GRAY TELEVISION, INC.
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
     
þ   ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    .
Commission file numbers 1-13796 and 333-117248.
A.   Full title of the plan and the address of the plan, if different from that of the issuer named below:
     
   
Gray Television, 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 Television, Inc.
   
4370 Peachtree Rd. NE
Atlanta, Georgia 30319
 
 

 


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GRAY TELEVISON, 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 schedule thereto of the Gray Television, Inc. Capital Accumulation Plan as required by Form 11-K, together with the report thereon of McGladrey & Pullen, LLP, independent auditors, dated May 12, 2006.
(b)   Exhibit. Consent of McGladrey & Pullen, LLP dated June 27, 2006 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 TELEVISION, INC.
CAPITAL ACCUMULATION PLAN
 
 
Date: June 27, 2006  By:   /s/ James C. Ryan    
    James C. Ryan   
    Gray Television, Inc. Chief Financial Officer   
 


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GRAY TELEVISION, INC.
FORM 11-K
EXHIBIT INDEX
         
Exhibit       Page
Number   Exhibit   Number
 
23.1
  Consent of McGladrey & Pullen, LLP to incorporation of its report by reference in Gray Television, Inc. Registration Statement on Form S-8, No. 1-13796 and No. 333-117248   10

 


 

Gray Television, Inc.
Capital Accumulation Plan
Financial Statements and
Supplemental Schedules
December 31, 2005 and 2004

 
 
Gray Television, Inc. Capital Accumulation Plan
Index
December 31, 2005 and 2004
         
    Page(s)
    1  
Financial Statements
       
    2  
    3  
    4-8  
Supplemental Schedule
       
    9  
 EX-23.1 CONSENT OF MCGLADREY & PULLEN, LLP
Additional schedules required under the Employee Retirement Income Security Act of 1974, other than the Schedule listed above, are omitted because of the absence of the conditions under which they are required.
 

 


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Plan Administrator
Gray Television, Inc. Capital Accumulation Plan
Albany, Georgia
We have audited the accompanying statements of net assets available for benefits of Gray Television, Inc. Capital Accumulation Plan (the “Plan”) as of December 31, 2005 and 2004, and the related statement of changes in net assets available for benefits for the year ended December 31, 2005. 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 the auditing standards of the Public Company Accounting Oversight Board (United States). 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 financial status of Gray Television, Inc. Capital Accumulation Plan as of December 31, 2005 and 2004, and the changes in its financial status for the year ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule H, Line 4i – Schedule of Assets (Held at End of Year) as of or for the year ended December 31, 2005, is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the United States Department of Labor Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
West Palm Beach, Florida
May 12, 2006
 1

 


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Gray Television, Inc. Capital Accumulation Plan
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
                 
    2005     2004  
     
Assets
               
 
               
Investments
               
Participant-directed
               
Mutual funds
  $ 33,638,525     $ 30,330,344  
Participant loans
    554,275       573,219  
Self directed brokerage account
    641,803       227,292  
 
           
 
               
Total participant directed
    34,834,603       31,130,855  
 
           
 
               
Nonparticipant-directed
               
Investment in Gray Television, Inc. Common Stock Fund- Class A shares of Gray Television, Inc. Class A Common stock allocated to participants
    254,989       432,556  
 
               
Investment in Gray Television, Inc. Common Stock Fund Shares of Gray Television, Inc. common stock allocated to participants
    6,754,217       7,818,679  
 
           
 
               
Total nonparticipant directed
    7,009,206       8,251,235  
 
           
 
               
Total investments
    41,843,809       39,382,090  
 
           
 
               
Receivables
               
Employer contributions
    796,351       1,385,479  
Participant contributions
          309,801  
Other
          40,000  
 
           
 
               
Total receivables
    796,351       1,735,280  
 
           
 
               
Total assets
    42,640,160       41,117,370  
 
               
Liabilities
               
 
               
Due to employer
          54,000  
Excess Contributions
    29,036        
 
           
Total liabilities
    29,036       54,000  
 
           
 
               
Net assets available for benefits
  $ 42,611,124     $ 41,063,370  
 
           
The accompanying notes are an integral part of these financial statements.

