FORM 11-K
Table of Contents

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, 2004

 

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

 

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

 



Table of Contents

Financial Statements and Supplemental Schedules

 

Forgent Networks 401(k) Plan

 

December 31, 2004 and 2003 and year ended December 31, 2004 with Report of

 Independent Registered Public Accounting Firm


Table of Contents

Forgent Networks 401(k) Plan

 

Financial Statements

and Supplemental Schedules

 

December 31, 2004 and 2003 and year ended December 31, 2004

 

Contents

 

Report of Independent Registered Public Accounting Firm    1
Financial Statements     
Statements of Net Assets Available for Benefits    2
Statement of Changes in Net Assets Available for Benefits    3
Notes to Financial Statements    4
Supplemental Schedules     
Schedule H, line 4a- Schedule of Delinquent Participant Contributions    10
Schedule H, line 4i, Schedule of Assets (Held at End of Year)    11


Table of Contents

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 as of December 31, 2004 and 2003, and the related statement of changes in net assets available for benefits for the year ended December 31, 2004. 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. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits 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, and 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, 2004 and 2003, and the changes in its net assets available for benefits for the year ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

 

Our audits were performed for the purpose of forming an opinion on the financial statements for the Plan taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2004, is presented for purposes of additional analysis and is not a required part of the 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 our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

 

Austin, Texas

July 8, 2005

 

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Table of Contents

Forgent Networks 401(k) Plan

 

Statements of Net Assets Available for Benefits

 

     December 31

     2004

   2003

Assets              

Investments at fair value

   $ 11,334,156    $ 12,985,070

Employee contributions receivable

     —        15,195

Employer contribution receivable

     —        1,855
    

  

Net assets available for benefits

   $ 11,334,156    $ 13,002,120
    

  

 

See accompanying notes.

 

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Table of Contents

Forgent Networks 401(k) Plan

 

Statement of Changes in Net Assets Available for Benefits

 

Year ended December 31, 2004

 

Additions:

        

Employee contributions

   $ 183,041  

Employer contributions

     4,165  

Net appreciation in fair value of investments

     949,868  

Rollover contributions

     98  

Interest income

     46,883  
    


Total additions

     1,184,055  

Deductions:

        

Benefit payments

     2,840,806  

Administrative expense

     11,213  
    


Total deductions

     2,852,019  
    


Net decrease in net assets available for benefits

     (1,667,964 )

Net assets available for benefits at beginning of year

     13,002,120  
    


Net assets available for benefits at end of year

   $ 11,334,156  
    


 

See accompanying notes.

 

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Table of Contents

Forgent Networks 401(k) Plan

 

Notes to Financial Statements

 

December 31, 2004

 

1. Description of Plan

 

The Forgent Networks 401(k) Plan (the 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

 

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).

 

On April 1, 2004, Prudential Retirement Insurance and Annuity Company (“Prudential”) assumed the operations of CIGNA Retirement & Investments (“CIGNA”). Thus the names of the various investment options within the Plan were renamed.

 

Contributions

 

Eligible employees may contribute from 1% up to 20% of 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.

 

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Table of Contents

Forgent Networks 401(k) Plan

 

Notes to Financial Statements (continued)

 

1. Description of Plan (continued)

 

Vesting

 

Participants are immediately vested in their contributions and actual earnings thereon. Company matching contributions and actual earnings thereon 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

 

Each participant’s account is credited with the participant’s contributions and allocations of a) the Company’s contributions and b) plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.

 

5


Table of Contents

Forgent Networks 401(k) Plan

 

Notes to Financial Statements (continued)

 

1. Description of Plan (continued)

 

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 either applied to payment of certain 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.

 

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Table of Contents

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”). On April 1, 2004 these contracts were assumed by Prudential. The contract includes the Prudential Guaranteed Income Fund and Guaranteed Governmental Securities Fund, which are invested in Prudential’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 are normally made immediately; however, Prudential may exercise their contractual right to defer a transfer or distribution from the Guaranteed Income Fund. It has seldom been necessary for Prudential to invoke this deferral provision. The rate of credited interest for any period of time will be determined by Prudential 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 and the Guaranteed Governmental Securities Fund was approximately 2.5% and 2.70% and .67% and .71% for the year ended December 31, 2004 and 2003, respectively. The crediting interest rate (i.e., the rate at which interest was accrued to the contract balance) for the Guaranteed Income Fund and the Guaranteed Governmental Securities Fund was 3.5% and 3.70% and 1.04% and .60% as of December 31, 2004 and 2003, respectively.

 

The contract also includes pooled separate accounts. Prudential 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. Investments in Forgent common stock are reported at fair value, based on quoted prices in active markets.

 

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.

 

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Table of Contents

Forgent Networks 401(k) Plan

 

Notes to Financial Statements (continued)

 

2. Summary of Significant Accounting Policies (continued)

 

Risks and Uncertainties

 

The Plan provides for investments in various investment securities which, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits and participant account balances.

