UNITED STATES
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, 2002
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COMMISSION FILE NUMBER 0-20842
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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:
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
PLATO Learning, Inc.
10801 Nesbitt Avenue South
Bloomington, MN 55437
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2002 AND 2001
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
CONTENTS
DECEMBER 31, 2002 AND 2001
PAGE(S)
REPORT OF INDEPENDENT ACCOUNTANTS......................................................1
FINANCIAL STATEMENTS
Statement of Assets Available for Plan Benefits........................................2
Statement of Changes in Assets Available for Plan Benefits.............................3
Notes to Financial Statements.......................................................4--8
SUPPLEMENTAL SCHEDULE
Schedule I: Schedule of Assets (Held at End of Year)...............................9
Note: Other schedules required by 29 CFR 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and 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
PLATO Learning, Inc. Savings/Retirement Plan
In our opinion, the accompanying statements of assets available for plan
benefits and the related statements of changes in assets available for plan
benefits present fairly, in all material respects, the assets available for
benefits of PLATO Learning, Inc. Saving/Retirement Plan (the "Plan") at
December 31, 2002 and 2001, and the changes in assets available for plan
benefits for the year ended December 31, 2002, 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 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, 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.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets
(Held at End of Year) 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, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
June 25, 2003
1
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 2002 AND 2001
2002 2001
ASSETS
Investments, at fair value $ 6,697,508 $ 7,690,550
Participant contribution receivable 34,501 -
Employer contribution receivable 16,319 186,659
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Assets available for plan benefits $ 6,748,328 $ 7,877,209
============ =============
The accompanying notes are an integral part of these financial statements.
2
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 2002
INVESTMENT LOSS
Net depreciation in fair value of investments $(2,107,046)
Interest and dividend income 105,708
-----------
Total investment loss (2,001,338)
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CONTRIBUTIONS
Participant 1,637,730
Employer 301,067
-----------
Total contributions 1,938,797
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DEDUCTIONS
Benefits paid to participants (1,065,627)
Administration expenses (713)
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Total deductions (1,066,340)
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Net decrease (1,128,881)
ASSETS AVAILABLE FOR PLAN BENEFITS
Beginning of year 7,877,209
-----------
End of year $ 6,748,328
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The accompanying notes are an integral part of these financial statements.
3
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
1. DESCRIPTION OF PLAN
The following description of the PLATO Learning, Inc. (the "Company")
Savings/Retirement Plan (the "Plan") is provided for general
informational purposes only. Participants should refer to the Plan
document for a more complete description of the Plan's provisions.
Effective January 2, 2003, the Company transferred the recordkeeping
functions of the Plan to Administrative Management Group, Inc., and the
trustee function of the Plan to Wilmington Trust Company.
Effective January 2, 2003, the Company terminated their other two
existing 401(k) plans (NetSchools Corporation 401(k) Plan and Department
of Defense 401(k) Plan) and the account balances of $1,060,795 and
$46,108, respectively, were transferred to the Plan pursuant to the terms
of the Plan.
GENERAL
The Plan is a contributory defined contribution plan covering all
eligible employees of the Company. Employees of the Company must complete
90 days of service to be eligible to participate in the Plan. There is no
age requirement to participate in the Plan. The Company utilizes Scudder
Trust Company ("Scudder") as the Plan's investment manager, asset
custodian and recordkeeper.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
CONTRIBUTIONS
Participants may contribute up to 20 percent of their pre-tax
compensation, up to a maximum dollar amount, as defined, subject to
certain other Internal Revenue Service limitations. The Company
appropriately adopted the provisions of the Economic Growth and Tax
Relief Reconciliation Act in 2002. These provisions increase the
contribution limits for participants who are at least age 50.
The Company may also make contributions to the Plan at its discretion.
Any such amount must be designated by Company resolution. In 2002, the
discretionary contribution was a per pay period match totaling 50 percent
of up to 4 percent of participant contributions, with a cap of $4,000 in
total employer contributions per participant.
PARTICIPANT ACCOUNTS
Individual participant accounts are maintained by Scudder. Each
participant's account is credited with the participant's contribution,
Plan earnings or loss and an allocation of the Company's contribution.
Allocations are based on participant earnings and account balances, as
defined.
VESTING
Participants are immediately vested in their contributions and actual
earnings thereon.
