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): February 14, 2005

PLATO Learning, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	0-20842	36-3660532
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
10801 Nesbitt Avenue South, Bloomington, Minnesota		55437
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

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

Not Applicable
______________________________________________
Former name or former address, 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 February 14, 2005, we issued a press release and held a conference call providing updated financial guidance for our recently completed first quarter and for the remainder of fiscal year 2005. The press release and a transcript of our prepared remarks for the conference call are attached hereto as Exhibits 99.1 and 99.2, respectively.

Item 7.01. Regulation FD Disclosure.

On February 14, 2005, we issued a press release and held a conference call providing updated financial guidance for our recently completed first quarter and for the remainder of fiscal year 2005. The press release and a transcript of our prepared remarks for the conference call are attached hereto as Exhibits 99.1 and 99.2, respectively.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1 - Press Release Dated February 14, 2005.
Exhibit 99.2 - Transcript of Prepared Remarks for Conference Call on February 14, 2005.

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.
February 14, 2005	By:	Laurence L. Betterley
		Name: Laurence L. Betterley
		Title: Senior Vice President and Chief Financial Officer

Exhibit Index

Exhibit No.	Description
99.1	Press Release Dated February 14, 2005
99.2	Transcript of Prepared Remarks for Conference Call on February 14, 2005

EX-99.1

[PLATO Learning Logo]

	For Immediate Release
Contact:	David Smith –President & CEO

Larry Betterley – Sr. VP & CFO
Steve Schuster – VP & Treasurer
952.832.1000

PLATO Learning, Inc. Provides Updated Financial Guidance for

First Quarter and Fiscal Year 2005

MINNEAPOLIS, MN – February 14, 2005 – PLATO Learning, Inc. (NASDAQ: TUTR), a leading provider of K-Adult computer-based and e-learning solutions, announced today that it expects revenues for the first fiscal quarter ended January 31, 2005 to total approximately $24.5 million to $25.5 million. As a result of the revenue reduction and a change in revenue mix, net loss is expected to be between $8.5 million and $9.3 million, before the impact of restructuring and executive termination charges.

Revenues and operating results for the first quarter ended January 31, 2005 will be announced on February 24, 2005 following completion of the Company’s regular quarterly closing and analysis procedures and review by the Company’s independent auditors. Final results could vary from those currently projected.

David Smith, President and CEO, said, “Revenue for the quarter was impacted by a shortfall in courseware orders of about $1.5 million and lower than anticipated educational consulting service revenue, partially offset by higher than planned supplemental education service and other revenues. In our previous guidance we had anticipated low revenue for the quarter, due to the realignment of the sales and service organizations, implementation of new sales procedures, and management turnover. The actual impact experienced from these changes was greater than expected.”

“Most of the shortfall in courseware revenue had a direct impact on net loss, given its low variable cost. Higher revenue from supplemental education services offset lower than expected educational consulting service revenue. Since most of the educational consulting costs are fixed, this had a further impact on the net loss,” said Smith.

“We believe the issues that impacted first quarter revenues are primarily behind us now. We do expect some carryover effect in the second quarter, and are lowering our revenue guidance to 5% to 10% below 2004 levels for that quarter. We view this as a temporary situation and expect to recover our underperformance during the first two quarters in the second half of the year. Therefore, we are maintaining our prior guidance for fiscal year 2005 of revenue growth of 4% to 7% over 2004, with pre-tax earnings of $8.5 million to $9.5 million, before the impact of restructuring and executive termination charges,” said Smith.

Quarterly Conference Call
A conference call to discuss this announcement is scheduled for today at 3:45 PM (CDT). The dial-in number for this call is 800.230.1093. Please call ten minutes prior to the start of the call and inform the operator you are participating in PLATO Learning’s call. Should you be unable to attend the live conference call, a recording will be available to you from 7:30 p.m. on February 14, 2005, through midnight, February 28, 2005. To access the recording call: 800.475.6701. At the prompt, enter pass code number 770885.

About PLATO Learning, Inc.
PLATO Learning is a leading provider of computer-based and e-learning instruction for kindergarten through adult learners, offering curricula in reading, writing, mathematics, science, social studies, and life and job skills. The company also offers innovative online assessment and accountability solutions and standards-based professional development services. With over 6,000 hours of objective-based, problem-solving courseware, plus assessment, alignment, and curriculum management tools, we create standards-based curricula that facilitate learning and school improvement.

PLATO Learning is a publicly held company traded as TUTR on the NASDAQ, with trailing 12-month revenues of approximately $140 million,. PLATO Learning educational software, delivered via networks, CD-ROM, the Internet, and private intranets, is primarily marketed to K–12 schools and colleges. The Company also sells to job training programs, correctional institutions, military education programs, corporations, and individuals.

PLATO Learning is headquartered at 10801 Nesbitt Avenue South, Bloomington, Minnesota 55437, 952.832.1000 or 800.869.2000. The Company has offices throughout the United States, Canada, and the United Kingdom, as well as international distributors in Puerto Rico, Singapore, South Africa, and the United Arab Emirates. For more information, please visit http://www.plato.com.

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 Annual Report on Form 10-K for the year ended October 31, 2004. Actual results may differ materially from anticipated results.

