8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act Of 1934

Date of Report (Date of earliest event reported): September 1, 2009

PLATO LEARNING, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-20842	36-3660532
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

10801 Nesbitt Avenue South  Bloomington, MN	55437
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (952) 832-1000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  Item 2.02. Results of Operations and Financial Condition.

On September 1, 2009, we issued a press release, attached hereto as Exhibit 99.1, announcing our third quarter fiscal year 2009 financial results.

  Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

Exhibit 99.1                                Press Release dated September 1, 2009.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

PLATO LEARNING, INC.

September 1, 2009                                                                        By         /s/ Robert J. Rueckl

Robert J. Rueckl

Vice President and

Chief Financial Officer

EX-99.1

PLATO LEARNING REPORTS THIRD QUARTER 2009 RESULTS

Third Quarter Year-Over-Year Highlights

· Net Income of $184,000, or $0.01 per Share vs. Net Loss of $2.1 million, or ($0.09) per Share, in Q3’08

· Subscription Orders Grow 33% to $23.5 million; PLE™ Orders Up 49%

· Subscription Revenues Increase 17%

· Subscription Gross Margins Improve to 62% from 50%

· Cash Balance Increases $3.9 million during the Quarter to $14.2 million

MINNEAPOLIS, MN – September 1, 2009 – PLATO Learning, Inc. (NASDAQ: TUTR), a leading provider of K–adult e-learning solutions, today announced unaudited results for its fiscal 2009 third quarter ended July 31, 2009.

Total revenue for the third quarter was $16.7 million, compared to $18.6 million in the third quarter of 2008.  Subscription revenue increased $1.6 million, or 17%, to $10.8 million on the Company’s growing base of subscription customers, while revenues from legacy perpetual products and related software maintenance declined $2.9 million, or 46%, to $3.5 million, as sales of these non-strategic products and services continue their natural decline.   Continued improvements in gross margins and operating efficiencies resulted in the Company reporting its third consecutive quarter of profitability.  Net income for the third quarter was $184,000, or $0.01 per share, compared to a net loss of ($2.1) million, or ($0.09) per share, a year ago.  The third quarter 2008 net loss includes restructuring charges of $0.8 million, or $0.04 per share.  Subscription orders grew 33% to $23.5 million compared to $17.7 million in the prior year quarter.  Total orders for the quarter grew 13% to $31.2 million.

Vin Riera, PLATO Learning President and CEO said, “Our fiscal third quarter occurs during the primary buying season in the education market, and we are pleased to report strong financial results for this important period in our business.  Compared to our third quarter last year, subscription orders and revenues grew at double-digit rates, gross margins improved, operating expenses declined, cash balances grew, and we achieved our third consecutive quarter of profitability.”

Mr. Riera continued, “During the quarter, we added 176 school districts and community colleges as first-time subscribers to PLE™. Although the budget environment remains difficult for our customers, we continued to experience strong new and recurring demand in the quarter for instructional solutions delivered on PLE™.  Compared to the third quarter of 2008, total PLE™ orders grew nearly 50% to $21.3 million.  Nearly two-thirds of PLE orders in the quarter came from new customers or expansions of existing customer installations, with the remainder coming from our increasing base of renewing customers.  Our renewal rate in the third quarter was approximately 90%, and our dollar weighted average subscription term increased to 18.5 months, from 13.9 months in the third quarter of 2008.  We view both these measures as strong indicators of the effectiveness and long-term value of our solutions to our customers”.

Subscription margins in the third quarter improved 12 percentage points to 62%, resulting in an improvement in total gross margins for the quarter to 57%, compared to 50% in the same quarter last year. The improvement in subscription margins reflects 17% growth in subscription revenues, and a decline in subscription product amortization.  Operating expenses in the third quarter decreased 10% to $9.4 million, compared to non-GAAP operating expenses before restructuring charges of $10.4 million in the same quarter last year.  Earnings before interest, taxes, depreciation and amortization (EBITDA, a non-GAAP measure), were $3.4 million in the third quarter of 2009, compared to adjusted EBITDA of $3.1 million in the third quarter of 2008.