4
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
Participants vest in their Company contribution account based on the
following schedule:
VESTED
YEARS OF SERVICE PERCENTAGE
Less than 1 year 0
1 year but less than 2 20
2 years but less than 3 40
3 years but less than 4 60
4 years but less than 5 80
5 years or more 100
A participant will also become fully vested upon permanent disability or
attainment of normal or early retirement as defined in the Plan.
Forfeitures are used to reduce future contributions made by the Company.
There were approximately $2,000 in forfeitures during 2002.
BENEFIT PAYMENTS
On termination of service due to death, disability or retirement, a
participant may elect to receive either a lump-sum amount equal to the
value of the participant's vested interest in his or her account, or
installments over a specified time. For termination of service for other
reasons, a participant may receive the value of the vested interest in
his or her account as a lump-sum distribution.
LOANS
Participants may borrow from their fund accounts a minimum of $500 and up
to a maximum equal to the lesser of $50,000 or 50 percent of their vested
account balance. Loan terms are generally five years. The loans are
collateralized by the balance in the participant's account and bear
interest at a rate commensurate with local prevailing rates as determined
by the plan administrator. Principal and interest is paid ratably through
biweekly payroll deductions. At December 31, 2002 and 2001, participant
notes receivable totaled $103,942 and $75,576, respectively, with
interest rates of 7 percent and were due at various dates through April
2007.
INVESTMENT OPTIONS
The Plan offers 12 investment options: 9 mutual funds, 2 common and
collective trust funds and a Company stock fund. Pursuant to the plan
agreement, a maximum of 30 percent of a participant's account balance can
be allocated to Company stock. Plan participants direct the investment of
their accounts among these 12 options.
TRUSTEES
The trustees of the Plan as of December 31, 2002, were John Buske, Nancy
Hanna and Greg Melsen, officers of the Company, and Nancy Haugen, human
resources representative.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become 100
percent vested in their accounts.
5
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies were used to prepare the
financial statements in accordance with accounting principles generally
accepted in the United States of America.
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared using the
accrual basis of accounting.
VALUATION OF INVESTMENTS AND INCOME RECOGNITION
The Plan's investments are stated at fair value except for the Stable
Value Fund, which is a benefit-responsive investment contract that is
valued at contract value. Quoted market prices are used to value
investments. Shares of mutual funds are valued at the asset value of
shares held by the Plan as of year end. Unrealized gains and losses are
determined for assets held at the end of the plan year based upon the
change in their respective fair values during the year.
The contract value of the benefit-response investment represents the
principal balance of the investment contract, plus accrued interest at
the stated contract rate, less withdrawals and administrative expenses.
The fair value of the investment contract approximates contract value as
of year end. The average yield and crediting interest rates were
approximately 5.22 percent for 2002.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on an accrual basis. Dividend income is
recorded on the ex-dividend date.
ADMINISTRATIVE EXPENSES
Administrative expenses, primarily transaction fees, are paid by the
Plan. Other expenses for professional services and administration costs
have been paid by the Company at its discretion.
PAYMENT OF BENEFITS
Benefits payments are recorded upon distribution.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the Plan's administrator to make estimates and assumptions that affect
the reported amounts of assets available for plan benefits at the date of
the financial statements and the changes in assets available from plan
benefits during the reporting period and, when applicable, disclosures of
contingent assets and liabilities. Actual results could differ from those
estimates.
RISKS AND UNCERTAINTIES
The Plan provides for various investment fund options. Investment
securities are exposed to various risk factors, such as interest rate,
market and credit risk. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes in
the values of investment securities will occur in the near term and that
such changes could materially affect participants' account balances and
the amounts reported in the Statement of Assets Available for Plan
Benefits.
