e11vk
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 Year Ended December 31, 2005
Commission file number: 0-1424
| A. |
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Full title of the plan and the address of the plan, if different from that of the issuer named below: |
ADC Telecommunications, Inc.
Retirement Savings Plan
| B. |
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Name of issuer of securities held pursuant to the plan and the address of its principal
executive offices: |
ADC Telecommunications, Inc.
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| Minnesota
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41-0743912 |
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| (State or other jurisdiction of
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(I.R.S. Employer |
| incorporation or organization)
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Identification No.) |
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| 13625 Technology Drive |
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| Eden Prairie, Minnesota
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55344 |
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| (Address of principal executive offices)
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(Zip Code) |
Issuer’s telephone number, including area code: (952) 938-8080
Financial Statements and Schedule
ADC Retirement Savings Plan
Years Ended December 31, 2005 and 2004
ADC Retirement Savings Plan
Financial Statements and Schedule
Years Ended December 31, 2005 and 2004
Contents
Report of Independent Registered Public Accounting Firm
The Plan Administrator and Participants
ADC Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits of the ADC
Retirement Savings Plan as of December 31, 2005 and 2004, 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 the 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. We
were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances but not for the purpose of expressing an
opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly,
we express no such opinion. An audit also 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 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, 2005 and 2004, and the
changes in its net assets available for benefits for the years then ended, in conformity with U.S.
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken
as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December
31, 2005, is presented for purposes of additional analysis and is not a required part of the
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 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.
Minneapolis,
Minnesota
June 26, 2006
/s/
Ernst & Young, LLP
1
ADC Retirement Savings Plan
Statements of Net Assets Available for Benefits
| |
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December 31 |
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2005 |
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2004 |
| |
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Assets |
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|
|
|
|
|
|
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Cash |
|
$ |
78,072 |
|
|
$ |
80,714 |
|
Investments, at fair value |
|
|
281,342,776 |
|
|
|
265,245,304 |
|
Employee contributions receivable |
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|
83,443 |
|
|
|
76,891 |
|
Employer contributions receivable |
|
|
4,742,915 |
|
|
|
275,283 |
|
| |
|
|
Net assets available for benefits |
|
$ |
286,247,206 |
|
|
$ |
265,678,192 |
|
| |
|
|
See accompanying notes.
2
ADC Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
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Year Ended December 31 |
| |
|
2005 |
|
2004 |
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Net assets available for benefits, beginning of year |
|
$ |
265,678,192 |
|
|
$ |
253,327,833 |
|
Increases (decreases) during the year: |
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Employee contributions: |
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|
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|
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Employee contributions |
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11,542,742 |
|
|
|
11,485,683 |
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Employee rollover contributions |
|
|
258,754 |
|
|
|
7,479,820 |
|
| |
|
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Total employee contributions |
|
|
11,801,496 |
|
|
|
18,965,503 |
|
|
|
|
|
|
|
|
|
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Employer contributions |
|
|
10,586,883 |
|
|
|
4,531,531 |
|
Investment income |
|
|
5,246,428 |
|
|
|
4,610,633 |
|
Net realized/unrealized appreciation in fair value
of investments |
|
|
17,347,426 |
|
|
|
12,315,434 |
|
Benefit distributions to participants |
|
|
(24,413,219 |
) |
|
|
(28,072,742 |
) |
| |
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Net increase during the year |
|
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20,569,014 |
|
|
|
12,350,359 |
|
| |
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Net assets available for benefits, end of year |
|
$ |
286,247,206 |
|
|
$ |
265,678,192 |
|
| |
|
|
See accompanying notes.
3
ADC Retirement Savings Plan
Notes to Financial Statements
December 31, 2005
1. Plan Description
General
The ADC Retirement Savings Plan (the Plan) is a defined contribution plan covering substantially
all domestic salaried employees of ADC Telecommunications, Inc. (ADC or the Company). The Plan is
subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The
following is not a comprehensive description of the Plan and, therefore, does not include all
situations and limitations covered by the Plan. Participants should refer to the plan document for
more complete information.
Plan Operations
Ameriprise Trust Company (the Trustee) is the trustee and record-keeper of the Plan. ADC
Telecommunications, Inc. is the plan sponsor. The Trustee is responsible for holding investment
assets of the Plan, executing investment transactions, and making disbursements to participants.
All audit, legal, and plan administrative-related expenses are paid by the Company except for
investment management fees, which are netted against investment income. During 2005 and 2004, the
Company paid $102,825 and $161,023, respectively, in expenses related to the Plan.
