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, 2002
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:
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
VTEL Corporation 401(k) Plan
Year ended December 31, 2002 with Report of Independent Auditors
VTEL Corporation 401(k) Plan
Financial Statements
and Supplemental Schedules
Year ended December 31, 2002
Contents
Report of Independent Auditors...............................................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 G, Part III, Schedule of Non-Exempt Transactions...................11
Schedule H, line 4i, Schedule of Assets (Held at End of Year)...............12
Report of Independent Auditors
The Trustees
VTEL Corporation 401(k) Plan
We have audited the accompanying statements of net assets available for benefits
of the VTEL Corporation 401(k) Plan as of December 31, 2002 and 2001 and the
related statement of changes in net assets available for benefits for the year
ended December 31, 2002. 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 auditing standards generally accepted
in the 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, 2002 and 2001 and the changes in its net assets available for
benefits for the year ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
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, 2002, and schedule of non-exempt
transactions 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.
The 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.
May 1, 2003 /s/ Ernst & Young, LLP
1
VTEL Corporation 401(k) Plan
Statements of Net Assets Available for Benefits
December 31
2002 2001
---------------------------------------
Assets
Investments at fair value $ 12,593,498 $ 18,294,591
Employee contributions receivable 15,738 24,292
Employer contribution receivable 2,548 3,691
---------------------------------------
Net assets available for benefits $ 12,611,784 $ 18,322,574
=======================================
See accompanying notes.
2
VTEL Corporation 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2002
Additions:
Employee contributions $ 714,407
Employer contributions 79,163
Rollover contributions 12,683
Interest income 119,542
----------------------
Total additions 925,795
Deductions:
Benefit payments 3,951,758
Net depreciation in fair value of investments 2,670,616
Administrative expense 14,211
----------------------
Total deductions 6,636,585
----------------------
Net decrease in net assets available for benefits (5,710,790)
Net assets available for benefits at beginning of year 18,322,574
----------------------
Net assets available for benefits at end of year $ 12,611,784
======================
See accompanying notes.
3
VTEL Corporation 401(k) Plan
Notes to Financial Statements
1. Description of Plan
The VTEL Corporation 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
On January 15, 2002, the name of VTEL Corporation was changed to Forgent
Networks, Inc.
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.
4
VTEL Corporation 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.
5
VTEL Corporation 401(k) Plan
Notes to Financial Statements
1. Description of Plan (continued)
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.
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.
6
VTEL Corporation 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 sic month periods (January 1 through June 30 and July 1 through
December 31). The average yield for the Guaranteed Income Fund was approximately
4.05% and 5.05% and for the Guaranteed Governmental Securities Fund was
approximately 1.13% and 5.05% for the year ended December 31, 2002 and 2001,
respectively. The crediting interest rate (i.e., the rate at which interest was
accrued to the contract balance) for the Guaranteed Income Fund was 3.80% and
4.95% and for the Guaranteed Governmental Securities Fund was 0.00% and .70% as
of December 31, 2002 and 2001, 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 accounting principles
generally accepted in the United States 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.
7
VTEL Corporation 401(k) Plan
Notes to Financial Statements
3. Investments
The following presents investments that represent five percent or more of the
Plan's net assets:
December 31, 2002
--------------------
Connecticut General Life Insurance Company Pooled
Separate Accounts:
Timesquare Corporate Bond Fund $ 1,270,469
Fidelity Advisors Growth Opportunities Fund 951,965
Dreyfus Founders Growth Fund 709,063
Neuberger & Berman Partners Trust Fund 862,703
Balanced I/Wellington Management Fund 924,619
Janus Worldwide Account Fund 652,898
State Street Russell 3000 Fund 686,893
Small Cap Growth/Timesquare Fund 1,565,459
Guaranteed Income Fund 3,164,178
December 31, 2001
--------------------
Connecticut General Life Insurance Company Pooled
Separate Accounts:
Timesquare Corporate Bond Fund 1,334,500
Fidelity Advisors Growth Opportunities Fund 1,815,213
Dreyfus Founders Growth Fund 1,267,102
Neuberger & Berman Partners Trust Fund 1,589,471
Balanced I/Wellington Management Fund 1,255,191
Janus Worldwide Account Fund 1,593,686
State Street Russell 3000 Fund 1,258,491
Small Cap Growth/Timesquare Fund 2,328,755
Guaranteed Income Fund 2,921,201
8
VTEL Corporation 401(k) Plan
Notes to Financial Statements
3. Investments (continued)
During 2002, the Plan's investments (including investments purchased, sold as
well as held during the year) depreciated in fair value as follows:
Pooled separate accounts $ (2,276,528)
Common stock (394,088)
-----------------------
$ (2,670,616)
=======================
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.
