<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-9692
------
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Tellabs, Inc. Profit Sharing and Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Tellabs, Inc.
4951 Indiana Avenue, Lisle, Illinois 60532
(Address of principal executive offices and zip code)
(630) 378-8800
(Registrant's telephone number, including area code)
<PAGE> 2
(10/14a) W03990620-CH(T)
Financial Statements
Tellabs, Inc.
Profit Sharing and Savings Plan
Years ended December 31, 1998 and 1997
with Report of Independent Auditors
<PAGE> 3
Tellabs, Inc. Profit Sharing and Savings Plan
Financial Statements
Years ended December 31, 1998 and 1997
CONTENTS
Report of Independent Auditors 1
Financial Statements
Statements of Net Assets Available for Benefits, With Fund Information 2
Statements of Changes in Net Assets
Available for Benefits, With Fund Information 3
Notes to Financial Statements 5
<PAGE> 4
Report of Independent Auditors
Board of Trustees
Tellabs, Inc. Advantage Program
We have audited the accompanying statements of net assets available for benefits
of the Tellabs, Inc. Profit Sharing and Savings Plan as of December 31, 1998 and
1997, 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, 1998 and 1997, and the changes in net assets available for benefits
for the years then ended, in conformity with generally accepted accounting
principles.
The Fund Information in the statements of net assets available for benefits and
the statements of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the net assets available
for benefits and changes in net assets available for benefits of each fund. The
Fund Information has been subjected to the auditing procedures applied in our
audits of the financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.
Ernst & Young LLP
Chicago, IL
June 9, 1999
1
<PAGE> 5
Tellabs, Inc. Profit Sharing and Savings Plan
Statements of Net Assets Available for Benefits, With Fund Information
<TABLE>
<CAPTION>
DECEMBER 31, 1998 FUND INFORMATION
------------------------------------------------------------------------------------
AMERICAN AMERICAN
DREYFUS FUNDS FUNDS
MONEY LASALLE GROUP - GROUP - BARCLAYS
MARKET INCOME BOND FUND AMERICAN EQUITY
FUND PLUS FUND OF AMERICA BALANCED FUND INDEX FUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest in Tellabs, Inc. Advantage
Program, at fair value $6,627,757 $7,962,854 $4,327,166 $11,527,723 $7,020,561
Contributions receivable 6,361 7,616 5,737 27,292 19,148
------------------------------------------------------------------------------------
Net assets available for benefits $6,634,118 $7,970,470 $4,332,903 $11,555,015 $7,039,709
====================================================================================
<CAPTION>
DECEMBER 31, 1998 FUND INFORMATION
------------------------------------------------------------------------------------
AMERICAN 20TH
NEUBERGER & FUNDS CENTURY SSGA
BERMAN FIDELITY GROUP - ULTRA SMALL
GUARDIAN CONTRA EUROPACIFIC INVESTORS CAP
FUND FUND GROWTH FUND FUND FUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest in Tellabs, Inc. Advantage
Program, at fair value $14,949,695 $15,361,624 $11,962,052 $16,199,441 $891,119
Contributions receivable 33,407 34,985 30,531 34,363 2,041
------------------------------------------------------------------------------------
Net assets available for benefits $14,983,102 $15,396,609 $11,992,583 $16,233,804 $893,160
====================================================================================
<CAPTION>
DECEMBER 31, 1998 FUND INFORMATION
-------------------------------------------------
TELLABS, INC. STOCK FUND
NONPARTICIPANT PARTICIPANT PARTICIPANT
DIRECTED DIRECTED LOANS TOTAL
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest in Tellabs, Inc. Advantage
Program, at fair value $8,922,266 $106,560,534 $7,598,372 $219,911,164
Contributions receivable - 73,264 - 274,745
-----------------------------------------------------------------
Net assets available for benefits $8,922,266 $106,633,798 $7,598,372 $220,185,909
=================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997 FUND INFORMATION
------------------------------------------------------------------------------------
AMERICAN AMERICAN
DREYFUS FUNDS FUNDS
MONEY LASALLE GROUP - GROUP - BARCLAYS
MARKET INCOME BOND FUND AMERICAN EQUITY
FUND PLUS FUND OF AMERICA BALANCED FUND INDEX FUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest in Tellabs, Inc. Advantage
Program, at fair value $5,066,550 $6,800,094 $3,504,007 $9,413,197 $3,146,985
Contributions receivable 6,735 9,434 8,730 24,051 40,943
------------------------------------------------------------------------------------
