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, 2005
COMMISSION FILE NUMBER 0-20842
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 AND 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 AND RETIREMENT PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2005 AND 2004
PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
INDEX
PAGE(S)
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............... 1
FINANCIAL STATEMENTS
Statements of Assets Available for Benefits
December 31, 2005 and 2004............................................ 2
Statement of Changes in Assets Available for Benefits
Year Ended December 31, 2005.......................................... 3
Notes to Financial Statements
December 31, 2005 and 2004............................................ 4-9
SUPPLEMENTAL SCHEDULE
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
December 31, 2005..................................................... 10
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 REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of the
PLATO Learning, Inc. Savings and Retirement Plan:
In our opinion, the accompanying statements of assets available for benefits and
the related statement of changes in assets available for benefits present
fairly, in all material respects, the assets available for benefits of PLATO
Learning, Inc. Savings and Retirement Plan (the "Plan") at December 31, 2005 and
2004, and the changes in assets available for benefits for the year ended
December 31, 2005, 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 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. 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 Year End) at December 31, 2005, 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.
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 28, 2006
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PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004
2005 2004
----------- -----------
ASSETS
Investments $22,574,858 $21,809,720
Cash 18,883 5,044
----------- -----------
Assets available for benefits $22,593,741 $21,814,764
=========== ===========
The accompanying notes are an integral part of these financial statements.
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PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME
Net appreciation in fair value of investments $ 379,196
Interest and dividend income 781,460
-----------
Total investment income 1,160,656
-----------
CONTRIBUTIONS
Participant 3,273,787
Employer 593,434
-----------
Total contributions 3,867,221
-----------
DEDUCTIONS
Benefits paid to participants (4,234,450)
Administration expenses (14,450)
-----------
Total deductions (4,248,900)
-----------
Increase in assets during the year 778,977
ASSETS AVAILABLE FOR BENEFITS
Beginning of year 21,814,764
-----------
End of year $22,593,741
===========
The accompanying notes are an integral part of these financial statements.
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PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
1. DESCRIPTION OF PLAN
The following description of the PLATO Learning, Inc. (the "Company")
Savings and 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.
General
The Plan is a contributory defined contribution plan covering all eligible
employees (including those former Lightspan employees) of the Company. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
Eligibility Requirements
All employees of the Company are eligible to participate in the Plan upon
the completion of six months of employment provided they are least 21 years
of age.
Contributions
Participant contributions are recorded in the period the employer makes the
payroll deductions. Employer matching contributions are accrued based on
participant contributions. Participants may contribute up to 60% of their
pre-tax compensation, up to a maximum dollar amount, as defined, subject to
certain other Internal Revenue Service ("IRS") limitations.
The Company may also make contributions to the Plan at its discretion. Any
such amount must be designated by Company resolution. In 2005, the
discretionary contribution was 50% for each dollar of participant
contributions up to a maximum Company contribution of 2% of participant
compensation, with a cap of $4,200 in total Company contributions per
participant.
Participant Accounts
Individual participant accounts are maintained by the Plan's recordkeeper,
Administrative Management Group, Inc. Each participant's account is
credited with the participant's contribution, Plan investment earnings or
loss, net of administrative expenses, and an allocation of employer
matching and discretionary contributions. Allocations are based on
participant earnings and account balances,
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as defined. The allocation of the participant's contributions to these
investment funds may be changed daily.
Vesting and Forfeitures
Participants are immediately vested in their contributions and actual
earnings thereon.
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 33-1/3
2 years but less than 3 66-2/3
3 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 $43,000 in forfeitures at December 31, 2005.
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 $1,000 and up
to a maximum equal to the lesser of $50,000 or 50% of their vested account
balance. The term of a loan repayment may not be greater than five years
unless the loan qualifies as a residential mortgage loan. The administrator
may fix the term of repayment of a residential mortgage loan considering
the maturity dates quoted by representative lending institutions in the
local area for a similar loan, but in no event greater than for a period of
up to 15 years or such longer period as approved on a nondiscriminatory
basis by the administrator. 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 at the date
of
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loan origination. Principal and interest is paid ratably through biweekly
payroll deductions. Participant notes receivable have interest rates
ranging from 5.0% to 9.5% and are due at various dates through December
2019. Repayments are generally made through payroll deductions and are
invested among the various investment funds in the same manner as
participant contributions.
Investment Options
The Plan offers nine investment options: seven mutual funds, one common
collective trust fund and one Company stock fund. Pursuant to the plan
agreement, a maximum of 30% of a participant's account balance can be
allocated to Company stock. Plan participants direct the investment of
their accounts among these nine options. Company contributions are invested
in the fund options in the same manner as participant contributions.
