U.S. leader in online learning expands offerings for schools and
families domestically and internationally
HERNDON, Va., Jul 26, 2010 (BUSINESS WIRE) --
K12 Inc. (NYSE: LRN), one of the nation's largest providers of
proprietary curriculum and online school programs for students in
kindergarten through high school, announced today the all-stock
acquisition of KC Distance Learning, Inc. (KCDL), a privately-held,
nationally-recognized provider of distance learning programs for middle
and high school students, with a newly-issued class of non-voting shares
having a value of $63.1 million under the terms of the Merger Agreement.
The acquisition bolsters K12's position as a leader in K-12 online
education and a premier provider of virtual school solutions. The move
adds a new line of products and services to K12's robust offerings for
public and private schools, international schools, and individual
consumers. Additionally, K12(R) significantly increases the size of its
online private school offering through the acquisition of KCDL.
"K12 is excited about the acquisition of KC Distance Learning and the
opportunity to deliver a greater variety of products and services to
more customers," said Ron Packard, founder and CEO of K12 Inc. "By
incorporating KCDL's offerings into K12's portfolio of high quality
products and services, we will be able to expand our online course and
virtual school program offerings to provide customers with more options
and greater flexibility. This will also enable us to scale at a faster
rate to meet the exploding demand from families, teachers and
administrators for online learning solutions, while maintaining K12's
high standards of quality and excellence. The complementary nature of
KCDL's businesses allows us to scale these new businesses and deliver
the products and services in a more cost efficient manner."
"K12 is committed to our mission of delivering a world-class education
to every child by empowering families, teachers and school
administrators with excellent education programs," said Mr. Packard.
"K12 will continue to leverage our vast experience and expertise on
behalf of our customers and passionately work to ensure that every child
reaches his or her full potential."
KCDL, headquartered in Portland, OR, has three brands that provide
quality education products and services to districts, public and private
schools, and directly to families: Aventa LearningTM, The
KeystoneTM School and iQ Academies(R).
Aventa Learning offers an extensive catalog of engaging courses and
effective instructional services for schools and school districts
designed to give educators innovative online content and services to
enhance their education programs. Aventa, which is accredited by the
Northwest Association of Accredited Schools, has over 140 core, elective
and AP(R) courses in grades 6-12 that provide organizations high quality
and cost-effective online learning solutions, from credit recovery
courses to full-scale virtual school programs.
The Keystone School is a leading online private school for middle and
high school students. The school, also accredited by the Northwest
Association of Accredited Schools, was established in 1974 and has
served over 250,000 students from 84 countries in its history. It
provides a flexible learning experience for full-time and part-time
students and offers a wide range of courses supported by experienced,
certified teachers.
iQ Academies operates statewide online public schools in partnership
with school districts or public charter schools to serve the education
needs of middle and high school students. iQ Academies are offered in
six states: Kansas, Minnesota, Nevada, Texas, Washington, and Wisconsin.
In fiscal year 2009 (FY 2009), KCDL's combined education channels
delivered an estimated 176,000 course enrollments to 67,000 students in
over 1,800 schools and organizations.
"In joining forces, K12 and KCDL will provide students, families, and
educators with even greater access to high quality online education
solutions," said Caprice Young, CEO of KCDL. "It expands our ability to
support the highly customized solutions educators require to create
hybrid learning environments tailored to the individual needs of
students."
Financial Highlights of the KC Distance
Learning Acquisition:
The KC Distance Learning product offering augments K12's online learning
offerings and will allow the Company to reach and meet the needs of a
broader group of students, teachers and school administrators. The
acquisition provides the opportunity to realize cost efficiencies and
greater revenues. As a result, the acquisition is expected to enhance
the Company's growth over time. Giving effect to certain transaction and
transition related expenses, the transaction is expected to be slightly
dilutive on earnings per share in FY 2011 and accretive on earnings per
share by FY 2012. K12 is on a June 30 Fiscal Year.
