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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 FISCAL YEAR ENDED DECEMBER 31, 2006
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
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PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2006 AND 2005
PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
INDEX
PAGE(S)
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS....... 1-2
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits
December 31, 2006 and 2005...................................... 3
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2006.................................... 4
Notes to Financial Statements
December 31, 2006 and 2005...................................... 5-11
SUPPLEMENTAL SCHEDULE
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
December 31, 2006............................................... 12
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
Participants and Plan Administrator
PLATO Learning, Inc. Savings and Retirement Plan
We have audited the accompanying statement of net assets available for benefits
of the PLATO Learning, Inc. Savings and Retirement Plan ("the Plan") as of
December 31, 2006 and the related statement of changes in net assets available
for benefits for the year 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 audit.
We conducted our audit 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. The Plan is not required to have,
nor were we engaged to perform an audit of its internal control over financial
reporting. Our audit 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, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 as of
December 31, 2006, and the changes in net assets available for benefits for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
Our audit was performed 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. The supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audit 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/ Grant Thornton LLP
Minneapolis, Minnesota
June 18, 2007
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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 statement of assets available for benefits
presents fairly, in all material respects, the assets available for benefits of
PLATO Learning, Inc. Savings and Retirement Plan (the "Plan") at December 31,
2005, in conformity with accounting principles generally accepted in the United
States of America. The statement of assets available for benefits is the
responsibility of the Plan's management; our responsibility is to express an
opinion on the statement of assets available for benefits based on our audit. We
conducted our audit 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
audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 28, 2006, except as to Note 2 - Valuation of Investments and Income
Recognition for which the date is June 28, 2007
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PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2006 AND 2005
2006 2005
ASSETS
Investments at fair value $ 22,561,145 $ 22,523,233
Cash - 18,883
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Net assets available for benefits at fair value 22,561,145 22,542,116
Adjustment from fair value to contract value for
fully benefit-responsive investment contracts 41,273 51,625
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Net assets available for benefits $ 22,602,418 $ 22,593,741
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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 NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2006
INVESTMENT INCOME
Net appreciation in fair value of investments $ 1,258,445
Interest and dividend income 1,139,509
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Total investment income 2,397,954
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CONTRIBUTIONS
Participant 2,499,913
Participant rollovers 263,008
Employer 565,999
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Total contributions 3,328,920
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DEDUCTIONS
Benefits paid to participants (5,684,089)
Adminstrative expenses (34,108)
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Total deductions (5,718,197)
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Increase in net assets during the year 8,677
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 22,593,741
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End of year $ 22,602,418
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The accompanying notes are an integral part of this financial statement.
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PLATO LEARNING, INC.
SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
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 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. 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.
Employer matching contributions are accrued based on participant
contributions. The matching contribution is 50% for each dollar of
participant contributions up to a maximum Company contribution of 2% of
participant eligible compensation, with a cap of $4,200 in total Company
contributions per participant. The Company may also make additional
contributions to the Plan at its discretion. Any such amount must be
designated by Company resolution.
Eligible participants who have attained age 50 before the close of the
calendar year may also make catch-up contributions up to the dollar amount
of the catch-up permitted for the year.
Participant Accounts
Individual participant accounts are maintained by the Plan's recordkeeper,
Administrative Management Group, Inc. Each participant's account is
credited
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with the participant's contribution, Plan investment earnings or loss, net
of administrative expenses, and an allocation of employer matching
contributions. Plan earnings are allocated based on account balances by
fund.
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 of non-vested company contributions are used to reduce future
contributions made by the Company. There were approximately $27,000 in
forfeited non-vested accounts at December 31, 2006. During the year ended
December 31, 2006, employer contributions were reduced by approximately
$28,000 from forfeited non-vested accounts.
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, net of tax, rollover the entire
vested portion to a qualified plan or Individual Retirement Account (IRA).
If the participant fails to notify the plan administrator of distribution
options within 90 days of termination of service and the vested account
balance is less than $5,000, the vested balance is automatically rolled
into an IRA. A participant with less than $1,000 in vested benefits
receives a lump sum distribution, net of tax.
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Loans
Participants may borrow from their fund accounts a minimum amount 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 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. Plan participants direct
the investment of their accounts among these nine options. New investments
in the Company stock fund are not permitted. Investments in the Company
stock fund are limited to those participants invested in that fund as of
March 30, 2005. 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.