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Gray Television, Inc. Capital Accumulation Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2005
         
Additions in net assets attributed to:
       
Investment income:
       
Net depreciation in fair value of investments
  $ (2,884,776 )
Interest and dividends
    1,625,102  
 
     
 
       
Total investment loss
    (1,259,674 )
 
     
 
       
Contributions
       
Rollover contributions
    26,372  
Participant contributions
    4,176,131  
Employer contributions – matching
    1,519,579  
Employer contributions – voluntary
    650,943  
 
     
 
       
Total contributions
    6,373,025  
 
     
 
       
Total additions
    5,113,351  
 
     
 
       
Deductions from net assets attributed to:
       
Benefits paid to participants
    3,548,357  
Administrative expenses
    17,240  
 
     
 
       
Total deductions
    3,565,597  
 
     
 
       
Net increase in net assets available for benefits
    1,547,754  
Net assets available for benefits, beginning of year
    41,063,370  
 
     
 
       
Net assets available for benefits, end of year
  $ 42,611,124  
 
     
The accompanying notes are an integral part of these financial statements.

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Gray Television, Inc. Capital Accumulation Plan
Notes to Financial Statements
1.   Description of the Plan
 
    The following description of the Gray Television, Inc. Capital Accumulation Plan (the “Plan”) provides only general information. Reference should be made to the Plan document for a more complete description of the Plan’s provisions.
 
    General
 
    The Plan was established and made effective October 1, 1994, for the administration and allocation of contributions by Gray Television, Inc. (the “Employer”), and to encourage eligible employees to defer a part of their current income to provide for their retirement, death, or disability under the provisions of Section 401(k) of the Internal Revenue Code. The Plan covers all employees of Gray Television, Inc. and its subsidiaries and affiliates that adopt the Plan. Employees who have completed one year of service as defined in the Plan document may become a participant. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). The “Employer” is the Plan’s sponsor and Plan administrator. Effective April 1, 2004, Reliance Trust Company (“Reliance”) became the Plan’s trustee and custodian and Metropolitan Life Insurance Company (“MetLife”) became the Plan’s recordkeeper.
 
    Contributions
 
    The Plan allows participants to make contributions up to a maximum of 16 percent of their compensation on a before-tax basis. Participants may change their deferral options quarterly. Participants who have attained age 50 before the end of the Plan Year are eligible to make catch-up contributions. Participants may also contribute amounts representing distributions from other qualified defined contribution plans.
 
    Participants’ contributions on a before-tax basis are limited by the Internal Revenue Code Section 402( c ) (5) to $14,000 in 2005. In addition, total annual additions to all individual participant accounts shall not exceed the lesser of $42,000 or 100 percent of a participant’s annual compensation. Contributions by highly compensated employees are subject to additional restrictions.
 
    The Employer 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 percent of eligible compensation as defined in the Plan document. The matching percentage was 50 percent for the year ended December 31, 2005. Additionally, the employer may elect to make a voluntary contribution to each active participant account based on the respective participant’s eligible compensation during the year. The voluntary contribution was equal to one percent of eligible compensation for the year ended December 31, 2005. The Employer’s contributions are made in shares of Gray Television, Inc. common stock.
 
    Investment Options
 
    Participants may direct their contributions, employer contributions, and any related earnings into various investment options sponsored by the Plan. The Plan currently offers fourteen mutual funds and one guaranteed investment account as investments options for participants. Participants may change their investment elections daily. Matching contributions made in shares of Gray Television, Inc. common stock may not be redirected by a participant until the participant’s accounts are fully vested.
 
    Participant Accounts
 
    Each Participant’s account is credited with the participant’s contribution and allocations of (a) the Company’s contribution and (b) Plan earnings, and charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

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Gray Television, Inc. Capital Accumulation Plan
Notes to Financial Statements
    Vesting
 
    Participants are immediately vested in their voluntary contributions plus the actual earnings thereon. Employer contributions and earnings thereon become 100 percent vested after the participant completes three years of service as defined in the Plan document. Upon termination of employment the nonvested portion of a participants account is forfeited. Forfeitures are used to reduce future Employer contributions. Forfeitures of nonvested amounts of $175,405 were utilized to reduce the Employer contribution for the year ended December 31, 2005.
 
    Payment of Benefits
 
    Upon retirement, death, disability, or termination of employment, a participant, or designated beneficiary, may elect to receive the vested balance in the participant’s account in the form of a single lump-sum cash payment or a direct rollover to another retirement plan.
 
    Participant Loans
 
    Participants may receive a loan from their account subject to the adoption of a written loan agreement and approval of the participant’s application. The maximum loan amount is the lesser of $50,000 or one-half of a participant’s vested account balance, with a minimum loan amount of $1,000. Loans are payable through payroll deductions over periods ranging up to five years, unless the loan qualifies as a home loan in which case the repayment period may be longer. The interest rate is determined by the Recordkeeper based on prevailing market conditions and is fixed over the life of the note. The loan interest rate is equal to the prime rate for major banks, as published in The Wall Street Journal on the date the loan is approved, plus one percent. The interest rates on outstanding participant loans as of December 31, 2005 ranged from 5 percent to 9.5 percent.
 