 

3. Investments

 

Individual investments that represent 5% or more of the Plan’s net assets at December 31, 2004 or 2003 are as follows:

 

     December 31

     2004

   2003

Prudential Retirement Insurance and Annuity Company:

             

Timesquare Corporate Bond/BSAM Fund

   $ 714,965    $ 1,091,549

Fidelity Advisors Growth Opportunities Fund

     899,169      970,791

Dreyfus Founders Growth Fund

     715,232      833,670

Neuberger & Berman Partners Trust Fund

     1,052,515      930,784

Balanced I/Wellington Management Fund

     1,190,995      1,213,214

Templeton Foreign Account Fund

     682,654      703,830

Janus Worldwide Account Fund

     372,957      604,282

State Street Russell 3000 Fund

     609,537      813,949

Small Cap Growth/Timesquare Fund

     1,762,190      1,965,429

Small Cap Value/Berger Fund

     —        722,789

Small Cap Value/Perkins Wolf McDonnell

     837,405      —  

Guaranteed Income Fund

     1,565,623      2,503,384

 

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Table of Contents

Forgent Networks 401(k) Plan

 

Notes to Financial Statements (continued)

 

3. Investments (continued)

 

During 2004, the Plan’s investments (including investments purchased, sold as well as held during the year) appreciated/(depreciated) in fair value as follows:

 

Pooled separate accounts

   $ 988,396  

Common stock

     (38,528 )
    


     $ 949,868  
    


 

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. Subsequent to this determination by the Internal Revenue Service, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Company has indicated that it will take the necessary steps, if any, to bring the Plan’s operations into compliance with the code.

 

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Table of Contents

Supplemental Schedules

 

 


Table of Contents

Forgent Networks 401(k) Plan

 

Schedule H, Line 4a – Schedule of Delinquent Participant Contributions

EIN: 74-2415696 PN: 001

 

Year ended December 31, 2004

 

Year Ended


   Participant
Contributions
Transferred Late to Plan


   Total that Constitute
Nonexempt Prohibited
Transactions


2003

   $ 2,480    $ 2,480

 

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Table of Contents

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, 2004

 

Identity of Issue


  

Description of Asset


   Current
Value


*Prudential Retirement Insurance
and Annuity Company

   Guaranteed Income Fund    $ 1,565,623

*Prudential Retirement Insurance
and Annuity Company

   Guaranteed Government Securities Fund      13,558

*Prudential Retirement Insurance
and Annuity Company

   Timesquare Corporate Bond/BSAM Fund      714,965

*Prudential Retirement Insurance
and Annuity Company

   Lifetime 20 Fund      82,315

*Prudential Retirement Insurance
and Annuity Company

   Lifetime 30 Fund      244,874

*Prudential Retirement Insurance
and Annuity Company

   Lifetime 40 Fund      88,229

*Prudential Retirement Insurance
and Annuity Company

   Lifetime 60 Fund      12,671

*Prudential Retirement Insurance
and Annuity Company

   Fidelity Advisors Growth Opportunities Fund      899,169

*Prudential Retirement Insurance
and Annuity Company

   Dreyfus Founders Growth Fund      715,232

*Prudential Retirement Insurance
and Annuity Company

   Neuberger & Berman Partners Trust Fund      1,052,515

*Prudential Retirement Insurance
and Annuity Company

   Balanced I/Wellington Management Fund      1,190,995

*Prudential Retirement Insurance
and Annuity Company

   Lazard Equity Portfolio Account Fund      118,439

*Prudential Retirement Insurance
and Annuity Company

   Janus Worldwide Account Fund      372,957

*Prudential Retirement Insurance
and Annuity Company

   Templeton Foreign Account Fund      682,654

 

11


Table of Contents

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, 2004

 

Identity of Issue


  

Description of Asset


  

Current

Value


*Prudential Retirement Insurance
and Annuity Company

   State Street Russell 3000 Fund    $ 609,537

*Prudential Retirement Insurance
and Annuity Company

   Small Cap Growth/Timesquare Fund      1,762,190

*Prudential Retirement Insurance
and Annuity Company

   Small Cap Value/Perkins Wolf McDonnell      837,405

*Prudential Retirement Insurance
and Annuity Company

   Mid Cap Value/Cooke & Bieler Fund      33,602

*Prudential Retirement Insurance
and Annuity Company

   Mid Cap Growth/Artisan Partners      97,106

*Prudential Retirement Insurance
and Annuity Company

   High Yield Bond/Caywood-Scholl Fund      63,697

*Prudential Retirement Insurance
and Annuity Company

   T. Rowe Price EQ Inc.-ADV SH      53,000

*Prudential Retirement Insurance
and Annuity Company

   Oppenheimer Global-CLA      54,584

*Forgent, Inc.

   Forgent Common Stock Fund      68,839
         

Total         $ 11,334,156
         


* Indicates a party-in-interest to the Plan.

 

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Table of Contents

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
Date: July 14, 2004   By:  

/s/ Paul Tesluk


    Name:   Paul Tesluk
    Title:   Plan Advisor

 

Exhibit Index

 

Exhibit
Number


 

Document Description


23.1   Consent of Ernst & Young

 

13