Cash and cash equivalents at July 31, 2009 totaled $14.2 million, an increase of $3.9 million from the end of the second quarter 2009, and a $2.3 million increase from the end of the third quarter 2008, reflecting the growth in orders and lower spending in the quarter. The third quarter 2009 represented the Company’s first reported year-over-year increase in cash balances since the fourth quarter of fiscal 2005.

Outlook

In light of the Company’s strong third quarter performance, it now expects fiscal year 2009 subscription order growth to be in the range of 25% to 30%, versus growth in the mid-teens as previously expected.  Cash balances are expected to increase from $14.2 million at the end of the third quarter, to between $25 million and $27 million at fiscal year end, up from previous expectations of approximately $20 million.  The Company’s expectations for fiscal 2009 subscription revenue remain unchanged at low double-digit growth given the nature of subscription revenue recognition, the timing of orders, and the effect of longer subscription contracts on near-term revenue.  Profitability for fiscal 2009 remains the Company’s goal; however, specific earnings guidance is not being provided.

Conference Call

A conference call to discuss this announcement is scheduled for today, September 1, 2009, at 9:00 am CT (10:00 am ET).  The dial-in number for this call is 877-941-2068 in the U.S. and Canada, and 480-629-9712 internationally.  Attendees should call 10 minutes prior to the start of the call and inform the operator they are participating in PLATO Learning’s call.  A recording of the call will be available from 11:00 am CT (12:00 pm ET) on September 1, 2009, until midnight September 8, 2009.  To access the recording, call 800-406-7325 in the U.S. and Canada and 303-590-3030 internationally.  At the prompt, enter pass code number 4145401#. Additionally, the webcast will be available for replay on the investor relations section of PLATO Learning’s web site at www.plato.com/Investor-Relations/Conference-Calls.aspx.

About PLATO Learning

PLATO Learning is a leading provider of computer-based and e-learning instruction for kindergarten through adult learners, offering curricula in reading, writing, math, science, social studies, and life and job skills. Learn more about PLATO Learning by visiting www.plato.com.

The announcement includes the use of non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures have been used in this announcement because the Company believes they are useful to investors by providing greater transparency to supplemental information used in the Company’s internal financial and operational analysis. Investors are encouraged to review the reconciliations attached to this announcement of the non-GAAP financial measures used in this announcement to their most directly comparable GAAP financial measures.

This announcement includes forward-looking statements. PLATO Learning has based these forward-looking statements on its current expectations and projections about future events. Although PLATO Learning believes that its assumptions made in connection with the forward-looking statements are reasonable, no assurances can be given that its assumptions and expectations will prove to have been correct. These forward-looking statements are subject to various risks, uncertainties and assumptions. PLATO Learning undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward looking statements made are subject to the risks and uncertainties as those described in the Company's most recent filings with the Securities and Exchange Commission on Forms 10-K and 10-Q. Actual results may differ materially from anticipated results.

PLATO®, Straight Curve® and Academic Systems® are registered trademarks of PLATO Learning, Inc. PLATO Learning is a trademark of PLATO Learning, Inc.

PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2009			2008			2009			2008
REVENUES
Subscriptions	$	10,774		$	9,247		$	30,368		$	25,691
License fees		1,328			3,353			3,338			7,113
Services		4,637			6,038			14,577			18,214
Total revenues		16,739			18,638			48,283			51,018
COST OF REVENUES
Subscriptions		4,095			4,593			12,165			14,058
License fees		611			1,540			1,467			4,060
Services		2,418			3,172			7,182			9,082
Total cost of revenues		7,124			9,305			20,814			27,200
GROSS PROFIT		9,615			9,333			27,469			23,818
OPERATING EXPENSES
Sales and marketing		5,969			6,657			17,460			21,182
General and administrative		2,209			2,258			6,504			7,909
Software maintenance and development		976			1,128			2,251			3,306
Amortization of intangibles		214			388			640			1,163
Restructuring		-			800			-			2,435
Total operating expenses		9,368			11,231			26,855			35,995
OPERATING INCOME (LOSS)		247			(1,898	)		614			(12,177	)
Other (expense) income, net		(63	)		(11	)		(48	)		188
INCOME (LOSS) BEFORE INCOME TAXES		184			(1,909	)		566			(11,989	)
Income tax expense		-			152			-			456
NET INCOME (LOSS)	$	184		$	(2,061	)	$	566		$	(12,445	)
INCOME (LOSS) PER SHARE
Basic	$	0.01		$	(0.09	)	$	0.02		$	(0.52	)
Diluted	$	0.01		$	(0.09	)	$	0.02		$	(0.52	)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Basic		24,106			23,881			24,052			23,825
Diluted		24,757			23,881			24,383			23,825

PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
	July 31,			October 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	14,185		$	20,018
Accounts receivable, net		17,751			6,834
Other current assets		6,053			7,408
Total current assets		37,989			34,260
Equipment and leasehold improvements, net		2,698			3,589
Software development costs, net		20,760			24,086
Identified intangible assets, net		2,719			3,723
Other long-term assets		3,203			3,309
Total assets	$	67,369		$	68,967
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,305		$	3,085
Accrued compensation		3,383			3,996
Other accrued liabilities		2,371			6,909
Deferred revenue		34,711			36,005
Total current liabilities		41,770			49,995
Long-term deferred revenue		13,859			8,916
Total liabilities		55,629			58,911
Stockholders' equity:
Common stock		242			240
Additional paid-in capital		172,275			171,143
Treasury stock at cost		(319	)		(315	)
Accumulated deficit		(159,224	)		(159,790	)
Accumulated other comprehensive loss		(1,234	)		(1,222	)
Total stockholders' equity		11,740			10,056
Total liabilities and stockholders' equity	$	67,369		$	68,967

PLATO Learning, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
	Nine Months Ended
	July 31,
	2009			2008
OPERATING ACTIVITIES:
Net income (loss)	$	566		$	(12,445	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Deferred income taxes		-			456
Depreciation and amortization		9,215			12,868
Stock-based compensation		1,023			559
Other adjustments		(166	)		105
Changes in operating assets and liabilities:
Accounts receivable		(10,727	)		(841	)
Other current and long-term assets		1,330			(238	)
Accounts payable		(1,780	)		(1,967	)
Other current and long-term liabilities		(5,144	)		(686	)
Deferred revenue		3,649			(1,275	)
Total adjustments		(2,600	)		8,981
Net cash used in operating activities		(2,034	)		(3,464	)
INVESTING ACTIVITIES:
Capitalized software development costs		(3,362	)		(8,741	)
Purchases of equipment and leasehold improvements		(525	)		(318	)
Net cash used in investing activities		(3,887	)		(9,059	)
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock, net of repurchases		107			60
Repayments of capital lease obligations		(7	)		(22	)
Net cash provided by financing activities		100			38
EFFECT OF CURRENCY EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS		(12	)		26
Net decrease in cash and cash equivalents		(5,833	)		(12,459	)
Cash and cash equivalents at beginning of period		20,018			24,297
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	14,185		$	11,838

PLATO Learning, Inc.

