SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 31, 2003
or
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from ______________ to
____________________
Commission file number
000-20008
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Forgent Networks 401(k) Plan
(formerly the VTEL Corporation 401(k) Plan)
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Forgent Networks, Inc.
108 Wild Basin Road
Austin, Texas 78746
Financial Statements and Supplemental Schedules
Forgent Networks 401(k) Plan (formerly the VTEL Corporation 401(k) Plan)
December 31, 2003 and 2002 and year ended December 31, 2003 with Report of
Independent Registered Public Accounting Firm
Forgent Networks 401(k) Plan (formerly the VTEL Corporation 401(k) Plan)
Financial Statements
and Supplemental Schedules
December 31, 2003 and 2002 and year ended December 31, 2003
Contents
Report of Independent Registered Public Accounting Firm 1
Financial Statements
Statements of Net Assets Available for Benefits 3
Statement of Changes in Net Assets Available for Benefits 4
Notes to Financial Statements 5
Supplemental Schedules
Schedule H, line 4a- Schedule of Delinquent Participant Contributions 11
Schedule H, line 4i, Schedule of Assets (Held at End of Year) 12
Report of Independent Registered Public Accounting Firm
The Trustees
Forgent Networks 401(k)
We have audited the accompanying statements of net assets available for benefits
of the Forgent Networks 401(k) Plan (formerly the VTEL Corporation 401(k) Plan)
as of December 31, 2003 and 2002 and the related statement of changes in net
assets available for benefits for the year ended December 31, 2003. 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 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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 at
December 31, 2003 and 2002 and the changes in its net assets available for
benefits for the year ended December 31, 2003, in conformity with generally
accepted United States accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2003, and schedule of delinquent
participant contributions for the year then ended, are presented for purposes of
additional analysis and are not a required part of the financial statements but
are 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.
1
These supplemental schedules are the responsibility of the Plan's management.
The supplemental schedules have been subjected to the auditing procedures
applied in our audits of the financial statements and, in our opinion, are
fairly stated in all material respects in relation to the financial statements
taken as a whole.
July 7, 2004
2
Forgent Networks 401(k) Plan
Statements of Net Assets Available for Benefits
December 31,
2003 2002
---------------------------
Assets
Investments at fair value $12,985,070 $12,593,498
Employee contributions receivable 15,195 15,738
Employer contribution receivable 1,855 2,548
---------------------------
Net assets available for benefits $13,002,120 $12,611,784
===========================
See accompanying notes.
3
Forgent Networks 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2003
Additions:
Employee contributions $ 548,672
Employer contributions 61,612
Net appreciation in fair value of investments 2,529,944
Rollover contributions 75,855
Interest income 82,410
-----------
Total additions 3,298,493
Deductions:
Benefit payments 2,894,310
Administrative expense 13,847
-----------
Total deductions 2,908,157
Net decrease in net assets available for benefits 390,336
Net assets available for benefits at beginning of year 12,611,784
-----------
Net assets available for benefits at end of year $13,002,120
===========
See accompanying notes.
4
Forgent Networks 401(k) Plan
Notes to Financial Statements
December 31, 2003
1. Description of Plan
The VTEL Corporation 401(k) Plan became effective January 1, 1990.
The following brief description of the Plan is provided for general purposes
only. Participants should refer to the Plan agreement for more complete
information.
General
On January 15, 2002, the name of VTEL Corporation was changed to Forgent
Networks, Inc. Effective October 1, 2003, the Plan was amended to change the
name to Forgent Networks 401(k) Plan (the Plan).
The Plan is a defined contribution profit sharing plan covering substantially
all employees of Forgent Networks, Inc. (the Company). It is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Eligible employees may contribute to the Plan an elected portion of their
eligible compensation, as defined in the Plan, up to the statutory annual
deferral limit.
The Company may make matching contributions up to specified amounts at its
discretion. The Company matched 25% of employee deferrals up to a maximum of 6%
of employee earnings.
All contributions are invested at the direction of the participants.
Eligibility
Employees are eligible for participation in the Plan after obtaining 21 years of
age as defined in the Plan, up to the statutory annual deferral limit.
5
Forgent Networks 401(k) Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Vesting
Participants are immediately vested in their contributions and earnings thereon.