Eligibility
Employees in recognized employment, as defined, may contribute to the Plan immediately. Company
contributions commence following one year of service, as defined by the Plan.
Contributions and Vesting
Under the provisions of the Plan, participants classified as highly compensated employees may elect
to make contributions from 1% to 15% of their eligible pretax earnings, and participants classified
as non-highly-compensated employees may elect to make contributions from 1% to 25% of their
eligible pretax earnings. The Company matches 50% of an eligible participant’s contributions up to
the first 6% of eligible compensation.
4
ADC Retirement Savings Plan
Notes to
Financial Statements (continued)
1. Plan Description (continued)
The Company may also make a discretionary performance match contribution. Amounts credited to the
accounts of participants for employer and employee contributions are fully vested.
Each participant’s account is credited with the participant’s contribution and allocations of (a)
the Company’s contribution and (b) plan earnings and is charged with an allocation of investment
management fees. Allocations are based on participant earnings on 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.
Distributions
Those participants whose employment terminates due to retirement, death, disability, or other
reasons are entitled to a lump-sum distribution of a benefit equal to the amount credited to their
account.
Participant Loans
A participant may obtain a loan generally up to the lesser of one-half of the participant’s account
balance or $50,000. The loan must be repaid with interest at 1% above the prime rate within 5
years, with the exception of residential loans, which must be repaid in 15 years. Participants
repay loans through payroll deductions.
As participant loan repayments are received, they are immediately invested in the investment
fund(s) in accordance with that participant’s investment allocation election for current
contributions.
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 terminate the Plan, subject to the provisions set
forth in ERISA. In the event of the Plan’s termination, the participants shall receive 100% of
their account balances.
5
ADC Retirement Savings Plan
Notes to
Financial Statements (continued)
2. Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting.
Valuation of Investments
Investments are recorded at fair value. Common stock and mutual fund values are determined using
quoted market prices. Common/collective funds are valued by the trustee based on the values of the
underlying investments. The participant loans are valued at their outstanding balances, which
approximate fair value. Changes in the fair value of investments between years are included in net
realized/unrealized appreciation in fair value of investments in the accompanying statements of
changes in net assets available for benefits. Purchases and sales of securities are recorded on a
trade-date basis.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted
in the United States requires management to make estimates that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates.
Reclassifications
Certain 2004 amounts were reclassified to conform to the 2005 presentation.
3. Investments
Upon enrollment in the Plan, a participant may direct employee contributions in any of 16
investment options.
The Plan invests in various 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, it is at least reasonably possible that changes in the value of
investment securities will occur in the near term and that such changes could materially affect the
amounts reported in the statements of net assets available for benefits.
6
ADC Retirement Savings Plan
Notes to
Financial Statements (continued)
3. Investments (continued)
The fair market value of individual investments that represent 5% or more of the Plan’s net assets
as of December 31 is as follows:
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|
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|
| |
|
2005 |
|
2004 |
| |
|
|
ADC Telecommunications, Inc. common stock |
|
$ |
52,637,888 |
|
|
$ |
50,040,949 |
|
Franklin Small/Mid Capital Growth Fund |
|
|
42,000,652 |
|
|
|
40,757,583 |
|
RiverSource Trust Stable Capital II Fund |
|
|
36,629,118 |
|
|
|
33,847,258 |
|
American Century Income and Growth Fund |
|
|
36,052,909 |
|
|
|
36,345,105 |
|
Dodge and Cox Balanced Fund |
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|
34,945,928 |
|
|
|
32,667,416 |
|
MFS Institutional International Equity Fund |
|
|
27,093,965 |
|
|
|
24,392,668 |
|
During 2005 and 2004, the Plan’s investments, including investments purchased and sold, as
well as held during the year, appreciated (depreciated) in fair value as follows:
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Year Ended December 31 |
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|
2005 |
|
2004 |
| |
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Net realized/unrealized appreciation (depreciation)
in fair value of investments: |
|
|
|
|
|
|
|
|
Mutual funds |
|
$ |
5,761,445 |
|
|
$ |
13,929,137 |
|
Common/collective funds |
|
|
1,783,369 |
|
|
|
3,339,668 |
|
Common stock |
|
|
9,802,612 |
|
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|
(4,953,371 |
) |
| |
|
|
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|
$ |
17,347,426 |
|
|
$ |
12,315,434 |
|
| |
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|
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated March 21,
2002, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the
Code) and, therefore, the related trust is exempt from taxation. Subsequent to the issuance of this
determination letter, the Plan was amended. 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, as amended, is qualified and the related trust is tax-exempt.