Net assets available for benefits $5,073,285 $6,809,528 $3,512,737 $9,437,248 $3,187,928
====================================================================================
<CAPTION>
DECEMBER 31, 1997 FUND INFORMATION
--------------------------------------------------------------------
AMERICAN 20TH
NEUBERGER & FUNDS CENTURY
BERMAN FIDELITY GROUP - ULTRA
GUARDIAN CONTRA EUROPACIFIC INVESTORS
FUND FUND GROWTH FUND FUND
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest in Tellabs, Inc. Advantage
Program, at fair value $15,649,188 $11,020,268 $10,541,258 $11,314,141
Contributions receivable 33,769 35,628 34,314 60,021
--------------------------------------------------------------------
Net assets available for benefits $15,682,957 $11,055,896 $10,575,572 $11,374,162
====================================================================
<CAPTION>
DECEMBER 31, 1997 FUND INFORMATION
-----------------------------------------------------------------
TELLABS, INC. STOCK FUND
NONPARTICIPANT PARTICIPANT PARTICIPANT
DIRECTED DIRECTED LOANS TOTAL
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest in Tellabs, Inc. Advantage
Program, at fair value $6,453,449 $77,130,785 $6,774,277 $166,814,199
Contributions receivable - 11,103 - 264,728
------------------------------------------------------------------
Net assets available for benefits $6,453,449 $77,141,888 $6,774,277 $167,078,927
==================================================================
</TABLE>
See accompanying notes.
2
<PAGE> 6
Tellabs, Inc. Profit Sharing and Savings Plan
Statement of Changes in Net Assets Available for Benefits, With Fund Information
Year ended December 31, 1998
<TABLE>
<CAPTION>
FUND INFORMATION
--------------------------------------------------------------------------------------
AMERICAN AMERICAN
DREYFUS FUNDS FUNDS
MONEY LASALLE GROUP - GROUP - BARCLAYS
MARKET INCOME BOND FUND AMERICAN EQUITY
FUND PLUS FUND OF AMERICA BALANCED FUND INDEX FUND
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest and dividend income $ 363,022 $ 476,297 $ 267,740 $ 422,208 $ -
Net realized and unrealized
appreciation (depreciation) in
fair value of investments - - (71,778) 680,289 1,282,381
--------------------------------------------------------------------------------------
363,022 476,297 195,962 1,102,497 1,282,381
Contributions:
Employer 235,356 169,245 138,707 336,241 181,490
Participants 721,925 562,523 460,109 1,081,107 1,091,525
--------------------------------------------------------------------------------------
957,281 731,768 598,816 1,417,348 1,273,015
--------------------------------------------------------------------------------------
Total additions 1,320,303 1,208,065 794,778 2,519,845 2,555,396
Deductions from net assets attributed
to:
Distributions to participants (804,655) (1,261,283) (49,240) (462,595) (80,781)
Transfers between funds 1,045,185 1,214,160 74,629 60,517 1,377,166
--------------------------------------------------------------------------------------
Net increase (decrease) 1,560,833 1,160,942 820,167 2,117,767 3,851,781
Net assets available for benefits:
Beginning of year 5,073,285 6,809,528 3,512,736 9,437,248 3,187,928
--------------------------------------------------------------------------------------
End of year $6,634,118 $7,970,470 $4,332,903 $11,555,015 $7,039,709
======================================================================================
<CAPTION>
FUND INFORMATION
-------------------------------------------------------------------------------------
AMERICAN 20TH
NEUBERGER & FUNDS CENTURY SSGA
BERMAN FIDELITY GROUP - ULTRA SMALL
GUARDIAN CONTRA EUROPACIFIC INVESTORS CAP
FUND FUND GROWTH FUND FUND FUND
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest and dividend income $ 2,159,218 $ 349,037 $ 147,788 $ - $ 984
Net realized and unrealized
appreciation (depreciation) in
fair value of investments (1,888,639) 3,237,011 1,436,392 3,977,564 (44,244)
-------------------------------------------------------------------------------------
270,579 3,586,048 1,584,180 3,977,564 (43,260)
Contributions:
Employer 503,072 470,959 426,891 473,650 29,325
Participants 1,510,571 1,598,424 1,255,214 1,603,631 333,130
-------------------------------------------------------------------------------------
2,103,643 2,069,383 1,682,105 2,077,281 362,455
-------------------------------------------------------------------------------------
Total additions 2,284,222 5,655,431 3,266,285 6,054,845 319,195
Deductions from net assets attributed
to:
Distributions to participants (545,197) (406,359) (341,796) (588,594) (466)
Transfers between funds (2,438,880) (908,359) (1,507,478) (606,609) 574,431
-------------------------------------------------------------------------------------