Unaudited Financial Results of KC
Distance Learning:
The following financial results are unaudited. For the three months
ending March 31, 2010, KCDL reported revenues of $8.9 million,
reflecting a growth rate of 23.0% over the same period in the prior
year. For calendar year 2009, KCDL reported revenues of $34.7 million,
reflecting a growth rate of 47.1% over the prior year.
The transaction closed on July 23, 2010. Further disclosures including
audited calendar year 2009 financial statements and pro forma financial
statements will be included in K12's future 8-K filings with the SEC.
Terms of the KC Distance Learning
Acquisition:
As consideration in the transaction, K12 issued a total of 2.75 million
shares of a new series of stock designated as the Series A Special Stock
to the prior owner of KCDL, KCDL Holdings LLC, which is an affiliate of
Learning Group LLC. The holders of the Series A shares initially have no
voting rights and no rights of conversion. However, K12 has agreed to
hold a meeting of stockholders to obtain the approval of K12's
stockholders for voting rights and rights of conversion of the Series A
shares. After stockholder approval of the voting rights and rights of
conversion of the Series A shares, the holders of Series A shares will
be entitled to vote on all matters presented to the holders of K12
common stock (other than for the election and removal of directors, on
which the holders of Series A shares shall have no vote) and the Series
A shares shall be convertible into an equal number of shares of K12
common stock. Holders of the Series A shares have a par value
liquidation preference and are entitled to participate on a pro rata
basis in all dividends and distributions made to holders of the K12
common stock. In the event that the K12 stockholders do not approve the
voting rights and rights of conversion of the Series A shares by the
first anniversary of the closing of the acquisition, the Series A shares
will be redeemable at the option of the holder or K12 at a price per
share of the greater of $22.95 or the price per share of the K12 common
stock at the date of redemption.
K12 expects to convene a special meeting of the K12 stockholders in the
Fall 2010 to consider the approval of the voting rights and rights of
conversion of the Series A shares. K12 has entered into a voting
agreement with Learning Group LLC and certain of its affiliates pursuant
to which they have agreed to vote their shares of K12 common stock equal
to approximately 17.2% of the outstanding shares in favor of the
approval of the voting rights and rights of conversion of the Series A
shares.
As a part of the transaction, KCDL Holdings LLC and certain of its
affiliates that are stockholders of K12 entered into a stockholders
agreement pursuant to which they have agreed to be bound by transfer
restrictions on their shares of stock of K12 (including the newly-issued
Series A shares) for a term of up to one year from the date of the
closing of the acquisition and agreed to other restrictions regarding
their shares and activities.
Advisors to K12 in the Acquisition:
In evaluating the transaction, among other information, the K12 Board of
Directors received an opinion from its financial advisor, Duff & Phelps
LLC, that the consideration paid in the acquisition was fair from a
financial point of view to K12 and its stockholders (other than Learning
Group LLC and its affiliates) as of the date of the opinion. Kirkland &
Ellis LLP served as legal counsel to K12.
About K12 Inc.:
K12 Inc. (NYSE:LRN), a technology-based education
company, is the nation's largest provider of proprietary curriculum and
online education programs for students in kindergarten through high
school. K12 provides its innovative, award-winning curriculum and
academic services to online public and private schools, traditional
classrooms, blended school programs, and directly to families.
In partnership with school district and charter schools, K12 operates
online public schools in 25 states and the District of Columbia. K12also operates the K12International AcademyTM,
an accredited, diploma-granting online private school serving students
worldwide.
K12 has provided over 1.5 million courses to more than 150,000 students
worldwide, and has received numerous awards and honors for academic
achievement and innovation. Over 95 percent of parents surveyed are
satisfied with the K12 program and agree that their children have
benefited academically with K12.
K12 provides courses in English/Language Arts, Math, Science, History,
Music, and Art. The K12 High School program offers students a catalog of
more than 130 core, elective, and AP(R) courses. K12's powerspeaK12(R)
world language program provides courses for students in grades 3-12 in
Spanish, French, German, Latin, and Chinese.
