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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
For the Year Ended December 31, 1999
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
Computer Network Technology Corporation
401(K) Salary Savings Plan
B. Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office:
Computer Network Technology Corporation
6000 Nathan Lane North
Minneapolis, MN 55442
763-268-6000
================================================================================
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REQUIRED INFORMATION
1. Not Applicable
2. Not Applicable
3. Not Applicable
4. The Computer Network Technology Corporation 401(K) Salary Savings Plan
(the Plan) is subject to the requirements of the Employee Retirement
Income Security Act of 1974 (ERISA). Attached hereto is a copy of the
most recent financial statements and schedules of the Plan prepared in
accordance with the financial reporting requirements of ERISA.
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COMPUTER NETWORK TECHNOLOGY CORPORATION
401 (K) SALARY SAVINGS PLAN
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1999 AND 1998
TABLE OF CONTENTS
Page
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 4
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits as of
December 31, 1999 and 1998 6
Statements of Changes in Net Assets Available for Benefits for
the Years Ended December 31, 1999 and 1998 7
NOTES TO FINANCIAL STATEMENTS 8
SUPPLEMENTARY SCHEDULE
Schedule H - Line 4 (i): Schedule of Assets Held for Investment
Purposes 16
SIGNATURE 17
EXHIBIT INDEX 18
Exhibit 23.01 - Consent of Independent Certified Public
Accountants 19
<PAGE> 4
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Plan Sponsor
Computer Network Technology Corporation
401(k) Salary Savings Plan
We have audited the accompanying statements of net assets
available for benefits of Computer Network Technology Corporation 401(k) Salary
Savings Plan (the 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 of America. 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 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 Computer Network Technology Corporation 401(k) Salary Savings Plan as of
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 of America.
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Our audits were performed for the purpose of forming an opinion
on the basic financial statements taken as a whole. The supplementary schedule
listed in the accompanying contents 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 Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplementary 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.
Minneapolis, Minnesota
April 26, 2000 (except for the second
paragraph of Note F as to which the date
is June 6, 2000)
<PAGE> 6
Computer Network Technology Corporation
401(k) Salary Savings Plan
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
<TABLE>
<CAPTION>
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
Cash $ 210 $ -
Investments
Fair value 4,176,345 2,790,891
Estimated fair value 20,603,966 14,052,124
Contract value 3,606,062 2,016,157
----------- -----------
28,386,373 18,859,172
Receivables
Participant elective deferral contributions 93,033 86,930
Employer match contributions 453,276 396,706
----------- -----------
546,309 483,636
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $28,932,892 $19,342,808
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
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Computer Network Technology Corporation
401(k) Salary Savings Plan
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the years ended December 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ADDITIONS
Investment income
Net appreciation in fair value of investments $ 6,051,450 $ 5,077,922
Interest and dividends 192,240 121,963
------------ ------------
6,243,690 5,199,885
Contributions
Participant elective deferrals 3,158,981 2,897,898
Participant rollovers 1,239,656 574,723
Employer match 453,276 396,706
------------ ------------
4,851,913 3,869,327
------------ ------------
Total additions 11,095,603 9,069,212
DEDUCTIONS
Benefits paid to participants (1,505,519) (1,819,516)
------------ ------------
Net increase 9,590,084 7,249,696
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 19,342,808 12,093,112
------------ ------------
End of year $ 28,932,892 $ 19,342,808
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
7
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Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies for Computer Network
Technology Corporation 401(k) Salary Savings Plan (the Plan) consistently
applied in the preparation of the accompanying financial statements follows:
Valuation of Investments
The Computer Network Technology Corporation Common Stock Fund (the common
stock of the Plan Sponsor) is valued utilizing the last quoted market price
on the last business day of the year (see Note F).
Assets in the Fidelity Advisor Equity Growth Account, Fidelity Advisor Growth
Opportunities Account, Fidelity Advisor Balanced Account, CIGNA Charter Large
Company Stock Index Fund, CIGNA Charter Growth and Income Fund, AIM
Constellation Account, Dreyfus Founders Growth Account, Janus Worldwide
Account, Neuberger Berman Partners Account, CIGNA Charter Small Company Stock
Growth Fund, and State Street Global Advisors Intermediate Bond Account
represent the Plan's share of the value of certain assets held in the
insurance company's separate accounts. Such assets are stated at estimated
fair value as determined by the insurance company based upon the fair value
of the funds underlying assets. Income from these funds represents the Plan's
share of income from the separate accounts.
Assets in the CIGNA Charter Guaranteed Long-Term Fund represent the contract
value, which approximates fair value, of a guaranteed investment contract
held with an insurance company. The crediting interest rate and average yield
for the guaranteed fund was 5.6% for 1999 and 1998. The crediting interest
rate is determined semi-annually by Connecticut General Life Insurance
Company (CIGNA) based upon market conditions.
Participant loans are valued at the estimated fair value of the loan.
All investments are participant directed.
8
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Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Plan and Administrative Expenses
All investment fees incurred with regard to the purchase and sale of
investments are paid by the Plan and are netted with investment income.
