SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 30, 1999
Commission File No. 0-24612
ADTRAN, INC. 401(k) EMPLOYEE SAVINGS PLAN
ADTRAN, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 63-0918200
(State of incorporation) (I.R.S. Employer
Identification Number)
901 Explorer Boulevard, Huntsville, Alabama 35806-2807
(Address of principal executive offices, including zip code)
(256) 963-8000
(Registrant's telephone number, including area code)
Required Information: The Plan is subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"). Therefore, in lieu of the requirements of Items
1-3 of Form 11-K, the financial statements and schedules of the Plan for the two
fiscal years ended December 31, 1999 and 1998, which have been prepared in
accordance with the financial reporting requirements of ERISA, and the consent
of PricewaterhouseCoopers, are filed as a part of this annual report:
Signatures: Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the Plan) have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
ADTRAN, Inc. 401(k) EMPLOYEE SAVINGS PLAN
/s/ John R. Cooper October 16, 2000
- ------------------ ----------------
John R. Cooper Date
Vice President - Administration and Finance
and Chief Financial Officer
ADTRAN, Inc.
401(k) Employee Savings Plan
Financial Statements and Supplemental Schedule
December 31, 1999 and 1998
ADTRAN, Inc. 401(k) Employee Savings Plan
Table of Contents
- --------------------------------------------------------------------------------
Pages
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits
December 31, 1999 and 1998 2
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1999 3
Notes to Financial Statements 4 - 8
*Supplemental Schedule:
Schedule of Assets Held For Investment Purposes as of December 31, 1999 9
*Other schedules required by 29 CFR 2520.130-10 of the Department of Labor's
Rules and Regulations for Disclosure under the Employee Retirement Income
Security Act of 1974 have been omitted because they are not applicable.
Report of Independent Accountants
To the Participants and Administrator of the
ADTRAN, Inc. 401(k) Employee Savings Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statement of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of ADTRAN, Inc. 401(k) Employee Savings Plan (the "Plan") at
December 31, 1999 and 1998, and the changes in net assets available for plan
benefits for the year ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America. 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 of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule, as listed on
the accompanying table of 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 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.
June 21, 2000
1
ADTRAN, Inc. 401(k) Employee Savings Plan
Statements of Net Assets Available for Plan Benefits
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
ASSETS
Investments, at market value $27,571,046 $19,684,006
Contributions receivable:
Employer 15,215 13,068
Employee 43,792 36,471
----------- -----------
Net assets available for plan benefits $27,630,053 $19,733,545
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
ADTRAN, Inc. 401(k) Employee Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
Investment income:
Interest and dividend income $ 261,664
Net appreciation in market value of investments 3,559,026
-----------
Total investment income 3,820,690
-----------
Contributions:
Employee contributions 3,329,130
Rollover proceeds 753,378
Employer contributions 1,140,213
-----------
Total contributions 5,222,721
-----------
Total additions 9,043,411
-----------
Benefits paid to participants 1,136,255
Administrative expenses 10,648
-----------
Total deductions 1,146,903
-----------
Net increase 7,896,508
Net assets available for plan benefits:
Beginning of year 19,733,545
-----------
End of year $27,630,053
===========
The accompanying notes are an integral part of these financial statements.
3
ADTRAN, Inc. 401(k) Employee Savings Plan
Notes to Financial Statements
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1. Description of the Plan
The following brief description of the ADTRAN, Inc. 401(k) Employee Savings
Plan (the Plan) is provided for general information only. Participants should
refer to the plan agreement for a more complete description of the Plan's
provisions.
General - ADTRAN, Inc. (the Company and the Employer) formed the Plan
effective January 1, 1990 to provide certain retirement, death, and
disability benefits for its employees. The Plan is a defined contribution
plan subject to the provisions set forth in the Employee Retirement Income
Security Act of 1974 (ERISA) and is funded by discretionary employee and
employer contributions. The plan assets are held by AUSA Life Insurance
Company, Inc. (the Custodian) which executes investment transactions,
receives the plan contributions, credits participants' individual accounts,
and pays benefits to participants and their beneficiaries in accordance with
the provisions of the Plan. The Plan was amended, effective July 1, 1997, to
allow the Company's common stock to be purchased by the Plan.
Eligibility - An employee is eligible to participate in the Plan following
the completion of six months of service and attainment of age twenty-one.