Supplemental Financial Information

(Unaudited)

Order Value ($000)
	Three Months Ended July 31,							Nine Months Ended July 31,
	2009		2008		% Change			2009		2008		% Change
Subscriptions	$	23,522	$	17,709		33	%	$	41,438	$	30,586		35	%
License fees		1,057		2,457		(57	%)		2,995		6,384		(53	%)
Services :
Professional services		3,861		3,153		22	%		7,003		5,470		28	%
Software maintenance		2,071		3,594		(42	%)		4,329		6,643		(35	%)
Other		720		761		(5	%)		2,238		2,288		(2	%)
Total Services		6,652		7,508		(11	%)		13,570		14,401		(6	%)
	$	31,231	$	27,674		13	%	$	58,003	$	51,371		13	%

Reconciliation of Deferred Revenue to Non-GAAP Deferred Revenue Backlog ($000)
	As of July 31,
	2009		2008		% Change
Total Deferred Revenue	$	48,570	$	43,324		12	%
Add: Unbilled amounts due under
non-cancelable subscription agreements		14,170		7,324		93	%
Deferred Revenue Backlog	$	62,740	$	50,648		24	%
Components of Deferred Revenue Backlog:
Subscriptions	$	51,771	$	38,413		35	%
License fees		99		349		(72	%)
Services		10,870		11,886		(9	%)
Deferred Revenue Backlog	$	62,740	$	50,648		24	%

PLATO Learning, Inc.

Supplemental Financial Information

(Unaudited)

Revenue Details ($000)	Three Months Ended July 31,							Nine Months Ended July 31,
	2009		2008		% Change			2009		2008		% Change
Subscriptions	$	10,774	$	9,247		17	%	$	30,368	$	25,691		18	%
License fees		1,328		3,353		(60	%)		3,338		7,113		(53	%)
Services:
Professional services		1,787		2,259		(21	%)		5,536		6,579		(16	%)
Software maintenance		2,142		3,032		(29	%)		6,838		9,393		(27	%)
Other		708		747		(5	%)		2,203		2,242		(2	%)
Total services		4,637		6,038		(23	%)		14,577		18,214		(20	%)
	$	16,739	$	18,638		(10	%)	$	48,283	$	51,018		(5	%)

Reconciliation of 2008 GAAP Net Loss and Loss Per Share to Non-GAAP Net Loss
and Loss Per Share Before Restructuring Charges
($000s, except per share amounts)
	Three Months Ended July 31,			Nine Months Ended July 31,
	2008			2008
Net loss, as reported	$	(2,061	)	$	(12,445	)
Restructuring charges		800			2,435
Net loss before restructuring charges	$	(1,261	)	$	(10,010	)
Loss per share (basic):
Loss per share, as reported	$	(0.09	)	$	(0.52	)
Restructuring charges		0.04			0.10
Loss per share before restructuring charges	$	(0.05	)	$	(0.42	)

PLATO Learning, Inc.

Supplemental Financial Information

(Unaudited)

Reconciliation of 2008 GAAP Operating Expenses to Non-GAAP Operating Expenses
Before Restructuring Charges ($000s)
	Three Months		Nine Months
	Ended July 31,		Ended July 31,
		2008		2008
Total operating expenses	$	11,231	$	35,995
Restructuring charges		800		2,435
Operating expenses before
restructuring charges	$	10,431	$	33,560

Reconciliation of GAAP Net Income To 2009 Non-GAAP Earnings before
Interest, Taxes, Depreciation and Amortization ("EBITDA") and 2008 Non-GAAP
Adjusted EBITDA ($000)
	Three Months Ended					Nine Months Ended
	July 31,					July 31,
	2009		2008			2009		2008
Net income (loss)	$	184	$	(2,061	)	$	566	$	(12,445	)
Income taxes		-		152			-		456
Interest, net		59		12			27		(190	)
Depreciation and amortization		3,150		4,154			9,086		12,750
EBITDA	$	3,393		2,257		$	9,679		571
Restructure charges				800					2,435
Adjusted EBITDA			$	3,057				$	3,006

Company Contacts:

Rob Rueckl

Chief Financial Officer

PLATO Learning, Inc.

952.832.1000

Todd Kehrli or Charles Messman

MKR Group

323.468.2300