During 1999 and 1998, $13,154 and $19,529 of investment fees were paid by the
Plan and netted with investment income. Other administrative expenses, that
are not offset by forfeitures of terminated participants' non-vested amounts,
are paid by the Plan Sponsor, Computer Network Technology Corporation.
Net Appreciation in Fair Value of Investments
Net appreciation in the fair value of investments represents the net realized
gains or losses and the net unrealized appreciation or depreciation of
investments. Realized gains or losses are the difference between the proceeds
received and either the cost of the investment sold, determined on an average
cost basis, or the fair value at the end of the previous year, whichever is
applicable. Unrealized appreciation or depreciation is the change in the
difference between fair value and the cost of investments or the fair value
at the end of the previous year, whichever is applicable.
Benefits Paid to Participants
Benefits paid to participants are recorded by the Plan when paid.
Use of Estimates
Preparing financial statements in conformity with accounting principles
generally accepted in the United States of America requires Plan management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and changes therein, and disclosures of contingent
assets and liabilities. Actual results could differ from those estimates.
9
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Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Adoption of Statement of Position 99-3
The Plan has adopted Statement of Position (SOP) 99-3, Accounting for and
Reporting of Certain Defined Contribution Plan Investments and Other
Disclosure Matters for the plan year ended December 31, 1999. This SOP
eliminates certain disclosures for participant-directed investment programs
and the requirement to disclose the total number of units and net asset
values per unit. The adoption of the SOP had no effect on the total net asset
amounts disclosed in the financial statements. Certain reclassifications have
been made to the 1998 financial statements to conform to the presentation
used in 1999.
NOTE B - PLAN DESCRIPTION
The following description of the Plan provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
General
The Plan is a defined contribution plan subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA). The Plan was
established effective January 1, 1991 and elective deferrals were first
permitted beginning July 1, 1991. During 1998, the Plan was restated,
effective January 1, 1997, to incorporate all amendments and tax compliance
provisions.
Plan assets are held by a trustee, CG Trust Company.
Eligibility
All employees of Computer Network Technology Corporation (the Company) who
are age eighteen or older and are scheduled to work at least 1,000 hours of
service in the first year are eligible to participate in the Plan beginning
on the first day of the calendar quarter following one month of employment.
Employees are eligible for discretionary employer matching contributions when
they become participants in the Plan, provided they are employees of the
Company as of December 31.
10
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Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE B - PLAN DESCRIPTION - Continued
Vesting
Participant elective deferral contributions are 100% vested regardless of
length of service. Employer match contributions are 50% vested with two years
of service, 75% vested with three years of service, and 100% vested with four
years of service (see Note F).
Funding Policy
Contributions made pursuant to participant elective deferrals are permitted
up to 15% of the participant's compensation, subject to limits established by
law. Participants may also make rollover contributions to the Plan. Elective
deferral contribution percentages may be changed on the first day of the
calendar quarter.
During 1998, the Plan accepted after-tax contributions of $99,352 from
participants. As of January 1, 1999, the Plan no longer accepts after-tax
contributions.
Matching employer contributions are at the discretion of the Plan Sponsor.
The contribution is based on a matching percentage of eligible participant
contributions, not to exceed a dollar amount, as determined by the employer.
During 1999 and 1998, the employer match was 50% of employee contribution,
not to exceed $1,000 (see note F). The participant must be employed on the
last day of the Plan year to share in the employer contribution.
Participants' Accounts
Participants' accounts are credited with their participant contributions
(elective deferral and rollover), discretionary employer matching
contributions and an allocation of Plan earnings. Allocations of Plan
earnings are based on participant account balances, as defined in the Plan.
The benefit to which a participant is entitled is the vested portion of the
participant's account.
Payment of Benefits
On termination of service, a participant may elect to receive a lump-sum
distribution equal to the value of the participant's vested interest in his
or her account, net of tax, or to rollover the entire vested portion to a
qualified plan. If the participant account is not fully distributed at
termination of service, an installment payment may be elected by the
participant. If the participant's vested balance is greater than $5,000, the
participant may also elect not to receive a distribution at the date of
termination, as defined in the agreement.
11
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Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE B - PLAN DESCRIPTION - Continued
Plan Termination
Although the Plan Sponsor has no current intention of terminating the Plan,
the Plan provides that upon termination, all amounts credited to a
participant's account become 100% vested. Net assets of the Plan would be
distributed to the participants as prescribed in the Plan agreement.
Net Transfers Between Accounts and Funds
Assets of the Plan are held in various accounts and funds, as defined in the
Plan summary. The Plan allows participant's to direct their investments and
to make transfers between these accounts and funds daily, except for the
participant loan fund. Participant loan transactions are treated as transfers
to/(from) the investment funds from/(to) the participant loan fund. The total
of all interfund transfers between the investment accounts and funds and the
participant loan fund is zero.
Participant Loans
The Plan allows participants to direct the investment of certain assets in
their accounts by providing loans to participants. Participants may borrow
from their fund accounts up to a maximum of the lesser of $50,000 or 50% of
their vested account balance. The participant loans outstanding at December
31, 1999 and 1998 were $638,014 and $537,064. Such loans bear interest at the
"prime rate" plus 1% at interest rates ranging from 7.00% to 9.75% for the
years ended December 31, 1999 and 1998. Principal and interest are repaid
ratably through payroll deductions.