Company matching contributions vest based on years of service completed by
participants. Vesting is determined in accordance with the following schedule:
Years of Service Percentage
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
Payment of Benefits
Participants are entitled to receive benefit payments at the normal retirement
age of 65, in the event of the participant's death or disability, or in the
event of termination under certain circumstances other than those listed or if
the participant reaches age 70-1/2 while still employed. Benefits may be paid in
a lump-sum distribution or by an annuity.
Plan Termination
Although the Company has not expressed any intent to terminate the Plan, it
reserves the right to do so at any time, as subject to the provisions of ERISA.
Upon such termination, each participant becomes fully vested and all benefits
shall be distributed to the participants or their beneficiaries.
Participant Accounts
Discretionary employer matching contributions, if any, are allocated annually to
participant accounts based upon the percentage determined and authorized by the
Company's Board of Directors.
6
Forgent Networks 401(k) Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Investment earnings or losses are allocated among the participants' accounts
based upon the percentage of the balance of each such account to the total
balance of all such accounts within each investment option.
Participant Loans
Upon written application of a participant, the Plan may make a loan to a
participant. Participants are allowed to borrow no less than $1,000 and no
greater than the lesser of 50% of the participant's vested account balance or
$50,000. Loans are amortized over a maximum of 60 months unless it is used to
purchase participant's principal residence and repayment is made through payroll
deductions. The amount of the loan is deducted from the participant's investment
accounts and bears interest at a rate commensurate with local rates for similar
plans.
Forfeitures
Forfeitures, if any, under the Plan are first applied to payment of
administrative expenses of the Plan and then to the Company's matching
contribution to the Plan for the Plan year in which the forfeitures occur.
Administration
The Plan is administered by trustees consisting of officers and employees of the
Company. Certain administrative expenses of the Plan are paid by the Company.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Plan's financial statements have been prepared on the accrual basis of
accounting.
7
Forgent Networks 401(k) Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Valuation of Investments
Effective January 1, 1998, the Plan entered into a group annuity contract with
Connecticut General Life Insurance Company (a CIGNA company) ("CGLIC"). The
contract includes the CIGNA Guaranteed Income Fund and Guaranteed Governmental
Securities Fund, which are invested in CGLIC's general portfolio and are
recorded at contract value, which approximates fair value. The Guaranteed Income
Fund does not have a maturity date or penalties for early withdrawals.
Participant directed transfers among investment options and distributions will
normally be made immediately; however, CIGNA may exercise their contractual
right to defer a transfer or distribution from the Guaranteed Income Fund. It
has seldom been necessary for CIGNA to invoke this deferral provision. The rate
of credited interest for any period of time will be determined by CGLIC and is
guaranteed for six month periods (January 1 through June 30 and July 1 through
December 31). The average yield for the Guaranteed Income Fund was approximately
2.70% and 4.05% and for the Guaranteed Governmental Securities Fund was
approximately .71% and 1.13% for the year ended December 31, 2003 and 2002,
respectively. The crediting interest rate (i.e., the rate at which interest was
accrued to the contract balance) for the Guaranteed Income Fund was 3.70% and
3.80% and for the Guaranteed Governmental Securities Fund was .60% and 0.00% as
of December 31, 2003 and 2002, respectively.
The contract also includes pooled separate accounts. CGLIC determines the fair
value of the pooled separate accounts based on the quoted market values of the
underlying assets in the separate accounts. Participant loans are stated at
cost, which approximates fair value.
Use of Estimates
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
that affect the amounts reported in the financial statements and the
accompanying notes and schedules. Actual results could differ from those
estimates.
