,778
Intermediate Return Fund 17,813.269 units 291,425 242,296
Growth and Income Fund 46,596.320 units 817,765 668,912
Maximum Appreciation Fund 54,130.844 units 1,004,668 806,143
---------------------- -------------------
Total 2,268,935 1,853,635
Sponsor Common Stock Fund -
Gray Communications Systems, Inc.
Common Stock - Class A*
46,210 shares 1,213,020 859,236
Common Stock - Class B* 24,800 shares 638,607 498,111
Participant loans 37,151 37,151
---------------------- ------------------
$ 4,157,713 $ 3,248,133
====================== ==================
</TABLE>
* This is a party-in-interest investment.
10
<PAGE>
Plan Number: 003
EIN: 58-0285030
Gray Communications Systems, Inc.
Capital Accumulation Plan
Line 27d - Schedule of Reportable Transactions
Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Identity of Party Involved Description of Asset
- --------------------------------------------------------------------------------------------------------------------
Category (iii) Series of Securities Transactions in Excess of 5% of Plan Assets
*Gray Communications Systems, Inc. Gray Communications Systems, Inc. Common Stock
- Class A
Purchases of 6,406 shares
Sales of 7,592 shares
*Gray Communications Systems, Inc. Gray Communications Systems, Inc. Common Stock
- Class B
Purchases of 25,739 shares
Sales of 939 shares
*INVESCO Trust Company Principal Protection Fund
Purchases of 4,360 units
Sales of 7,106 units
*INVESCO Trust Company Intermediate Return Fund
Purchases of 6,953 units
Sales of 2,502 units
*INVESCO Trust Company Growth and Income Fund
Purchases of 21,630 units
Sales of 4,883 units
*INVESCO Trust Company Maximum Appreciation Fund
Purchases of 25,600 units
Sales of 5,597 units
*INVESCO Trust Company Liquid Asset Fund
Purchases of 617,995 units
Sales of 615,811 units
Category (i), (ii) or (iv) Transactions
</TABLE>
There were no category (i), (ii) or (iv) transactions during 1997.
* This is a party-in-interest investment.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Current Value of Asset on
Transaction Date Net Gain (Loss)
Purchase Price Selling Price Cost of Asset
- ------------------------------------------------------------------------------------------------------------------------------
$ 123,191 $ 123,191 $ 123,191
$ 150,686 139,887 150,686 $ 10,799
516,196 516,196 516,196
18,905 18,085 18,905 820
59,787 59,787 59,787
100,182 89,650 100,182 10,532
105,432 105,432 105,432
37,823 32,250 37,823 5,573
349,264 349,264 349,264
78,736 65,012 78,736 13,724
435,077 435,077 435,077
92,481 73,233 92,481 19,248
617,995 617,995 617,995
615,811 615,811 615,811 -0-
</TABLE>
12
CONSENT OF INDPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-84656 and Form S-8 No. 333-17773) pertaining to the Gray
Communications Systems, Inc. Capital Accumulation Plan of our report dated June
18, 1998, with respect to the financial statements and schedules of the Gray
Communications Systems, Inc. Capital Accumulation Plan included in this Annual
Report (Form 11-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Columbus, Georgia
June 24, 1998