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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 various mutual fund and company stock investments are carried at
fair value which represents the quoted market values of the underlying
investments on the last business day of the plan year including current
income and investment expenses. Investments in common/collective trusts are
valued at fair value based on the market value of the underlying
investments. As described in Financial Accounting Standards Board Staff
Position (FSP) AAG INV-1 and SOP 94-4-1, Reporting of Fully
Benefit-Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and
Defined-Contribution Health and Welfare and Pension Plans (the "FSP"),
investment contracts held by a defined-contribution plan are required to be
reported at fair value. However, contract value is the relevant measurement
attribute for that portion of the net assets available for benefits of a
defined-contribution plan attributable to fully benefit-responsive
investment contracts because the contract value is the amount participants
would receive if they were to initiate permitted transactions under the
terms of the plan. As required by the FSP, the Statement of Net Assets
Available for Benefits presents the fair value of the Wells Fargo Stable
Value Fund, as well as the adjustment of the fully benefit-responsive
investment contract from fair value to contract value. The Statement of
Changes in Net Assets Available for Benefits is prepared on a contract
value basis. Accordingly, the investments as of December 31, 2005 have been
decreased by $51,625 to reflect the fully benefit-responsive investment
contracts at fair value with a corresponding adjustment from fair value to
contract value for fully benefit-responsive investment contracts.
Participant loans are valued at estimated fair value, consisting of
principal outstanding and any related accrued interest.
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.
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The Plan presents the net appreciation (depreciation) in the fair value of
its investments in the Statement of Changes in Net 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 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.
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 Net Assets Available
for Benefits in future periods.
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3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
assets as of December 31, 2006 and 2005:
2006 2005
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MUTUAL FUNDS
American Funds American Mutual A, 155,690 and 169,041
shares in 2006 and 2005, respectively $ 4,547,705 $ 4,440,704
Franklin Capital Growth A, 403,496 shares in 2005 - 4,490,907
American Funds Growth Fund of America, 140,139 in 2006 4,606,357 -
American Funds EuroPacific Growth Fund A, 44,668 and
64,646 shares in 2006 and 2005, respectively 2,079,765 2,656,933
Managers Special Equity Fund, 21,706 and 20,830 shares
in 2006 and 2005, respectively 1,800,711 1,807,426
MFS High Income Fund A, 290,549 and 263,801 shares in
2006 and 2005, respectively 1,133,143 1,008,465
American Beacon Funds, 126,105 and 136,886 shares in 2006
and 2005, respectively 2,673,419 2,741,820
Other mutual funds individually less than 5% 2,377,966 1,074,397
COMMON COLLECTIVE TRUST FUND
Wells Fargo Stable Value Fund, 76,198 and 99,046
shares in 2006 and 2005, respectively 2,906,830 3,635,872
COMPANY COMMON STOCK INDIVIDUALLY LESS THAN 5% 161,689 394,475
PARTICIPANT LOANS INDIVIDUALLY LESS THAN 5% 273,560 272,234
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$ 22,561,145 $ 22,523,233
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During 2006, the Plan's investments (including gains and losses on
investments bought, sold, and held during the year) appreciated in value by
$1,258,445 as follows:
Mutual funds $ 1,2,02,770
Common collective trust funds 121,955
Common stock (66,280)
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$ 1,258,445
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4. TAX STATUS
The Plan is a prototype plan. The Internal Revenue Services 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 Internal Revenue Code (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
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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. 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.
6. PARTY-IN-INTEREST TRANSACTIONS
Transaction in shares of the Company's common stock qualify as
party-in-interest transactions under the provisions of ERISA. During 2006,
the Plan made no purchases and had sales of approximately $167,000 of the
Company's common stock.
7. SUBSEQUENT EVENT
Effective January 1, 2007, the plan was amended to reduce the eligibility
requirements from six months of service to three months of service, to
automatically enroll newly hired employees, and to increase the
discretionary match to $.50 for every $1 participant contribution up to 6%
of eligible compensation.
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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, 2006 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 $ 1,133,143
Oppenheimer U.S. Government A Mutual fund 1,004,953
American Funds EuroPacific
Growth A Mutual fund 2,079,765
American Beacon Fund Mutual fund 2,673,419
American Funds American
Mutual A Mutual fund 4,547,705
American Growth Fund of America Mutual fund 4,606,357
Managers Special Equity Mutual fund 1,800,711
Oppenheimer International Small Mutual fund 653,466
Vanguard Bond Index Fund Mutual fund 25,690
Vanguard Small Cap Index Fund Mutual fund 54,146
Vanguard Total International Mutual fund 72,663
Vanguard Total Stock Market Index Mutual fund 82,687
Willimington Prime Money Market Mutual fund 484,361
Wells Fargo Stable Value Fund Common collective trust fund 2,948,103
* PLATO Learning, Inc. Common stock, 29,887 shares 161,689
* Participant loans Interest rate ranging from 5.0%
to 9.5%, due at various dates
through December 2019 273,560
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$ 22,602,418
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* Denotes party in interest.
** Cost information not required for participant-directed benefits
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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, 2007
By: /s/ ROBERT J. RUECKL
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Robert J. Rueckl
Trustee
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