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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, 1999.
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 number 0-9692
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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)
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Financial Statements
Tellabs, Inc.
Profit Sharing and Savings Plan
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
Employee Identification No. 36-3831568
Plan #001
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Tellabs, Inc. Profit Sharing and Savings Plan
Financial Statements
Years ended December 31, 1999 and 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................................................ 1
Financial Statements
Statements of Net Assets Available for Benefits....................................................... 2
Statements of Changes in Net Assets Available for Benefits............................................ 3
Notes to Financial Statements......................................................................... 4
</TABLE>
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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, 1999 and
1998, 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 auditing standards generally accepted
in the 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 net assets available for benefits of the Plan at
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the years then ended, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
May 26, 2000
1
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EIN 36-3831568
Plan #001
Tellabs, Inc. Profit Sharing and Savings Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
----------------------------
<S> <C> <C>
Interest in Tellabs, Inc. Advantage Program $371,014,065 $219,911,164
Contributions receivable 393,250 274,745
----------------------------
Net assets available for benefits $371,407,315 $220,185,909
============================
</TABLE>
See accompanying notes.
2
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EIN 36-3831568
Plan #001
Tellabs, Inc. Profit Sharing and Savings Plan
Statements of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998
--------------------------------
<S> <C> <C>
ADDITIONS
Allocable share of the Tellabs, Inc. Advantage
Program net investment income $120,089,059 $ 40,439,083
Contributions:
Employer 6,812,505 5,122,954
Participants 20,847,060 14,672,643
-----------------------------
27,659,565 19,795,597
Transfer from Coherent Communications Systems
Corporation Savings Incentive Plan 11,947,244 -
-----------------------------
Total additions 159,695,868 60,234,680
DEDUCTIONS
Distributions to participants (8,439,814) (7,127,697)
Transfer to Tellabs, Inc. Retirement Plan (34,648) -
-----------------------------
Net increase 151,221,406 53,106,983
Net assets available for benefits:
Beginning of year 220,185,909 167,078,926
-----------------------------
End of year $371,407,315 $220,185,909
=============================
</TABLE>
See accompanying notes.
3
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Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements
Years ended December 31, 1999 and 1998
1. DESCRIPTION OF PLAN
The following description of the Tellabs, Inc. Profit Sharing and Savings Plan
(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, prior
to April 1, 1999, had 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. Effective April 1, 1999, employees are eligible to participate in
the Plan if they are 18 years or older. In order to receive the company matching
contributions and profit sharing, employees must be employed by the Company for
at least nine months and have completed 1,000 hours of service in a 12-month
period. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). The 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.
The Plan participates in the Tellabs, Inc. Advantage Program (the Master Trust).
The Tellabs, Inc. Retirement Plan also participates in the Master Trust.
On March 3, 1999, the Coherent Communications Systems Corporation Savings
Incentive Plan (Coherent Plan) merged into the Plan.
CONTRIBUTIONS
Each year, participants may elect to contribute, on a before-tax basis, between
1% and 15% of the participants' eligible annual compensation. For 1999 and 1998,
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 1999
and 1998, (the Profit Sharing Contribution). The full amount of the
4
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Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
Company's profit-sharing contribution, $1,002,320 and $720,246 in 1999 and 1998,
respectively, is automatically invested in the Tellabs, Inc. Stock Fund. The
Company's Board of Directors may authorize additional discretionary
contributions to the Plan, no such amounts were authorized in 1999 or 1998.
Effective January 1, 1999, the Company will make a Vacation Rollover
contribution equal to the value of the participant's forfeitured vacation time
(up to one week), based on 75% of total pay, as defined. This amount is subject
to the same investment and vesting rules as the profit-sharing contribution.
The contribution will be made in the calendar year following the year in which
the forfeiture occurred.
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, 1999 and 1998.
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.
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.