Net increase (decrease) (699,855) 4,340,713 1,417,011 4,859,642 893,160
Net assets available for benefits:
Beginning of year 15,682,957 11,055,896 10,575,572 11,374,162 -
-------------------------------------------------------------------------------------
End of year $14,983,102 $15,396,609 $11,992,583 $16,233,804 $893,160
=====================================================================================
<CAPTION>
FUND INFORMATION
---------------------------------------------------
TELLABS STOCK FUND
----------------------------
NONPARTICIPANT PARTICIPANT PARTICIPANT
DIRECTED DIRECTED LOANS TOTAL
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest and dividend income $ 4,307 $ 52,365 $ 640,738 $ 4,883,704
Net realized and unrealized
appreciation (depreciation) in
fair value of investments 2,048,116 24,898,287 - 35,555,379
-------------------------------------------------------------------
2,052,423 24,950,652 640,738 40,439,083
Contributions:
Employer 720,246 1,437,772 - 5,122,954
Participants - 4,454,484 - 14,672,643
-------------------------------------------------------------------
720,246 5,892,256 - 19,795,597
-------------------------------------------------------------------
Total additions 2,772,669 30,842,908 640,738 60,234,680
Deductions from net assets attributed
to:
Distributions to participants (264,828) (2,067,724) (254,179) (7,127,697)
Transfers between funds (39,024) 716,726 437,536 -
-------------------------------------------------------------------
Net increase (decrease) 2,468,817 29,491,910 824,095 53,106,983
Net assets available for benefits:
Beginning of year 6,453,449 77,141,885 6,774,277 167,078,926
-------------------------------------------------------------------
End of year $8,922,266 $106,633,795 $7,598,372 $220,185,909
===================================================================
</TABLE>
See accompanying notes.
3
<PAGE> 7
Tellabs, Inc. Profit Sharing and Savings Plan
Statement of Changes in Net Assets Available for Benefits, With Fund Information
Year ended December 31, 1997
<TABLE>
<CAPTION>
FUND INFORMATION
------------------------------------------------------------------------------------
AMERICAN AMERICAN
DREYFUS FUNDS FUNDS
MONEY LASALLE GROUP - GROUP - BARCLAYS
MARKET INCOME BOND FUND AMERICAN EQUITY
FUND PLUS FUND OF AMERICA BALANCED FUND INDEX FUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest $ 344,373 $ - $ 210,743 $ - $ -
Dividends - 387,694 - 309,506 -
Net realized and unrealized
appreciation (depreciation) in
fair value of investments (6,437) 9,461 56,335 1,360,733 590,995
------------------------------------------------------------------------------------
337,936 397,155 267,078 1,670,239 590,995
Contributions:
Employer 420,265 170,265 135,565 316,961 104,888
Participants 269,816 585,092 329,857 910,077 650,601
------------------------------------------------------------------------------------
690,081 755,357 465,422 1,227,038 755,489
------------------------------------------------------------------------------------
Total additions 1,028,017 1,152,512 732,500 2,897,277 1,346,484
Deductions from net assets attributed
to:
Distributions to participants (2,122,848) (168,532) (221,312) (161,323) (32,226)
Transfers between funds (1,830,092) 1,538,669 265,171 (756,828) 833,344
------------------------------------------------------------------------------------
Net increase (decrease) (2,924,923) 2,522,649 776,359 1,979,126 2,147,602
Net assets available for benefits:
Beginning of year 7,998,208 4,286,879 2,736,378 7,458,122 1,040,326
------------------------------------------------------------------------------------
End of year $5,073,285 $6,809,528 $3,512,737 $9,437,248 $3,187,928
====================================================================================
<CAPTION>
FUND INFORMATION
---------------------------------------------------------------------
AMERICAN 20TH
NEUBERGER & FUNDS CENTURY
BERMAN FIDELITY GROUP - ULTRA
GUARDIAN CONTRA EUROPACIFIC INVESTORS
FUND FUND GROWTH FUND FUND
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest $ - $ - $ - $ -
Dividends 92,214 905,684 177,370 2,321,198
Net realized and unrealized
appreciation (depreciation) in
fair value of investments 2,215,724 1,037,882 666,189 (298,064)
---------------------------------------------------------------------
2,307,938 1,943,566 843,559 2,023,134
Contributions:
Employer 487,799 412,262 422,075 477,199
Participants 1,491,581 1,494,129 1,298,117 1,471,318
---------------------------------------------------------------------
1,979,380 1,906,391 1,720,192 1,948,517
---------------------------------------------------------------------
Total additions 4,287,318 3,849,957 2,563,751 3,971,651
Deductions from net assets attributed