Voting Rights
Each participant is entitled to exercise voting rights attributable to the
Company shares allocated to his or her account and is notified by the
Trustee prior to the time that such rights are to be exercised. The Trustee
is not permitted to vote any allocated share for which a participant has
not given instructions.
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%
vested in their accounts, and assets of the Plan will be distributed in
accordance with the Plan document.
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.
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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 valued at
contract value. Quoted market prices are used to determine fair value of
investments. Investments in mutual funds and common collective trust funds
are valued at the net asset value as of year end which is determined based
on fair value of underlying investments. Participant loans are valued at
estimated fair value, consisting of principal outstanding and any related
accrued interest.
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
4% for 2005 and 2004.
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.
The Plan presents the net appreciation (depreciation) in the fair value of
its investments in the Statement of Changes in Assets Available for
Benefits, which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
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 extensive use of estimates and assumptions
that affect the reported amounts of assets available for 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.
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Risks and Uncertainties
The Plan provides for various investment options in various combinations of
investment securities. Investment securities are exposed to various risk
factors including, but not limited to, interest rates, market conditions
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 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 Statements of Assets Available for
Benefits in future periods.
3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
assets as of December 31, 2005 and 2004:
2005 2004
----------- -----------
MUTUAL FUNDS
American Funds American Mutual A, 169,041 and 160,259
shares in 2005 and 2004, respectively $ 4,440,704 $ 4,243,671
Franklin Capital Growth A, 403,496 and 410,044 shares in
2005 and 2004, respectively 4,490,907 4,535,090
American Funds EuroPacific Growth Fund A, 64,646 and
60,544 shares in 2005 and 2004, respectively 2,656,933 2,157,205
Managers Special Equity Fund, 20,830 and 17,923 shares
in 2005 and 2004, respectively 1,807,426 1,620,435
Royce Total Return Fund, 0 and 195,807 shares in
2005 and 2004, respectively -- 2,400,595
American Beacon Funds, 136,886 and 0 shares in 2005
and 2004, respectively 2,741,820 --
Other mutual funds individually less than 5% 2,082,862 1,991,978
COMMON COLLECTIVE TRUST FUND
Wells Fargo Stable Value Fund, 99,046 and 105,161
shares in 2005 and 2004, respectively 3,687,497 3,780,545
COMMON STOCK INDIVIDUALLY LESS THAN 5% 394,475 728,871
PARTICIPANT LOANS INDIVIDUALLY LESS THAN 5% 272,234 351,330
----------- -----------
$22,574,858 $21,809,720
=========== ===========
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During 2005, the Plan's investments (including gains and losses on
investments bought, sold, and held during the year) appreciated in value by
$379,196 as follows:
Mutual funds $235,161
Common collective trust funds 125,600
Common stock 18,435
--------
$379,196
========
4. TAX STATUS
The Plan is a prototype plan. The IRS has determined and informed the
Trustee by letter dated March 5, 2002, 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 currently designed and 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.
5. PLAN AMENDMENT
During 2003, the Company determined that participants were allowed to
contribute certain compensation that did not meet the Plan's definition of
Eligible Compensation and the Company took remedial actions 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 was expanded to include all such
compensation contributed by participants. On October 13, 2005, the Company
received notice that the Department of Labor accepted the Company's
corrective action.
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SUPPLEMENTAL SCHEDULE
PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
SCHEDULE H, LINE 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2005 SCHEDULE I
(A) (B) (C) (D) (E)
DESCRIPTION OF INVESTMENT,
IDENTITY OF ISSUE, INCLUDING MATURITY DATE, FAIR OR
BORROWER, LESSOR INTEREST RATE, COLLATERAL, CONTRACT
OR SIMILAR PARTY PAR OR MATURITY DATE COST ** VALUE
- --------------------------------- ------------------------------- ------- ------------
MFS High Income A Mutual fund $ 1,008,465
Oppenheimer U.S. Government A Mutual fund 1,074,397
American Funds EuroPacific
Growth A Mutual fund 2,656,933
American Beacon Fund Mutual fund 2,741,820
American Funds American
Mutual A Mutual fund 4,440,704
Franklin Capital Growth A Mutual fund 4,490,907
Managers Special Equity Mutual fund 1,807,426
Wells Fargo Stable Value Fund Common collective trust fund 3,687,497
* PLATO Learning, Inc. Common stock, 97,835 shares 394,475
* Participant loans Interest rate ranging from 5.0%
to 9.5%, due at various dates
through December 2019 272,234
-----------
$22,574,858
===========
* Denotes party in interest.
** Cost information not required for participant-directed investments.
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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.
PLATO Learning, Inc. Savings and Retirement Plan
June 29, 2006
By: /s/ LAURENCE L. BETTERLEY
---------------------------------
Laurence L. Betterley
Trustee
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