2.   Accounting Policies
 
    Basis of Accounting
 
    The Plan’s financial statements are presented on the accrual basis of accounting.
 
    Contributions
 
    Employer contributions are accrued in the period in which they become obligations of the Company. The amount is determined in accordance with the provision of the Plan as approved by the Company’s Board of Directors. Contributions from participants are made on a voluntary basis. The number of shares of Gray Television, Inc. common stock contributed to the Plan by the Employer is determined using the most recent closing price per share on the contribution date as reported on the New York Stock Exchange.
 
    Payments of Benefits
 
    Benefits are recorded when paid.
 
    Investment Valuation and Income Recognition
 
    The Plan’s investments are stated at fair value. Shares of Gray Television, Inc. common stock are valued on the basis of the closing price per share on each business day as reported on the New York Stock Exchange, or if no sales were made that date, at the closing price on the next preceding day on which sales were made. Shares of mutual funds are valued at the reported net asset value of the mutual fund each business day. Participant loans are valued at their outstanding balances, which approximate fair value.
 
    Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest is recorded on an accrual basis. Realized gains and loses on sales of investments are determined on the basis of average cost.

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Gray Television, Inc. Capital Accumulation Plan
Notes to Financial Statements
    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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
 
    Administrative Expenses
 
    The Employer pays all administrative expenses of the Plan except for certain contract administrative and trustee fees. Such charges not paid by the Employer are applied directly to the accounts of the participants and are classified as administrative expenses in the statement of changes in net assets available for benefits. Administrative expenses paid by the Employer are not included in the financial statements of the Plan.
 
3.   Investments
 
    The Plan has a general investment contract with MetLife (“Guaranteed Investment Account”). MetLife maintains the Plan’s deposits in an unallocated fund, to which it adds interest at the contract rate, which was 3.35% and 3.25% as of December 31, 2005 and 2004, respectively. Deposits into this contract are guaranteed the contract minimum rate of return. The weighted average interest rate earned for the year ended December 31, 2005 was 3.16%. Withdrawals are permitted at any time without penalty and the contract has been determined to be fully benefit responsive as defined in SOP 94-4. The investment is carried at contract value as reported by MetLife. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. There are no reserves against contract value for credit risk of the contract issuer or otherwise. The fair value, as reported by MetLife, of the investment is not materially different from its contract value.
 
    The fair values of investments that represent five percent or more of the Plan’s net assets available for benefits as of December 31, 2005 and 2004 are as follows:
                 
    2005     2004  
Participant directed:
               
Mutual Funds:
               
American Funds American Balanced Fund
  $ 2,854,292     $ 2,615,916  
American Funds Growth Fund of America Fund
    2,721,752       2,073,500  
American Century Strategic Allocation Conservative Advisor Class
    11,710,386       11,862,145  
American Century Strategic Allocation Aggressive Advisor Class
    5,928,851       5,492,672  
American Century Strategic Allocation Moderate Advisor Class
    4,111,664       4,234,113  
Other
    6,953,383       4,279,290  
Participants Loans With Interest Rates Ranging From 5% - 9.5%
    554,275       573,219  
 
           
Total Participant Directed
    34,834,603       31,130,855  
 
           
 
               
Nonparticipant directed:
               
Common Stock
               
(held in the Gray Television, Inc. Common Stock Fund)
    6,754,217       7,818,679  
Other
    254,989       432,556  
 
           
Total Nonparticipant directed
    7,009,206       8,251,235  
 
           
 
               
 
  $ 41,843,809     $ 39,382,090  
 
           

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Gray Television, Inc. Capital Accumulation Plan
Notes to Financial Statements
4.   Income Tax Status
 
    The Plan has received a favorable determination letter from the Internal Revenue Service, dated October 25, 1995, regarding the Plan’s exemption from federal income tax under Section 401(a) of the Internal Revenue Code. The Employer has subsequently amended and restated the Plan by adopting a volume submitter program. An IRS determination letter has not been obtained for the Plan instrument as adopted, but an IRS opinion letter has been obtained by the volume submitter program sponsor regarding the original plan instrument. The volume submitter program received a favorable opinion letter from the Internal Revenue Service, dated September 4, 2001, regarding the program’s exemption from federal income tax under Section 401(a) of the Internal Revenue Code. The Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, the Plan administrator believes that the Plan is qualified as of December 31, 2005, and as such, no provision for income tax has been included in the Plan’s financial statements.
 
5.   Transactions with Parties-In-Interest
 
    Certain Plan investments are managed by Reliance Trust. Reliance Trust is the trustee of the Plan and therefore these transactions qualify as party-in-interest transactions. In addition, transactions involving the Common Stock Fund, which invests in the common stock of the Employer, also qualify as party-in-interest transactions.
 