PLATO® is a registered trademark of PLATO Learning, Inc. PLATO Learning is a trademark of PLATO Learning, Inc. All other company and product names may be trademarks or registered trademarks of their respective companies.

PLATO Learning, Inc.
Q1 FY 2005 Pre Release Script
February 14, 2005

OPERATOR INTRODUCTION

DAVE SMITH

Thank you. Good afternoon. Thank you for joining us today for our conference call. With me today is Larry Betterley, PLATO’s Senior Vice President and Chief Financial Officer and Steve Schuster, our Vice President and Treasurer.

Before we begin, Larry will preface our remarks with a safe harbor statement. Larry.

LARRY BETTERLEY

Thanks Dave. This announcement includes forward-looking statements. We have based these statements on our current expectations and projections about future events. Although we believe our assumptions made in connection with the forward-looking statements are reasonable, no assurances can be given that the assumptions and expectations will prove to have been correct. These statements are subject to the risks and uncertainties as those described in the Company’s Annual report on Form 10-K for the year ended October 31, 2004. Actual results may differ materially from anticipated results.

The content of our call contains time-sensitive information that is accurate only as of today, February 14, 2005. 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.

This call is the property of PLATO Learning, Inc. Any redistribution, or rebroadcast of this call in any form without the express written consent of PLATO Learning, Inc. is prohibited. Dave.

DAVE SMITH

Thanks Larry.

Earlier today we issued a press release that provided financial guidance regarding our first quarter and fiscal year 2005. As stated in the press release, our revenue results for the first quarter fell below our expectations and the mix of revenue was more heavily weighted towards certain service and other revenues, causing a decrease in expected earnings for the quarter. These results have caused us to also change our guidance for second quarter of this fiscal year, but we feel the causes are temporary and do not impact the longer term performance or value of the company.

During our fourth quarter conference call we discussed various initiatives that were underway. Several of these directly impacted the field sales and service organizations, including a reorganization to more vertically align the group and implementation of new systems and procedures aimed at improving the efficiencies of our sales process in the future. These initiatives, along with management turnover, were expected to have an impact on sales in the first and second quarters and were considered in establishing our financial guidance for 2005 at that time.

The actual impact of those factors was greater than anticipated for the quarter, resulting in a shortfall in courseware orders of approximately $1.5 million. We also had about $1 million less of educational consulting services revenue than anticipated due to these factors. The impact of this was partially offset by higher than expected Supplemental Education Services and other revenues. As a result, we now expect revenues for the first quarter to be between $24.5 and $25.5 million.

After review with sales management and personnel, we believe the worst of the field transition is behind us and we are taking some additional measures to improve it further going forward, but it is prudent to anticipate that some additional impact on the second quarter will occur. We have also initiated actions in the U.K. to reduce their losses going forward, which will have an impact on revenues as well. Considering these factors, we are currently projecting second quarter revenues to be between 5% and 10% below 2004 levels.

The revenue reduction and change in product mix in the first quarter will have a significant impact on net earnings, given our low variable costs of courseware and educational consulting services and lower gross margins on Supplemental Education Service and other revenues. The result is an expected net loss, before restructuring and executive termination charges of about $8.5 million to $9.3 million.

We expect to recover our underperformance in the first two quarters of the year during the second half of the year. Therefore, our financial guidance for the full year remains unchanged. Revenues are expected to grow 4%-7% over 2004 amounts, and pre-tax earnings are expected to be $8.5 to $9.5 million, before impact of restructuring and executive termination charges.

We are still completing our regular quarterly closing and analysis procedures, and review by the Company’s independent auditors. Therefore, further information is limited at this time and actual results could vary from current estimates. Additional guidance and details will be provided during the conference call on first quarter results, scheduled for February 24, 2005.

OTHER DEVELOPMENTS

I would now like to discuss two other recent developments in the company.

In January, the employees of our U.K. subsidiary were notified that a restructuring of that business would occur. It is expected that up to approximately 50% of the employees will be terminated and three offices will be closed. The restructuring process is proceeding and should be completed by early March. We will continue to evaluate the U.K. situation and explore alternatives as necessary to improve its impact on the company’s profitability.

I would like to close now on a more positive note.

We were very pleased to announce on Friday, that Michael Morache has been appointed as the company’s new President and CEO, effective February 28th. With his appointment, I will assume the position of Executive Chairman.

Mike has more than 30 years of experience in developing, leading and growing technology businesses. He also has substantial experience in the education market as President of Pearson Education Technologies and NCS Services, and has held senior positions at Unisys, Alltel, Fujitsu and IBM, in areas of general management, product management, and sales and marketing. I have known Mike personally for many years and feel he has the right management and leadership skills to take PLATO Learning to the next level of growth and profitability.

I am very excited to work with Mike on realizing the substantial value in the company, its intellectual assets and its employees.

That concludes my formal remarks. We will now answer any questions you may have.

Q&A

Closing remarks.

Thank you again for joining us today. When I first took over as interim CEO, I believed that PLATO Learning had tremendous assets and significant potential for growth and value creation. I have learned much in the last few months about the company, and my opinion on this has not changed. Our future remains exciting, regardless of near term fluctuations in performance. We appreciate your continued support as we develop and grow the business to achieve its value potential.