to:
Distributions to participants (387,173) (200,727) (226,535) (269,607)
Transfers between funds (429,944) (194,389) (649,897) (911,554)
---------------------------------------------------------------------
Net increase (decrease) 3,470,201 3,454,841 1,687,319 2,790,490
Net assets available for benefits:
Beginning of year 12,212,756 7,601,055 8,888,253 8,583,672
---------------------------------------------------------------------
End of year $15,682,957 $11,055,896 $10,575,572 $11,374,162
=====================================================================
<CAPTION>
FUND INFORMATION
---------------------------------------------------
TELLABS, INC. STOCK FUND
----------------------------------
NONPARTICIPANT PARTICIPANT PARTICIPANT
DIRECTED DIRECTED LOANS TOTAL
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest $ 2,684 $ 33,914 $ 537,663 $ 1,129,377
Dividends - - - 4,193,666
Net realized and unrealized
appreciation (depreciation) in
fair value of investments 1,760,696 22,251,023 - 29,644,537
--------------------------------------------------------------------
1,763,380 22,284,937 537,663 34,967,580
Contributions:
Employer 598,230 1,053,487 - 4,598,996
Participants - 3,267,876 - 11,768,464
--------------------------------------------------------------------
598,230 4,321,363 - 16,367,460
--------------------------------------------------------------------
Total additions 2,361,610 26,606,300 537,663 51,335,040
Deductions from net assets attributed
to:
Distributions to participants (160,014) (1,008,750) (195,990) (5,155,037)
Transfers between funds (10,633) 1,293,544 852,609 -
--------------------------------------------------------------------
Net increase (decrease) 2,190,963 26,891,094 1,194,282 46,180,003
Net assets available for benefits:
Beginning of year 4,262,486 50,250,794 5,579,995 120,898,924
--------------------------------------------------------------------
End of year $6,453,449 $77,141,888 $6,774,277 $167,078,927
====================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 8
Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements
Years ended December 31, 1998 and 1997
1. DESCRIPTION OF PLAN
The Tellabs, Inc. Profit Sharing and Savings Plan (the Plan) participates in the
Tellabs, Inc. Advantage Program (the Master Trust). The Tellabs, Inc. Retirement
Plan also participates in the Master Trust.
The following description of the Plan provides only general information.
Participants should refer to the Tellabs Inc. Advantage Program Plan document
for a more complete description of the Plan's provisions.
GENERAL
The Plan is a defined-contribution plan which covers all full-time employees of
Tellabs, Inc. (the Company and Employer) and adopting subsidiaries, who have
been employed by the Company for at least nine continuous months, have completed
1,000 hours of service in a 12-month period, and are age 21 or older. The Plan
is subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA). Plan administrator maintains all necessary records and determines
participant eligibility. Plan assets are held in a trust and are managed by a
Trustee appointed by the Company.
CONTRIBUTIONS
Each year, participants may elect to contribute, on a before-tax basis, up to
15% of the participants' eligible annual compensation. For 1998 and 1997, the
Company contributed to the Plan an amount equal to each participant's before-tax
contribution, not exceeding 3% of the participant's eligible compensation for
the year, for all participants, regardless of years of service (the Match
Contribution). In addition, the Company contributed to the Plan 0.5% of each
participant's annual eligible compensation for all participants in 1998 and
1997, (the Profit Sharing Contribution). The full amount of the Company's Profit
Sharing Contribution, $720,246 and $598,230 in 1998 and 1997, respectively, is
automatically invested in the Tellabs, Inc. Stock Fund. The Company's Board of
Directors may authorize additional discretionary contributions to the Plan, for
which no amount was authorized in 1998 or 1997.
5
<PAGE> 9
Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
PARTICIPANTS' ACCOUNTS
The Plan administrator maintains an account in the name of each participant,
which reflects the participant's share of the Employer contributions,
participant contributions, and the participant's share of earnings or losses of
the respective investment funds. Forfeited balances of terminated participants'
nonvested Profit Sharing Contributions plus actual earnings thereon are used to
reduce future Company contributions. The balance of forfeited nonvested Profit
Sharing Contributions plus actual earnings thereon was not material as of
December 31, 1998 and 1997.
