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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, 1999.
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
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GRAY COMMUNICATIONS SYSTEMS, INC.
FORM 11-K
REQUIRED INFORMATION
(a) Financial Statements. Filed as part of this Report
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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 May 18, 2000.
(b) Exhibits. A consent of Ernst & Young LLP dated June 26, 2000 is
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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 28, 2000 By: /S/ James C. Ryan
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James C. Ryan
Chief Financial Officer
Plan Administrator
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Audited Financial Statements and Supplemental
Schedules
Gray Communications Systems, Inc.
Capital Accumulation Plan
December 31, 1999 and 1998 and year ended December 31, 1999
with Report of Independent Auditors
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Audited Financial Statements and Supplemental Schedules
December 31, 1999 and 1998 and year ended December 31, 1999
Contents
Report of Independent Auditors............................................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits.............................. 2
Statement of Changes in Net Assets Available for Benefits.................... 3
Notes to Financial Statements................................................ 4
Supplemental Schedules
Schedule of Assets Held for Investment Purposes at End of Year............... 7
Schedule of Reportable Transactions.......................................... 8
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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, 1999 and 1998, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1999. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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, 1999 and 1998 and the changes in its net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of Assets
Held for Investment Purposes at End of Year as of December 31, 1999 and
Reportable Transactions for the year ended December 31, 1999, are presented for
purposes of additional analysis and are not a required part of the financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedules have been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
May 18, 2000
1
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Statements of Net Assets Available for Benefits
December 31
1999 1998
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Asset
Investments, at fair value $ 9,990,015 $8,004,725
Receivables:
Sponsor contributions 59,256 45,128
Participant contributions 140,984 107,971
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Total receivables 200,240 153,099
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Net assets available for benefits $10,190,255 $8,157,824
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See accompanying notes.
2
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1999
Additions
Participant contributions $ 1,381,455
Sponsor contributions 613,885
Rollover contributions 5,175
Investment income:
Interest and dividend income 20,240
Net realized and unrealized appreciation of investments 1,047,363
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1,067,603
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Total additions 3,068,118
Deductions
Withdrawals by participants (962,311)
Transfers related to sale of a subsidiary (12,561)
Administrative and other expenses (60,815)
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Total deductions (1,035,687)
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Net increase in assets available for benefits 2,032,431
Net assets available for benefits:
Beginning of year 8,157,824
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End of year $10,190,255
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See accompanying notes.
3
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements
December 31, 1999
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 balances in
their accounts.
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
his/her 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 $10,000 during 1999. Contributions by highly
compensated employees are subject to additional restrictions.
Upon enrollment, a participant may direct employee contributions in 10%
increments to any of the Plan's fund options. 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 may change their investment options
quarterly.
4
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The Sponsor shall contribute to the Plan a matching 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 year ended December 31, 1999. 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 $80,700 for the year ended December 31, 1999.
5
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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 his/her 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.
At December 31, 1999, none of the net assets available for benefits were
allocated to the accounts of persons who had withdrawn from participation in the
Plan, but had not been paid. Such amounts would be, if any, 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 accounting principles
generally accepted in the United States requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Investment Valuation
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The collective trust funds are valued at their redemption prices (fair values)
as established by the Trustee. Generally, the fair values are based on the fair
values of the underlying assets which 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. The participant loans are valued at their outstanding balances, which
approximate fair value.
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Investment Valuation (continued)
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. There were no administrative and investment expenses paid
by the Sponsor for the year ended December 31, 1999.
Parties-in-Interest Transactions
Plan assets included in the Collective Trust Funds are managed by INVESCO Trust
Company ("INVESCO"). As INVESCO is the trustee, as defined by the Plan,
transactions involving these investments are party-in-interest transactions. In
addition, transactions involving the Common Stock Fund, which invests in the
common stock of the Sponsor, also qualify as party-in-interest transactions.
Reclassifications
Certain amounts in the December 31, 1998 financial statements have been
reclassified to conform to the December 31, 1999 presentation.
3. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated October 25, 1995, stating that the Plan qualifies under Section 401(a) and
401(k) of the Internal Revenue Code (the "Code") and, therefore, the related
trust is exempt from taxation. Once qualified, the Plan is required to operate
in conformity with the Code to maintain its qualification. The Plan Sponsor
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.