Contributions - Employees participating in the Plan elect to have 1% to 16%
of their salaries deferred and contributed to the Plan. For each employee who
participated in the Plan during 1999, the Company made matching contributions
equal to 50% of the first 5% of salary deferred by the participants. At its
discretion, the Company may contribute to the Plan a discretionary profit-
sharing contribution, which shall be in addition to the Company's matching
contribution. No discretionary contributions were made in 1999. Each
participant directs how contributions made by the participant and by the
Company on his/her behalf are to be invested among the investment options
available under the Plan. The Plan currently offers twelve pooled separate
accounts, one guaranteed interest account, and a Company stock fund.
Participant Accounts - Each participant's account is credited with the
employee's contribution and the Company's matching contribution plus an
allocation of Company discretionary contributions and plan earnings.
Allocations are based on account balances, as defined more fully in the plan
agreement. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's account.
Vesting - Employees are always 100% vested in their individual accounts.
Retirement Date - The normal retirement date is the first day of the calendar
month following the date a participant reaches age 62. Early retirement is
permitted after a participant reaches age 59-1/2.
4
ADTRAN, Inc. 401(k) Employee Savings Plan
Notes to Financial Statements
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Distribution of Benefits - Benefits commence upon one of several dates:
normal retirement, early retirement, date of disability, pre-retirement
death, and upon termination other than described above. Benefits are
distributed by means of either a lump sum payment or by one of various
conventional annuity options.
Other - The Plan allows for participant hardship withdrawals at any time if
certain conditions are met.
Plan Termination - While it is the intention of the Company to permanently
continue the Plan, the Company has the right to amend or terminate the Plan
at any time upon written notice to the Savings Committee and to the plan
Custodian. No amendment may permit any plan assets to revert to the Employer
or be used for any purpose other than to provide benefits to participants and
their beneficiaries, or eliminate an optional form of benefit payment. Upon
termination of the plan, plan assets will be distributed to participants and
their beneficiaries in accordance with the Plan and subject to ERISA
guidelines.
Participant Loans - Participants may borrow a minimum of $1,000 from their
fund accounts up to a maximum equal to the lesser of $50,000 or 50% of their
account balance. Loan transactions are treated as transfers between the
investment fund and the participant loan fund. Loan terms range from one to
five years unless such loan is used to acquire a principal residence. The
outstanding loans at December 31, 1999 are collateralized by the balances in
the participants' accounts and bear interest at rates commensurate with local
prevailing rates as determined quarterly by the plan administrator. Interest
rates range from 8.25% to 10% for loans that were outstanding as of December
31, 1999.
Administrative Expenses - All expenses incident to the functioning of the
Plan may be paid out of plan assets unless paid by the Employer. Accrued
expenses constitute a liability of the Plan until paid, and may be reimbursed
by the Employer. Any such reimbursement is not considered an Employer
contribution.
2. Summary of Significant Accounting Policies
The following is a summary of accounting policies utilized in the financial
statements which were prepared in accordance with accounting principles
generally accepted in the United States of America.
Basis of Accounting - The accounting records of the Plan are maintained on
the accrual basis in accordance with accounting principles generally accepted
in the United States of America.
5
ADTRAN, Inc. 401(k) Employee Savings Plan
Notes to Financial Statements
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Valuation of Investments - Investments in pooled separate accounts and
unallocated contracts with insurance companies are stated at contract value
as determined by the Custodian. Market value of equity securities which are
traded on a national exchange are valued at the last reported sales price on
the last business day of the plan year. Purchases and sales of investments
are reflected as of the trade date. Dividend and interest income is recorded
when earned.
The Plan presents, in the statement of changes in net assets available for
plan benefits, the net appreciation (depreciation) in the market value of its
investments which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
Contributions - Contributions from the Employer are accrued based on amounts
declared by the Company's Savings Committee. Contributions from employees are
recorded in the period in which the Company makes the deductions from the
participants' payroll.
Risks and Uncertainties - The Plan provides for various investment options in
any combination of stocks, bonds, fixed income securities, and other
investment securities. Investment securities are exposed to various risks,
such as interest rate, market, and credit risks. Due to the level of risk
associated with certain investment securities and the level of uncertainty
related to changes in the value of investment securities, it is at least
reasonably possible that changes in risks in the near term could materially
affect participants' account balances and the amounts reported in the
statement of net assets available for plan benefits and the statement of
changes in net assets available for plan benefits.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 additions and deductions during the reporting periods.
Actual results could differ from those estimates.