6.   Plan Termination
 
    The Plan may be terminated or amended by the Board at any time, provided, however, that no such amendment shall make it possible for any part of the corpus or income of the Plan to be used for or directed to purposes other than for the exclusive benefit of participants or their beneficiaries. If the Plan is terminated by the Employer, each participant’s account will become fully vested and nonforfeitable.
 
7.   Plan Spinoff
 
    Effective December 30, 2005, in accordance with a separation and distribution agreement between the Employer and Triple Crown Media, Inc. (TCM), the Plan was amended to fully vest transferred employees of Gray Publishing, LLC and Graylink, LLC, its affiliates and participating employers of the Plan, which were spun-off from the Employer. Transferred employees who have completed a year of service during the Plan year and who are employed as of the separation date, December 30, 2005 have shared in the annual discretionary matching contribution for the 2005 Plan year. The number of employees affected by the spin-off was approximately 349, which represents less than 20% of the total plan participants.
 
    In connection with the spin-off, the Plan received one share of TCM common stock for every ten shares of Gray Television, Inc. common stock and for every ten shares of Gray Television, Inc. Class A common stock held by shareholders of record as of December 30, 2005, of which the Plan held approximately 470,000 shares. The Plan received approximately 47,000 shares of TCM common stock on January 3, 2006, related to this transaction.
 
8.   Reconciliation of Financial Statements to Form 5500
 
    The following table presents a reconciliation of net assets available for benefits per these financial statements at December 31, 2005 and 2004 to the Form 5500:
                 
    2005     2004  
                 
Net assets available for benefits per the financial Statements
  $ 42,611,124     $ 41,063,370  
Current year employer contributions receivable
    (796,351 )     (1,385,479 )
Due to employer, per the financial statements
          54,000  
Other, per the financial statements
          (40,000 )
Excess contributions, per financial statement
    29,036        
 
           
Net assets per the Form 5500
  $ 41,843,809     $ 39,691,891  
 
           

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Gray Television, Inc. Capital Accumulation Plan
Notes to Financial Statements
The following table presents a reconciliation of the changes in net assets available for benefits for the year ended December 31, 2005 per these financial statement and net income per the Form 5500:
         
Change in net assets available for benefits per the financial statements
  $ 1,547,754  
Current year employer contributions receivable
    (796,351 )
Excess Contributions
    29,036  
Prior year employer contributions receivable
    1,385,479  
Prior year dividend receivable
    40,000  
Prior year due to employer
    (54,000 )
 
     
Net income per the Form 5500
  $ 2,151,918  
 
     

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Gray Television, Inc. Capital Accumulation Plan
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
December 31, 2005
                         
    Description of              
    Investment Shares     Cost     Fair Value  
Held in custody by Reliance Trust Company *
                       
Alger Mid Cap Growth Ins Fund
    20,143.345       #       $ 336,797  
American Century Strategic Allocation
    753,348.400       #       5,928,851  
Aggressive Advisor Class
                       
American Century Strategic Allocation Moderate
    610,039.461       #       4,111,664  
Advisor Class
                       
American Century Strategic Allocation
    2,129,161.204       #       11,710,386  
Conservative Advisor Class
                       
American Funds American Balanced Fund
    160,173.576       #       2,854,292  
American Funds Europacific Growth Fund
    29,919.026       #       1,229,671  
American Funds Growth Fund of America Fund
    88,196.776       #       2,721,752  
American Funds Investment Company of America Fund
    47,317.792       #       1,483,885  
Blackrock Govt Income Fund
    36,035.303       #       390,985  
Blackrock Small Midcap Growth Portfolio
    22,890.970       #       328,028  
Henssler Equity Fund
    2,163.254       #       31,346  
JP Morgan Mid Cap Value Fund
    28,672.653       #       667,500  
Lord Abbett Small Cap Value Fund
    25,463.378       #       722,172  
Met Series Stock Index Fund Class II
    4,616.031       #       52,253  
Stable Value Pooled GIC 4th Quarter 2002
                    1,068,944  
Gray Television, Inc. *
                       
Common Stock – Class A
    16,422.237       327,878       254,989  
Common Stock Common Stock Fund
    453,668.520       8,750,032       6,754,217  
Self Directed Brokerage Acct
    641,802.000       641,802       641,802  
 
                     
Total held in custody by Reliance Trust Company*
                    41,289,534  
 
                       
Participant Loans (rates of interest lowest – 5%, Highest – 9.5%)*
            #       554,275  
 
                     
 
                       
 
                  $ 41,843,809  
 
                     
*   Indicates a party-in-interest.
 
#   Not applicable for participant directed investments.

9