4. Investments
During 1999, the Plan's investments including investments purchased, sold as
well as held during the year appreciated (depreciated) in fair value as
determined by quoted market prices as follows:
Net Realized and Unrealized
Appreciation (Depreciation) in
Fair Value of Investments
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Principal Protection Fund $ 19,277
Intermediate Return Fund 55,620
Growth and Income Fund 314,946
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Maximum Appreciation Fund 728,407
Common Stock Fund* (70,887)
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$1,047,363
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
4. Investments (continued)
Individual investments that represent 5% or more of the fair value of net assets
available for benefits are as follows:
December 31
1999 1998
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Collective Trust Funds
INVESCO Trust Company:
Principal Protection Fund $ 406,800 $ 560,333
Intermediate Return Fund 742,010 628,448
Growth and Income Fund 2,313,801 1,854,977
Maximum Appreciation Fund 3,798,886 2,813,850
Common Stock Fund
Gray Communications Systems, Inc. Common Stock -
Class A* 906,184 1,012,936
Gray Communications Systems, Inc. Common Stock -
Class B* 1,682,195 1,043,215
* Non-participant-directed
5. Non-participant-Directed Investments
Information about the net assets and the significant components of changes in
net assets related to the non-participant-directed investments is as follows:
December 31
1999 1998
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Investments, at fair value:
Gray Communications Systems common
stock - Class A $ 906,184 $1,012,936
Gray Communications Systems common
stock - Class B 1,682,195 1,043,215
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$2,588,379 $2,056,151
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Year Ended
December 31, 1999
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Change in net assets:
Contributions $ 768,873
Rollovers 4,970
Interest and dividend income 14,926
Net realized and unrealized depreciation of investments (70,887)
Withdraws by participants (143,561)
10
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Interfund transfers (net) (29,532)
Transfers related to sale of a subsidiary (12,561)
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$ 532,228
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11
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SUPPLEMENTAL SCHEDULES
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Gray Communications Systems, Inc.
Capital Accumulation Plan
EIN: 58-0285030 Plan Number: 003
Schedule H, Line 4i
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 1999
<TABLE>
<CAPTION>
(b) (c) (e)
Identity of Issue, Borrower, Description of (d) Current
(a) Lessor or Similar Party Investment Cost Value
-------------------------------------- ------------------------- -------------------- ------------------
* INVESCO Trust Company
<S> <C> <C> <C> <C>
Collective Trust Funds:
Liquid Assets Fund 26,723.88 units # $ 26,723
Principal Protection Fund 24,272.079 units # 406,800
Intermediate Return Fund 37,100.509 units # 742,010
Growth and Income Fund 97,096.137 units # 2,313,801
Maximum Appreciation Fund 133,577.676 units # 3,798,886
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Total 7,288,220
Sponsor Common Stock Fund-
Gray Communications Systems,
Inc
* Common Stock - Class A 51,233 shares $ 633,037 906,184
* Common Stock - Class B 124,607 shares 1,823,335 1,682,195
Participant loans Interest at rates from
8.75% to 9.5% # 113,416
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$9,990,015
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</TABLE>
* Indicates a party-in-interest to the Plan.
# Not applicable for participant directed investments.
7
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Gray Communications Systems, Inc.
Capital Accumulation Plan
EIN: 58-0285030 Plan Number: 003
Schedule H, Line 4j
Schedule of Reportable Transactions
Year Ended December 31, 1999
<TABLE>
<CAPTION>
(h)
(a) (c) Current Value of
Identity of Party (b) Purchase (d) (g) Asset on Transaction (i)
Involved Description of Asset Price Selling Price Cost of Asset Date Net Loss
------------------------------------------------------------------------------------------------------------------------------------
Category (iii) Series of Securities Transactions in Excess of 5% of Plan Assets
Gray Communications Gray Communications
Systems, Inc. Systems, Inc. Common
Stock - Class B
<S> <C> <C> <C> <C> <C> <C>
Purchases of 63,927 -
shares $827,144 - $ 827,144 $ 827,144
Sales of
15,537 shares - $208,850 230,407 208,850 ($21,557)
</TABLE>
8
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There were no category (i), (ii) or (iv) transactions during the year ended
December 31, 1999.
Note: The information required by columns (e) and (f) is not applicable.
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