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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, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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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 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, 2001.
(b) Exhibits. A consent of Ernst & Young LLP dated June 25, 2001
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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 27, 2001 By: /S/ James C. Ryan
-----------------
James C. Ryan
Chief Financial Officer
Plan Administrator
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GRAY COMMUNICATIONS SYSTEMS, INC.
FORM 11-K
EXHIBIT INDEX
Exhibit Page
Number Exhibit Number
- ------ ------- ------
23 Consent of Ernst & Young LLP to 20
incorporation of its report by
reference in Gray Communications
Systems, Inc. Registration Statement
on Form S-8, No. 33-84656 and No. 333-17773.
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AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
Gray Communications Systems, Inc.
Capital Accumulation Plan
Years ended December 31, 2000 and 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, 2000 and 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 at End of Year)....................................12
Schedule of Reportable Transactions.........................................13
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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, 2000 and 1999, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2000. 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, 2000 and 1999 and the changes in its net assets available for
benefits for the year ended December 31, 2000, 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 at End of Year) as of December 31, 2000 and Reportable Transactions for
the year then ended, 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. These supplemental schedules are the responsibility of the Plan's
management. 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
Atlanta, Georgia
May 18, 2001
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2000 1999
--------------------------------
Assets
Investments, at fair value $11,143,617 $ 9,990,015
Receivables:
Sponsor contributions 59,850 59,256
Participant contributions 148,452 140,984
--------------------------------
Total receivables 208,302 200,240
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Net assets available for benefits $11,351,919 $10,190,255
================================
See accompanying notes.
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2000
Additions
Participant contributions $ 1,637,459
Sponsor contributions 685,155
Rollover contributions 8,096
Other (net) 4,526
Investment results:
Interest and dividend income 684,127
Net realized and unrealized depreciation of investments (715,195)
------------
(31,068)
------------
Total additions 2,304,168
Deductions
Withdrawals by participants (1,102,085)
Administrative and other expenses (40,419)
------------
Total deductions (1,142,504)
------------
Net increase in assets available for benefits 1,161,664
Net assets available for benefits:
Beginning of year 10,190,255
------------
End of year $ 11,351,919
============
See accompanying notes.
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements
December 31, 2000
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 and Change in Trustee
Assets of the Plan were held for safekeeping and investment by INVESCO Trust
Company from January 1, 2000 through July 11, 2000. Effective July 11, 2000, all
assets of the Plan were transferred to Circle Trust Company (the "Trustee") as
part of a trust agreement between the Sponsor and the Trustee.
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
1. Description of the Plan (Continued)
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 $10,500 during 2000. 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
liquidity cash account until used to purchase Gray Communications Systems, Inc.
common stock. Participants may change their investment options quarterly.
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, 2000. 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 $27,000 for the year ended December 31, 2000.
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.
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
1. Description of the Plan (Continued)
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, 2000, 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.
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
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
The trust 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. The participant loans are valued at their
outstanding balances, which approximate fair value.
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.
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (Continued)
Parties-In-Interest Transactions
Plan assets included in the funds are managed by Circle Trust Company ("Circle
Trust"). As Circle Trust 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.
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) 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.
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
4. Investments
During 2000, 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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Collective Trust Funds:
INVESCO Funds
Principal Protection Fund $ 9,417
Intermediate Return Fund 21,458
Growth and Income Fund 78,113
Maximum Appreciation Fund 146,172
Mutual Funds:
Circle Trust Funds
Growth Fund of America (554,265)
Small Cap World Fund (145,315)
Europacific Growth (144,775)
New Economy Fund (126,329)
Investment Company of America (124,282)
Intermediate Bond Fund 37,754
Van Kempen Emerging Growth Fund (8,082)
New Perspective Fund (574)
Fundamental Investors Fund (311)
Equity Growth (252)
Fidelity Advisor Overseas Fund A (54)
Common Stock* 96,130
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$(715,195)
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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
2000 1999
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Collective Trust Funds
INVESCO Trust Company:
Principal Protection Fund $ -- $ 406,800
Intermediate Return Fund -- 742,010
Growth and Income Fund -- 2,313,801
Maximum Appreciation Fund -- 3,798,886
Circle Trust Funds
Growth Fund of America 2,584,472 --
Investment Company of America 1,773,414 --
Intermediate Bond Fund 1,355,378 --
Cash Management Trust 626,668 --
Common Stock Fund
Gray Communications Systems, Inc.
Common Stock - Class A* 711,563 906,184
Gray Communications Systems, Inc.
Common Stock - Class B* 2,503,191 1,682,195
* Non-participant-directed
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Gray Communications Systems, Inc.
Capital Accumulation Plan
Notes to Financial Statements (continued)
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
2000 1999
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Investments, at fair value:
Gray Communications Systems, Inc.
Common Stock - Class A $ 711,563 $ 906,184
Gray Communications Systems, Inc.
Common Stock - Class B 2,503,191 1,682,195
Common Stock liquidity cash 101,467 26,723
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$3,316,221 $2,615,102
==============================
Year Ended
December 31,
2000
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Change in net assets:
Contributions $ 858,354
Interest and dividend income 10,424
Net realized and unrealized appreciation of investments 96,130
Withdrawals by participants (192,152)
Transfers to participant directed investments (71,637)
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$ 701,119
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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
Supplemental Schedules
Schedule of Assets (Held at End of Year)
December 31, 2000
(b) (c) (d) (e)
Identity of Issue, Borrower, Description of Cost Current
(a) Lessor or Similar Party Investment Value
- -----------------------------------------------------------------------------------------
* Circle Trust Company
Growth Fund of America 95,450.513 units # $2,584,472
Investment Company of
America 57,139.935 units # 1,773,414
Intermediate Bond Fund 101,084.220 units # 1,355,378
Cash Management Trust 626,686.000 units # 626,668
Europacific Growth Fund 14,514.712 units # 442,929
New Economy Fund 21,783.420 units # 483,626
Small Cap World Fund 11,879.513 units # 329,835
Van Kampen Emerging
Growth Fund 347.326 units # 21,646
New Perspective 159.935 units # 3,846
Fundamental Investors Fund 117.310 units # 3,655
Equity Growth Fund 29.324 units # 1,597
Fidelity Advisor Overseas
Fund Class A 9.671 units # 165
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Total 7,627,231
Common Stock Fund-
Gray Communications
Systems, Inc.
* Common Stock - Class A 45,000 shares $ 573,507 711,563
* Common Stock - Class B 170,430 shares 2,393,860 2,503,191
Common Stock liquidity cash # 101,467
Participant loans Interest at rates from
8.75% to 9.5% 200,165
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$11,143,617
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* Indicates a party-in-interest to the Plan.
# Not applicable for participant directed investments.
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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, 2000
(h)
(a) (d) Current Value
Identity of Party (b) (c) Selling (g) of Asset on (i)
Involved Description of Asset Purchase Price Price Cost of Asset Transaction Date Net Gain
- -----------------------------------------------------------------------------------------------------------------------------------
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
Purchases of 78,937
shares $1,160,742 $ -- $1,160,742 $1,160,742 $ --
Sales of 30,653 shares -- 499,293 426,538 499,293 72,755
There were no category (i), (ii), or (iv) transactions during the year ended
December 31, 2000.
Note: The information required by columns (e) and (f) is not applicable.
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