Forfeitures
The Plan allows for forfeitures of terminated participants' non-vested
amounts to be transferred to the CIGNA Charter Guaranteed Long-Term Fund
account at the time of the terminated participant's distribution or after a
five year break-in-service period. Prior to the five year break-in-service
limit, the forfeitures are held in the respective funds in a time restricted
account on behalf of the Plan Sponsor. The Plan Sponsor may use these funds
to offset administrative expenses.
12
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Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE C - INVESTMENTS
The following fair values represent 5 percent or more of the Plan's net
assets.
<TABLE>
<CAPTION>
December 31,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Fidelity Advisor Growth Opportunities
Account, 63,789 and 65,625 units $5,122,474 $5,041,241
Computer Network Technology Corporation
Common Stock Fund, 182,075 and 223,271 shares
(see Note F) 4,176,345 2,790,891
CIGNA Charter Guaranteed Long-Term
Fund, 96,176 and 57,430 units 3,606,062 2,016,157
CIGNA Charter Large Company Stock
Index Fund, 45,385 and 36,895 units 3,386,054 2,278,093
Janus Worldwide Account, 34,882 and 21,116 units 3,074,575 1,132,164
Fidelity Advisor Equity Growth Account, 23,040 and
21,128 units 2,610,992 1,743,940
Fidelity Advisor Balanced Account, 45,645 and 43,683
units 1,523,873 1,386,846
</TABLE>
The Plan's investments (including realized and unrealized gains and losses)
appreciated in value as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Mutual Funds $3,203,375 $2,475,802
Common Stock 2,848,075 2,602,120
---------- ----------
$6,051,450 $5,077,922
========== ==========
</TABLE>
NOTE D - INCOME TAX STATUS
The Plan obtained its latest determination letter on December 18, 1998, in
which the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the Internal Revenue
Code.
13
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Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE E - RELATED PARTIES
Certain Plan investments are separate accounts managed by CG Trust Company,
affiliated with CIGNA, and therefore, these transactions qualify as
party-in-interest.
NOTE F - SUBSEQUENT EVENTS
Beginning January 1, 2000, the employer match contribution was modified to 100%
of employee contribution, not to exceed $1,500 for all eligible participants as
defined in the Plan agreement. Also, the employer match contributions vest
prospectively as follows: 25% vested with one year of service, 50% vested with
two years of service, 75% vested with three years of service, and 100% vested
with four years of service.
As of June 6, 2000, the fair value of the Plan's investment in shares of
Computer Network Technology Corporation common stock declined by approximately
$1,800,000 from December 31, 1999.
14
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SUPPLEMENTARY SCHEDULE
<PAGE> 16
Computer Network Technology Corporation
401(k) Salary Savings Plan
EIN: 41-1356476
Plan No: 001
SCHEDULE H - Line 4(i) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1999
<TABLE>
<CAPTION>
(b) Identity of issue, borrower, (e) Current
(a) lessor or similar party (c) Description of investment value
--- ---------------------------------- --------------------------------- ------------
<S> <C> <C> <C>
(*) CG Trust Company CIGNA Charter Guaranteed Long-Term
Fund $ 3,606,062
(*) CG Trust Company Fidelity Advisor Equity Growth Account 2,610,992
(*) CG Trust Company Fidelity Advisor Balanced Account 1,523,873
(*) CG Trust Company Fidelity Advisor Growth Opportunities
Account 5,122,474
(*) CG Trust Company CIGNA Charter Large Company Stock
Index Fund 3,386,054
(*) Computer Network Technology Corporation Computer Network Technology
Corporation Common Stock Fund 4,176,345
(*) CG Trust Company CIGNA Charter Growth and Income Fund 1,323,045
(*) CG Trust Company Dreyfus Founders Growth Account 1,203,912
(*) CG Trust Company Janus Worldwide Account 3,074,575
(*) CG Trust Company Neuberger Berman Partners Account 546,511
(*) CG Trust Company AIM Constellation Account 883,830
(*) CG Trust Company State Street Global Advisors
Intermediate Bond Account 90,868
(*) CG Trust Company CIGNA Charter Small Company Stock
Growth Fund 199,818
(*) Participant Loans Interest ranging from 7.00% to 9.75% 638,014
-----------
$28,386,373
===========
</TABLE>
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(*) Party-in-interest
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee
(or other persons who administer the employee benefit plan) have duly caused
this annual report to be signed on its behalf by the undersigned thereunto duly
authorized.
COMPUTER NETWORK TECHNOLOGY CORPORATION
401(K) SALARY SAVINGS PLAN
By: COMPUTER NETWORK TECHNOLOGY CORPORATION
PLAN ADMINISTRATOR
By: /s/ Gregory T. Barnum
-----------------------------
Gregory T. Barnum
Chief Financial Officer
Date: June 9, 2000
<PAGE> 18
EXHIBIT INDEX
Exhibit Description
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Page
23.01 Consent of Independent Certified Public
Accountants.................................Electronically Filed