7
ADC Retirement Savings Plan
Notes to
Financial Statements (continued)
5. Reconciliation of the Financial Statements to the Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements
to the Form 5500:
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|
|
|
|
| |
|
December 31, |
|
| |
|
2004 |
|
Net assets available for benefits per the financial statements |
|
$ |
265,678,192 |
|
Employer contributions receivable allocated on the Form 5500 |
|
|
2,220,057 |
|
|
|
|
|
Net assets available for benefits per the Form 5500 |
|
$ |
267,898,249 |
|
|
|
|
|
The following is a reconciliation of employer contributions per the financial statements to the
Form 5500:
| |
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|
|
|
|
|
|
| |
|
Year Ended December 31 |
| |
|
2005 |
|
2004 |
| |
|
|
Employer contributions per the financial statements |
|
$ |
10,586,883 |
|
|
$ |
4,531,531 |
|
Employer contributions allocated on
Form 5500 at December 31, 2004 |
|
|
(2,220,057 |
) |
|
|
2,220,057 |
|
| |
|
|
Employer contributions per the Form 5500 |
|
$ |
8,366,826 |
|
|
$ |
6,751,588 |
|
| |
|
|
Employer contributions allocated to participants are recorded on the Form 5500 for
contributions that were approved prior to December 31, 2004, but
were not reported in the financial statements until
2005.
8
ADC Retirement Savings Plan
Notes to Financial Statements (continued)
6. Legal Matters
On May 19, 2003, ADC Telecommunications, Inc. was served with a lawsuit that was filed in the
United States District Court for the District of Minnesota. The complaint named ADC and several of
its current and former officers, employees, and directors as defendants. After this lawsuit was
served, ADC was served with two substantially similar lawsuits. All three of these lawsuits were
consolidated into a single lawsuit captioned In Re ADC Telecommunications, Inc. ERISA
Litigation. This lawsuit has been brought by individuals who seek to represent a class of
participants in the Plan who purchased ADC common stock as one of the investment alternatives under
the Plan from February 2000 to present. The lawsuit alleges a breach of fiduciary duties under the
Employee Retirement Income Security Act. On October 26, 2005, after mediation, the parties settled
the case subject to various approvals, including approvals from an independent fiduciary and the
court. Pending finalization, the amount and terms of the settlement due the Plan are confidential.
We do not expect, based on the conditional agreement, the resolution of this matter to have a
material impact on the financial statements of the Plan.
9
Schedule
ADC Retirement Savings Plan
EIN: 41-0743912
Plan #002
Schedule H,
Line 4i — Schedule of Assets (Held at End of Year)
December 31, 2005
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Current |
|
| Description of Investment |
|
Value |
|
| |
ADC Telecommunications, Inc. common stock* |
|
$ |
52,637,888 |
|
RiverSource Trust Money Market II* |
|
|
924,793 |
|
Franklin Small/Mid Capital Growth Fund |
|
|
42,000,652 |
|
RiverSource Trust Stable Capital II Fund* |
|
|
36,629,118 |
|
American Century Income and Growth Fund |
|
|
36,052,909 |
|
Dodge and Cox Balanced Fund |
|
|
34,945,928 |
|
MFS Institutional International Equity Fund |
|
|
27,093,965 |
|
RiverSource Trust Equity Index Fund I* |
|
|
11,962,085 |
|
Dodge and Cox Income Fund |
|
|
6,689,866 |
|
Robeco Boston Partners Small Cap Value II Instl |
|
|
9,282,915 |
|
BNY Hamilton Small Cap Growth Fund |
|
|
4,443,704 |
|
Vanguard Target Retirement Income Fund |
|
|
2,142,252 |
|
Vanguard Target Retirement 2015 Fund |
|
|
4,524,390 |
|
Vanguard Target Retirement 2035 Fund |
|
|
6,828,200 |
|
Vanguard Target Retirement 2005 Fund |
|
|
260,788 |
|
Vanguard Target Retirement 2025 Fund |
|
|
580,708 |
|
Vanguard Target Retirement 2045 Fund |
|
|
317,397 |
|
Loans to participants, 6.5% to 8.25%* |
|
|
4,025,218 |
|
|
|
|
|
Total investments |
|
$ |
281,342,776 |
|
|
|
|
|
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, ADC Telecommunications,
Inc. has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
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ADC Telecommunications, Inc. |
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Retirement Savings Plan |
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(Name of Plan) |
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By:
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ADC TELECOMMUNICATIONS, INC. |
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Date: June 28, 2006
|
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By:
|
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/s/ Gokul V. Hemmady |
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Name: Gokul V. Hemmady |
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Title:
|
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Vice President and Chief Financial Officer |