VESTING
Participants are immediately vested in their contributions and the Company's
Match Contribution plus actual earnings thereon. Vesting in the Company's Profit
Sharing Contribution portion of their accounts plus actual earnings thereon is
based on years of service. A participant is 100% vested upon completion of five
years of service.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 (or less if
the participant demonstrates financial hardship) up to a maximum of $50,000.
Loan transactions are treated as a transfer from (to) the investment fund to
(from) the loan fund. Interest rates are commensurate with local prevailing
rates as determined by the Administrative Committee. Loan terms range from 1-5
years or up to 15 years for the purchase of a primary residence. The loans are
secured by the Participant's loan account.
PAYMENT OF BENEFITS
Upon termination of service, retirement, or disability, a participant may elect
to receive a lump-sum amount equal to the value of the participant's account or
monthly, quarterly, semiannual, or annual installments over a period not to
exceed the life expectancy of the participant or the joint life expectancies of
the participant and an individual beneficiary. In the event of the participant's
death, the value of the participant's account will be distributed to the
participant's beneficiary in either a lump-sum or monthly, quarterly, or
semiannual installments not to exceed the life expectancy of the beneficiary.
6
<PAGE> 10
Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan have been prepared under the accrual method
of accounting and in conformity with general accepted accounting principles.
INVESTMENT VALUATION
The Plan's interest in the Master Trust is stated at fair value. The shares of
registered investment companies are valued at quoted market prices which
represent the net asset values of shares held by the Master Trust at year-end.
The participant loans receivable are valued at their outstanding balances, which
approximate fair value. The Plan's percentage interest in the net assets of the
Master Trust as of December 31, 1998 and 1997, was approximately 88% and 89%,
respectively. Investment income is allocated to participating plans on a basis
which reflects their weighted participation in the investment funds of the
Master Trust.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
RECLASSIFICATION
Certain items in the 1997 financial statements have been reclassified to conform
to the 1998 presentation.
3. INVESTMENT IN MASTER TRUST
Participants have the option of investing all or a portion of their accounts
(other than the Profit Sharing Contribution which is automatically allocated to
the Tellabs, Inc. Stock Fund) in any of the following investment funds. On a
daily basis, participants have the option of changing the allocation of future
contributions or transferring all or a portion of their existing account
balances among the investment funds. A brief description of each fund follows:
DREYFUS MONEY MARKET FUND invests primarily in treasury bills
and repurchase agreements.
LASALLE INCOME PLUS FUND generally may be invested in
guaranteed investment contracts (GICs), synthetic GICs, bank
investment contracts (BICs), or other similar instruments
offered by insurance companies, U.S. government agencies, and
banks. It may, however, also hold other fixed-income
securities and cash equivalents at times.
7
<PAGE> 11
Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENT IN MASTER TRUST (CONTINUED)
AMERICAN FUNDS GROUP - BOND FUND OF AMERICA invests in bonds
across the maturity spectrum, including U.S. government and
agency securities, corporate bonds (including
non-investment-grade bonds), mortgage-backed and asset-backed
securities, and non-U.S. bonds. The fund will also invest in
cash equivalents.
AMERICAN FUNDS GROUP - AMERICAN BALANCED FUND invests in
stocks, bonds, and cash equivalents.
BARCLAYS EQUITY INDEX FUND invests in stocks mostly found in
the S&P 500 Index. The fund is broadly diversified in
companies of different sizes and different sectors.
NEUBERGER & BERMAN GUARDIAN FUND is invested primarily in
U.S. equity securities and cash equivalents.
FIDELITY CONTRA FUND invests in undervalued stocks and bonds
of companies that are currently out of favor with the
investing public and that have favorable long-term outlooks
because of termination of unprofitable operations, changes in
management, industry, or products or a possible
merger/acquisition.
AMERICAN FUNDS GROUP - EUROPACIFIC GROWTH FUND is invested in
equity securities registered on exchanges outside of the U.S.
The fund is expected to be well diversified, including
securities from a large number of markets. The size of the
companies will vary significantly within the fund.
20TH CENTURY ULTRA INVESTORS FUND is aggressively invested in
U.S. equities and cash equivalents. In general, the stocks
held in this fund will be of small and rapidly growing
companies.
SSGA SMALL CAP FUND invests at least 65% of total assets in
smaller capitalized securities. The securities are selected
based on a proprietary analytical model that ranks securities
according to the momentum of Wall Street sentiments.