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Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
PAYMENT OF BENEFITS
Upon termination of service, retirement, disability, or death, a participant or
beneficiary 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. If the
participant's vested account balance does not exceed $5,000, the participant's
vested account balance will be distributed in a lump-sum payment. Distributions
from a Coherent Plan account must be made in the form of a Qualified Joint and
Survivor Annuity unless the participant has elected to not receive a Qualified
Joint and Survivor Annuity.
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.
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 beneficial interest in the Master Trust represents the Plan's share
of the Master Trust's investments 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. Investments in
common stock are valued at the closing exchange prices reported by the New York
Stock Exchange. The market value for short-term investments is cost which
approximates fair value. The participant loans 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, 1999 and 1998, was
approximately 89% and 88%, respectively. Investment income is allocated to
participating plans on a basis which reflects their weighted participation in
the investment funds of the Master Trust.
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Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADMINISTRATIVE COSTS
All administrative costs are paid by the Company.
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 amounts in the 1998 financial statements have been reclassified to
conform to the 1999 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 investment fund options offered by
the Plan. 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.
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Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENT IN MASTER TRUST (CONTINUED)
The following table presents investments held by the Master Trust:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------------------------------
<S> <C> <C>
INVESTMENTS AT FAIR VALUE AS DETERMINED
BY QUOTED MARKET PRICE
Registered investment companies:
American Funds Group - Bond Fund of America $ 6,933,722 $ 5,628,005
American Funds Group - American Balanced Fund 19,866,854 14,531,879
Barclays Equity Index Fund 15,236,745 8,706,271
Neuberger & Berman Guardian Fund - 19,628,303
Fidelity Contra Fund 32,021,090 20,483,541
American Funds Group - EuroPacific Growth Fund 31,839,132 16,317,230
20th Century Ultra Investors Fund 39,227,574 23,626,537
SSGA Small Cap Fund 1,832,478 1,144,921
Washington Mutual Investors Fund 25,192,116 -
Equities:
Tellabs, Inc. common stock 200,603,332 115,482,800
-------------------------------
372,753,043 225,549,487
INVESTMENTS AT ESTIMATED FAIR VALUE
Money market funds:
Northern Trust Short-Term Investment Fund 2,624,396 -
Dreyfus Money Market Fund 18,451,691 8,813,782
LaSalle Income Plus Fund 15,377,703 9,229,028
Participant loans 9,664,009 7,598,372
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46,117,799 25,641,182
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Total investments $ 418,870,842 $ 251,190,669
===============================
</TABLE>
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Tellabs, Inc. Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
The investment income for the years ended December 31, 1999 and 1998, are
summarized as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------------
<S> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Interest and dividend income $ 14,696,582 $ 6,197,448
Net realized and unrealized appreciation in fair
value of investments:
Mutual funds 94,555,771 11,517,959
Tellabs, Inc. common stock 19,337,280 26,946,403
------------------------------
Total net appreciation 113,893,051 38,464,362
------------------------------
Total additions $ 128,589,633 $ 44,661,810
==============================
</TABLE>
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------------------------------
<S> <C> <C>
Investments, at fair value:
Tellabs, Inc. common stock $ 17,210,002 $ 8,922,266
==============================
Changes in net assets:
Interest and dividend income $ 7,660 $ 4,307
Net realized and unrealized appreciation in fair
value of investments 7,657,908 2,048,116
Employer contributions 1,002,320 720,246
Distributions (342,910) (264,828)
Interfund transfers (37,242) (39,024)
------------------------------
$ 8,287,736 $ 2,468,817
==============================
</TABLE>
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5. 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. The Plan has been amended since
receiving the determination letter. However, the Plan Administrator believes the
Plan is being operated in compliance with the applicable requirements of the
Code.
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SIGNATURE
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: /s/ Joan E. Ryan
---------------------------
Joan E. Ryan
Vice President and
Chief Financial Officer,
Tellabs, Inc.
Date: June 28, 2000