9
Supplemental Schedules
10
VTEL Corporation 401(k) Plan
Schedule G, Part III - Schedule of Nonexempt Transactions
EIN: 74-2415696 PN: 001
Year ended December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------
Relationship to Plan,
Identity of Employer, or Other Description of Transactions Current Net Gain
Party Involved Party-In-Interest Cost of Asset Value of (repaid
Asset interest)*
- ------------------------------------------------------------------------------------------------------------------------
Forgent Employer/Plan Sponsor Loan to the Employer in the $2,480 $2,480 -
Networks, Inc. form of late remittance of
participant deferrals for the pay
periods from July 1, 2002 -
November 1, 2002.
- ------------------------------------------------------------------------------------------------------------------------
*The Plan Sponsor is in the process of determining the applicable interest in
order to fully correct the late remittances.
11
VTEL Corporation 401(k) Plan
Schedule H, line 4i, Schedule of Assets (Held at End of Year)
EIN: 74-2415696 Plan Number 001
December 31, 2002
Current
Identity of Issue Description of Asset Value
-----------------------------------------------------------------------------------------------------------------
*Connecticut General Life Insurance
Company Guaranteed Income Fund $ 3,164,178
*Connecticut General Life Insurance
Company Guaranteed Government Securities Fund 25,900
*Connecticut General Life Insurance
Company Timesquare Corporate Bond Fund 1,270,469
*Connecticut General Life Insurance
Company CIGNA Lifetime 20 Fund 66,023
*Connecticut General Life Insurance
Company CIGNA Lifetime 30 Fund 71,709
*Connecticut General Life Insurance
Company CIGNA Lifetime 40 Fund 46,789
*Connecticut General Life Insurance
Company CIGNA Lifetime 50 Fund 87,180
*Connecticut General Life Insurance
Company CIGNA Lifetime 60 Fund 14,937
*Connecticut General Life Insurance Fidelity Advisors Growth Opportunities
Company Fund 951,965
*Connecticut General Life Insurance
Company Dreyfus Founders Growth Fund 709,063
*Connecticut General Life Insurance
Company Neuberger & Berman Partners Trust Fund 862,703
*Connecticut General Life Insurance
Company Balanced I/Wellington Management Fund 924,619
*Connecticut General Life Insurance
Company Lazard Equity Portfolio Account Fund 48,800
*Connecticut General Life Insurance
Company Janus Worldwide Account Fund 652,898
*Connecticut General Life Insurance
Company Templeton Foreign Account Fund 583,801
12
VTEL Corporation 401(k) Plan
Schedule H, line 4i, Schedule of Assets (Held at End of Year) (continued)
EIN: 74-2415696 Plan Number 001
December 31, 2002
Current Value
Identity of Issue Description of Asset
-----------------------------------------------------------------------------------------------------------------
*Connecticut General Life Insurance
Company State Street Russell 3000 Fund $ 686,893
*Connecticut General Life Insurance
Company Small Cap Growth/Timesquare Fund 1,565,459
*Connecticut General Life Insurance
Company Small Cap Value/Berger Fund 602,711
*National Financial Services Forgent Common Stock 245,099
*Participant Loans Loaned funds of various maturities (years) and
rates from 7.75% to 8.50% 12,302
---------------------
Total $ 12,593,498
=====================
*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.
VTEL Corporation 401(k) Plan
Date: June 27, 2003 /s/ Paul Tesluk
----------------------------------
Paul Tesluk
Plan Administrator
14
Exhibit Index
Exhibit
Number Document Description
- ------- --------------------
23.1 Consent of Ernst & Young
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the sarbanes-Oxley Act of 2002.
15
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (File No. 333-44533) pertaining to the VTEL Corporation 401(k) Plan of
our report dated May 1, 2003, with respect to the financial statements and
schedule of the VTEL Corporation 401(k) Plan included in this Annual Report on
Form 11-K for the year ended December 31, 2002.
Austin, TX /s/ Ernst & Young, LLP
June 24, 2003
Exhibit 99.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the filing of the Annual Report of the VTEL
Corporation 401(k) Plan (the "Plan") on Form 11-K for the period ended December
31, 2002, as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Jay Peterson, Chief Financial Officer of Forgent
Networks, Inc., certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Plan.
Date: June 27, 2003 /s/ Jay Peterson
--------------------------------------
Jay Peterson
Chief Financial Officer
Exhibit 99.2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the filing of the Annual Report of the VTEL
Corporation 401(k) Plan (the "Plan") on Form 11-K for the period ended December
31, 2002, as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Paul Tesluk, Plan Administrator of the Plan, certify
pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Plan.
Date: June 27, 2003 /s/ Paul Tesluk
--------------------------------
Paul Tesluk
Plan Administrator