8
<PAGE> 12
Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENT IN MASTER TRUST (CONTINUED)
TELLABS, INC. STOCK FUND invests exclusively in the common
stock of Tellabs, Inc. All stock held in the Tellabs, Inc.
Stock Fund is purchased on the open market and kept in a
custodial account with the Trustee. At December 31, 1998 and
1997, this fund included 1,658,249 and 1,577,585 shares,
respectively, of Tellabs, Inc. common stock. Each
participant's account is credited or charged with its pro
rata portion of the stock's appreciation or depreciation.
The following table presents investments held by the Master Trust:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------------
<S> <C> <C>
INVESTMENTS AT FAIR VALUE AS DETERMINED BY QUOTED
MARKET PRICE
Mutual funds:
American Funds Group - Bond Fund of America $ 5,628,005 $ 4,503,012
American Funds Group - American Balanced Fund 14,531,879 11,748,804
Barclays Equity Index Fund 8,706,271 3,766,203
Neuberger & Berman Guardian Fund 19,628,303 19,809,895
Fidelity Contra Fund 20,483,541 14,195,754
American Funds Group - EuroPacific Growth Fund 16,317,230 13,862,611
20th Century Ultra Investors Fund 23,626,537 15,908,461
SSGA Small Cap Fund 1,144,921 -
Equities:
Tellabs, Inc. common stock 115,482,800 83,584,234
------------------------------------
225,549,487 167,378,974
INVESTMENTS AT ESTIMATED FAIR VALUE
Money market funds:
Dreyfus Money Market Fund 8,813,782 6,500,089
LaSalle Income Plus Fund 9,229,028 7,766,001
Participant loans 7,598,372 6,774,277
------------------------------------
25,641,182 21,040,367
------------------------------------
Total investments $251,190,669 $188,419,341
====================================
</TABLE>
9
<PAGE> 13
Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENT IN MASTER TRUST (CONTINUED)
The changes, in the net assets of the Master Trust during the years ended
December 31, 1998 and 1997, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------
<S> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Interest and dividend income $ 6,197,448 $ 6,692,799
Net realized and unrealized appreciation in fair
value of investments:
Mutual funds 11,517,959 6,867,986
Equities 26,946,403 24,011,719
Money market funds - 3,056
------------------------------------
Total net appreciation 38,464,362 30,882,761
Contributions from participating plans 26,277,780 21,775,741
------------------------------------
Total additions 70,939,590 59,351,301
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants (8,158,245) (5,548,478)
------------------------------------
Net increase 62,781,345 53,802,823
Net assets:
Beginning of year 188,684,069 134,881,246
====================================
End of year $251,465,414 $188,684,069
====================================
</TABLE>
4. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated September 13, 1995, stating that the Plan is qualified under Section
401(a) of the Internal Revenue Service Code (the Code) and, therefore, the
related Master Trust is exempt from taxation. Once qualified, the Plan is
required to operate in conformity with the Code to maintain its qualification.
The Plan Administrator 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.
5. TRANSACTIONS WITH PARTIES IN INTEREST
For 1998 and 1997, administrative expenses relating to the Plan were paid by the
Company, and it is anticipated that the Company will continue to pay such
expenses.
10
<PAGE> 14
Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of a termination of the
Plan, participants will become 100% vested in their accounts and the assets of
the Plan will be liquidated and promptly distributed to each participant or
beneficiary.
7. YEAR 2000 ISSUE (UNAUDITED)
The Company has taken actions to understand the nature and extent of the work
required to make its systems and infrastructure Year 2000 compliant. The Company
began work several years ago to prepare its financial information and other
computer-based systems for the Year 2000, including replacing and updating
existing legacy systems. This process also has included determining whether
third-party service providers have reasonable plans in place to become Year 2000
compliant. The Company does not expect this process to have a significant effect
on plan operations.
11
<PAGE> 15
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees have duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
TELLABS, INC. PROFIT SHARING AND SAVINGS PLAN
By:
-------------------------------
Michael J. Birck
President and Chief
Executive Officer,
Tellabs, Inc.
By:
-------------------------------
Robert Settles
Plan Administrator
Date: June 28, 1999
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-48972) pertaining to the Profit Sharing and Savings Plan of Tellabs,
Inc. of our report dated June 9, 1999, with respect to the financial statements
of the Tellabs, Inc. Profit Sharing and Savings Plan included in this Annual
report (Form 11-K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
Chicago, Illinois
June 28, 1999