More information can be found at www.K12.com.
Forward-Looking Statements:
This press release contains forward-looking statements within the
meaning of federal securities regulations. These forward-looking
statements are identified by their use of terms and phrases such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"plan," "predict," "project," "will," "continue" and other similar terms
and phrases, including references to assumptions and forecasts of future
results. Forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and other
factors which may cause the actual results to differ materially from
those anticipated at the time the forward-looking statements are made.
These risks include, but are not limited to: the reduction of per pupil
funding amounts at the schools we serve; reputation harm resulting from
poor performance or misconduct of other virtual school operators;
challenges from virtual public school opponents; failure of the schools
we serve to comply with regulations resulting in a loss of funding;
discrepancies in interpretation of legislation by regulatory agencies
that may lead to payment or funding disputes; termination of our
contracts with schools due to a loss of authorizing charter; failure to
renew existing contracts with schools; KCDL's businesses and the
acquisition, the timing of the meeting of stockholders to approve the
voting rights and rights of conversion of the Series A Special Stock;
the effects of disruption from the transaction making it more difficult
to maintain relationships with employees, customers, other business
partners or governmental entities; the ability to realize the expected
synergies resulting for the transaction in the amounts or in the
timeframe anticipated; the ability to integrate KCDL's businesses into
those of K12 in a timely and cost-efficient manner;increased
competition; and other risks and uncertainties associated with our
business described in the Company's filings with the Securities and
Exchange Commission. Although the Company believes the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that the expectations will be
attained or that any deviation will not be material. All information in
this release is as of July 26, 2010, and the Company undertakes no
obligation to update any forward-looking statement to conform the
statement to actual results or changes in the Company's expectations
except as required by law.
Additional Information and Where to Find
It:
K12 plans to file with the Securities and Exchange Commission and
mail to its stockholders a proxy statement in connection with the
proposed approval of voting rights and rights of conversion of the
Series A Special Stock by the holders of the outstanding shares of K12
common stock.The proxy statement will contain important
information about the acquisition of KC Distance Learning, Inc. and the
Series A Special Stock and related matters.INVESTORS AND
STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT
BECOMES AVAILABLE.Investors and stockholders will be able to
obtain free copies of the proxy statement and other documents filed with
the SEC by K12 through the web site maintained by the SEC at www.sec.gov.In addition, investors and stockholders will be able to obtain free
copies of the proxy statement when it becomes available from K12 by
contacting Investor Relations by telephone at (703) 483-7000, by mail at
K12 Inc., Investor Relations, 2300 Corporate Park Drive, Herndon,
Virginia 20171, or by going to K12's Investor Relations page at www.k12.com.
Participants in Solicitation:
K12 and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders of K12
in connection with the solicitation of the proposed approval of voting
rights and rights of conversion of the Series A Special Stock.Information
regarding the interests of these directors and executive officers will
be included in the proxy statement described above.Additional
information regarding these directors and executive officers is also
included in K12's proxy statement for its 2009 Annual Meeting of
Stockholders, which was filed with the Securities and Exchange
Commission on October 19, 2009.This document is available free
of charge at the SEC's web site at www.sec.gov
and from K12 by contacting Investor Relations by telephone at (703)
483-7000, by mail at K12 Inc., Investor Relations, 2300 Corporate Park
Drive, Herndon, Virginia 20171, or by going to K12's Investor Relations
page at www.k12.com.
***
© 2010 K12Inc. K12 ,
powerspeaK12 and iQ Academies are registered
trademarks, and the K12 logo, Aventa Learning,
Keystone and K12 International Academy are
trademarks of K12 Inc. or its subsidiaries. All other trademarks are the
property of their respective owners.
SOURCE: K12 Inc.
K12 Inc.
SVP, Finance and Investor Relations
Keith Haas, 703-483-7077
khaas@K12.com
or
VP, Public Affairs
Jeff Kwitowski, 703-483-7281
jkwitowski@K12.com