3. Investments
The Plan's investments, other than participant loans and the ADTRAN stock
fund, are held in unallocated contracts or pooled separate accounts sponsored
by the Custodian. Investments as of December 31, 1999 and 1998 and investment
information for the year ended December 31, 1999 are as follows:
6
ADTRAN, Inc. 401(k) Employee Savings Plan
Notes to Financial Statements
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Contract Value Contract Value
At at
December 31, December 31,
Description 1999 1998
----------- ------------- -------------
Unallocated contracts:
Stable fund $ 3,027,543 $ 2,510,739
Pooled separate accounts:
Money market fund 468,676 366,562
Equity income fund 3,351,984 2,757,748
Growth and income fund 5,602,578 3,122,701
Special equity fund 4,658,887 3,493,696
Intermediate government bond fund 800,615 623,948
Balanced fund 2,731,463 2,369,256
Government/Corporate bond fund 281,212 137,543
Short horizon SAF fund 98,885 76,207
Intermediate horizon SAF fund 956,735 751,679
Inter/Long horizon SAF fund 1,715,704 1,327,303
Government fixed fund 822,623 783,243
Stock index fund 1,171,975 261,480
ADTRAN stock fund 773,910 178,173
Participant loans 1,108,256 923,728
----------- -----------
Total investments $27,571,046 $19,684,006
=========== ===========
Interest and dividend income $ 261,664
===========
Net appreciation in market value of investments $ 3,559,026
===========
The following is a summary of assets held in excess of 5% of the Plan's net
assets available for plan benefits at December 31, 1999 and 1998:
1999 1998
Stable fund $3,027,543 $2,510,739
Equity income fund $3,351,984 $2,757,748
Growth and income fund $5,602,578 $3,122,701
Special equity fund $4,658,887 $3,493,696
Balanced fund $2,731,463 $2,369,256
Inter/Long Horizon SAF fund $1,715,704 $1,327,303
7
ADTRAN, Inc. 401(k) Employee Savings Plan
Notes to Financial Statements
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
The Plan's investments (including investments bought and sold, as well as
held, during the year) appreciated in value by $3,559,026 during the year
ended December 31, 1999, as follows:
Pooled separate accounts $ 3,136,133
ADTRAN stock fund 422,893
------------
$ 3,559,026
============
4. Income Tax Status
The Plan has received a favorable determination letter from the Internal
Revenue Service stating that the Plan, as then designed, was in compliance
with the applicable requirements of the Internal Revenue Code. Although the
Plan has since been amended, the Plan administrator and the Plan's tax
counsel believe that the Plan is operating in such a manner so as not to
jeopardize its favorable tax status. Therefore, no provision for income taxes
has been included in the Plan's financial statements.
5. Comparison of Financial Statements to Form 5500
Annually, the Company files, on behalf of the Plan, an information return
(Form 5500) that includes financial information prepared on the basis of cash
receipts and disbursements. The accompanying financial statements differ from
the 1999 Form 5500 primarily due to the accrual of employer and employee
contributions for financial statement reporting purposes.
8
Supplemental Schedule
ADTRAN, Inc. 401(k) Employee Savings Plan
Schedule of Assets Held for Investment Purposes
As of the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
c. Description of Investment Including
b. Identity of Issuer, Borrower, Maturity Date, Rate of Interest, e. Current
a. Lessor, or Similar Party Collateral, Par or Maturity Value Value
- -- --------------------------------- --------------------------------------- ------------
* AUSA Life Insurance Company Unallocated contract with insurance
company - Stable fund $3,027,543
* AUSA Life Insurance Company Pooled separate account - Money
market fund 468,676
* AUSA Life Insurance Company Pooled separate account - Equity
income fund 3,351,984
* AUSA Life Insurance Company Pooled separate account - Growth and
income fund 5,602,578
* AUSA Life Insurance Company Pooled separate account - Special
equity fund 4,658,887
* AUSA Life Insurance Company Pooled separate account -
Intermediate government bond fund 800,615
* AUSA Life Insurance Company Pooled separate account - Balanced
fund 2,731,463
* AUSA Life Insurance Company Pooled separate account -
Government/Corporate bond fund 281,212
* AUSA Life Insurance Company Pooled separate account - Short
horizon SAF fund 98,885
* AUSA Life Insurance Company Pooled separate account -
Intermediate horizon SAF fund 956,735
* AUSA Life Insurance Company Pooled separate account - Inter/Long
horizon SAF fund 1,715,704
* AUSA Life Insurance Company Pooled separate account - Government
fixed fund 822,623
* Diversified Investment Pooled separate account - Stock
Advisors index fund 1,171,975
* AUSA Life Insurance Company ADTRAN stock fund 773,910
* Diversified Investment Participant loans - rate of
Advisors interest: 8.25% - 10% 1,108,256
------------
$ 27,571,046
============
* Party-in-interest to the Plan.
9