6
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
3. INVESTMENTS
The following presents investments that represent 5 percent or more of
the Plan's assets as of December 31, 2002 and 2001:
2002 2001
MUTUAL FUNDS
American Century Ultra Fund, 46,299 and 39,536 shares
in 2002 and 2001, respectively $ 980,617 $ 1,092,779
Scudder Global Discovery Fund, 30,716 and 26,302 shares
in 2002 and 2001, respectively 575,308 616,248
Scudder Large Company Value Fund, 49,076 and 44,399
shares in 2002 and 2001, respectively 899,068 993,652
Scudder Growth and Income Fund, 64,840 and 56,943 shares
in 2002 and 2001, respectively 1,036,135 1,199,226
Scudder International Fund, 16,213 and 14,526 shares in
2002 and 2001, respectively 492,221 532,541
Scudder Pathway Moderate Portfolio, 44,389 and 31,528
shares in 2002 and 2001, respectively 405,720 335,774
Scudder Income Fund, 46,174 and 29,301 shares in 2002
and 2001, respectively 591,030 366,853
COMMON COLLECTIVE TRUST FUND
Scudder Stable Value Fund, 534,557 and 914,284 shares
in 2002 and 2001, respectively 534,557 914,284
COMPANY STOCK
PLATO Learning, Inc. stock, 90,320 and 79,354 shares
in 2002 and 2001, respectively 536,501 1,318,069
OTHER 646,351 321,124
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$ 6,697,508 $ 7,690,550
============= =============
During 2002, the Plan's investments (including gains and losses on
investments bought, sold, and held during the year) depreciated in value
by $2,107,046 as follows:
Mutual funds $ (1,198,948)
Common/collective trust funds (41,033)
Company stock (867,065)
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$ (2,107,046)
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7
PLATO LEARNING, INC. SAVINGS/RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
4. RELATED PARTY AND PARTY-IN-INTEREST TRANSACTIONS
Scudder is authorized under contract provisions and by ERISA regulations
providing an administrative or statutory exemption, to invest in
securities under its control. For the year ended December 31, 2002, such
purchases and sales were $8,212,877 and $6,494,769, respectively.
5. TAX STATUS
The Plan is a prototype plan and the Internal Revenue Service has
determined and informed the Trustee by letter dated January 12, 1996,
that the prototype plan and related trust are designed in accordance with
applicable sections of the IRC. Although the Plan has been amended since
the date of this letter, the plan administrator believes that the Plan is
designed and is currently being operated in compliance with the
applicable requirements of the IRC. Therefore, no provision for income
taxes has been included in the Plan's financial statements.
6. COMPLIANCE MATTERS
Subsequent to December 31, 2002, the Company determined that employer
matching contributions in the amount of $8,396 were not accurately
calculated for certain payroll transactions during 2002. The Company is
taking remedial actions in 2003 to correct the matter. As of December 31,
2002, the employer contribution receivable includes $8,302 of employer
matching contributions relating to these transactions, which, along with
any unallocated earnings, will be contributed to the Plan in 2003.
Subsequent to December 31, 2002, the Company determined that participants
were allowed to contribute certain compensation that did not meet the
Plan's definition of Eligible Compensation. The Company is taking
remedial actions in 2003 under the Department of Labor Voluntary
Compliance Program to correct the matter through retroactive amendment to
the Plan's definition of Eligible Compensation whereby the definition
will be expanded to include all such compensation contributed by
participants.
8
SUPPLEMENTAL SCHEDULE
SCHEDULE I: SCHEDULE OF ASSETS (HELD AT END OF YEAR)
(A) (B) (C) (D) (E)
DESCRIPTION OF INVESTMENT,
IDENTITY OF ISSUE, INCLUDING MATURITY DATE, FAIR OR
BORROWER, LESSOR RATE OF INTEREST, COLLATERAL, CONTRACT
OR SIMILAR PARTY PAR OR MATURITY DATE COST ** VALUE
* Scudder Trust Company 21st Century Fund $ 109,505
* Scudder Trust Company Development Fund 40,885
* Scudder Trust Company Income Fund 591,030
* Scudder Trust Company Growth and Income Fund 1,036,135
* Scudder Trust Company Large Company Value Fund 899,068
* Scudder Trust Company Global Discovery Fund 575,308
* Scudder Trust Company International Fund 492,221
* Scudder Trust Company Pathway Moderate Portfolio 405,720
American Century Ultra Fund 980,617
* Scudder Trust Company Stable Value Fund 534,557
* Scudder Trust Company Stock Index Fund 179,652
* Scudder Trust Company Global Fund 471
* Scudder Trust Company Cash Income Fund 191
* Scudder Trust Company Dreman High Return Fund A 211,705
* PLATO Learning, Inc. Common Stock 536,501
* Participant Loans Interest rate at 7 percent, due at
various dates through April 2007 103,942
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$ 6,697,508
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* Denoted party in interest.
** Cost information no longer required as all investments are
participant-directed.
9
EXHIBIT INDEX
23 Consent of Independent Accountants
99 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
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 on June
30, 2003.
PLATO Learning, Inc. Savings/Retirement Plan
By: /s/ Gregory J. Melsen
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Trustee