8
Forgent Networks 401(k) Plan
Notes to Financial Statements (continued)
3. Investments
Individual investments that represent 5% or more of the Plan's net assets at
December 31, 2003 or 2002 are as follows:
December 31,
2003 2002
---------------------------
Connecticut General Life Insurance Company
Pooled
Separate Accounts
Timesquare Corporate Bond Fund $ 1,091,549 $ 1,270,469
Fidelity Advisors Growth Opportunities Fund 970,791 951,965
Dreyfus Founders Growth Fund 833,670 709,063
Neuberger & Berman Partners Trust Fund 930,784 862,703
Balanced I/Wellington Management Fund 1,213,214 924,619
Templeton Foreign Account Fund 703,830 583,801
Janus Worldwide Account Fund 604,282 652,898
State Street Russell 3000 Fund 813,949 686,893
Small Cap Growth/Timesquare Fund 1,965,429 1,565,459
Small Cap Value/Berger Fund 722,789 602,711
Guaranteed Income Fund 2,503,384 3,164,178
During 2003, the Plan's investments (including investments purchased, sold as
well as held during the year) appreciation in fair value as follows:
Pooled separate accounts $ 2,361,418
Common stock 168,526
-----------
$ 2,529,944
===========
9
Forgent Networks 401(k) Plan
Notes to Financial Statements (continued)
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated January 26, 2000, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.
10
Supplemental Schedules
Forgent Networks 401(k) Plan
Schedule H, Line 4a - Schedule of Delinquent Participant Contributions
EIN: 74-2415696 PN: 001
Year ended December 31, 2003
Participant Contributions Total that Constitute
Transferred Late to Plan Nonexempt Prohibited Transactions
$2,480 $2,480
11
Forgent Networks 401(k) Plan
Schedule H, line 4i, Schedule of Assets (Held at End of Year)
EIN: 74-2415696 Plan Number 001
December 31, 2003
Current
Identity of Issue Description of Asset Value
===============================================================================
*Connecticut General Life
Insurance Company Guaranteed Income Fund $2,503,384
*Connecticut General Life
Insurance Company Guaranteed Government Securities Fund 26,167
*Connecticut General Life
Insurance Company Timesquare Corporate Bond Fund 1,091,549
*Connecticut General Life
Insurance Company CIGNA Lifetime 20 Fund 87,568
*Connecticut General Life
Insurance Company CIGNA Lifetime 30 Fund 117,600
*Connecticut General Life
Insurance Company CIGNA Lifetime 40 Fund 51,003
*Connecticut General Life
Insurance Company CIGNA Lifetime 50 Fund 69,862
*Connecticut General Life
Insurance Company CIGNA Lifetime 60 Fund 11,893
*Connecticut General Life Fidelity Advisors Growth
Insurance Company Opportunities Fund 970,791
*Connecticut General Life
Insurance Company Dreyfus Founders Growth Fund 833,670
*Connecticut General Life Neuberger & Berman Partners
Insurance Company Trust Fund 930,784
*Connecticut General Life Balanced I/Wellington
Insurance Company Management Fund 1,213,214
*Connecticut General Life Lazard Equity Portfolio
Insurance Company Account Fund 66,445
*Connecticut General Life
Insurance Company Janus Worldwide Account Fund 604,282
*Connecticut General Life
Insurance Company Templeton Foreign Account Fund 703,830
12
Forgent Networks 401(k) Plan
Schedule H, line 4i, Schedule of Assets (Held at End of Year)(continued)
EIN: 74-2415696 Plan Number 001
December 31, 2003
Current
Identity of Issue Description of Asset Value
===============================================================================
*Connecticut General Life
Insurance Company State Street Russell 3000 Fund $813,949
*Connecticut General Life
Insurance Company Small Cap Growth/Timesquare Fund 1,965,429
*Connecticut General Life
Insurance Company Small Cap Value/Berger Fund 722,789
*National Financial Services Forgent Common Stock 200,861
-----------
Total $12,985,070
===========
*Indicates a party-in-interest to the Plan.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employees benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
Forgent Networks
401(k) Plan (formerly
the VTEL Corporation
401(k) Plan)
Date: July 13, 2004 By: /s/ Paul Tesluk
Name: Paul Tesluk
Title: Plan Advisor
Exhibit Index
Exhibit
Number Document Description
--------- --------------------
23.1 Consent of Ernst & Young
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-44533) pertaining to the Forgent Networks 401(k) Plan (formerly the
VTEL Corporation 401(k) Plan) of our report dated July 7, 2004, with respect to
the financial statements and schedule of the Forgent Networks 401(k) Plan
(formerly the VTEL Corporation 401(k) Plan) included in this Annual Report (Form
11-K) for the year ended December 31, 2003.
Austin, TX
July 12, 2004 /s/ Ernst & Young, LLP