Annual Revenues Increase 36 percent to $522 million on Strong
Enrollment Growth in Core Business
HERNDON, Va., Oct 07, 2011 (BUSINESS WIRE) --
K12 Inc. (NYSE: LRN), a leading provider of proprietary,
technology-based curriculum, software and education services created for
individualized learning for students primarily in kindergarten through
12th grade, today announced its results for the fourth fiscal quarter
and full year ended June 30, 2011.
Summary Financial Results For FY 2011
-
Revenues for fiscal year 2011 (FY 2011) grew to $522.4 million, an
increase of 35.9 percent over the prior year, primarily due to 23.7
percent organic revenue growth. Acquisitions contributed 10.4 percent
to revenue growth and new initiatives contributed 1.8 percent.
-
EBITDA for FY 2011(see reconciliation below) was $67.1 million, an
increase of 9.6 percent as compared to $61.2 million for the prior
year, reflecting strong growth in the core business, but reduced by
$12.0 million of expenses primarily associated with transaction costs,
merger integration, and implementation of our ERP. In addition, the
Company incurred startup losses associated with its new initiatives
(as described below) of approximately $7.9 million.
-
Operating income was $24.2 million, a decrease of 31.8 percent as
compared to $35.5 million for the prior year, reflecting the factors
described above plus an increase of $17.2 million in depreciation and
amortization due to new product launches, systems releases and
transaction related purchase accounting.
-
Net income to common and Series A shareholders was $12.8 million as
compared to $21.5 million in the prior year, a decrease of 40.5
percent.
-
Diluted earnings per share were $0.37 as compared to $0.71 in the
prior year.
Review of Significant Business Activities
Ron Packard, Chief Executive Officer of K12 Inc., stated, "This fiscal
year was a transformational one for K12. We are pleased with the many
accomplishments across our business. As a company, we achieved revenue
growth of over 35 percent with most of it being organic. We made three
acquisitions during the year that, combined, enhance our online public
school offering and scale our Institutional Business and Private School
distribution channels. In aggregate, acquisitions contributed 10.4
percent to revenue growth in fiscal year 2011. We completed several
strategic initiatives this year that contributed 1.8 percent to our
growth. Our virtual public school business is strong and growing. The
increasing acceptance of online learning has enabled us to open schools
in two new states for Fall 2011 and raise or eliminate several
enrollment caps. We also now have a meaningful presence in China and
have had an outstanding business development year. School is already
open for the 2011/2012 school year and we are delighted to serve so many
more children."
Significant accomplishments of Fiscal Year 2011:
-
Total average enrollment increased by over 45% to 98,890, including
acquisitions;
-
Strategic acquisitions of KC Distance Learning (KCDL), American
Education Corporation (AEC) and International School of Berne
complement and expand our virtual charter school business,
institutional sales and private school offering;
-
Our investment in Web International Education positions us for a
significant growth opportunity in China; and
-
Our launch of new initiatives, including Capital Education, Middlebury
Interactive Languages (MIL), SF Flex School and brick and mortar
classroom pilot programs, positions K12 in several complementary
markets;
-
We materially strengthened our financial position with the completion
of a private placement of 4 million shares with Technology Crossover
Ventures providing proceeds of approximately $125 million; and
-
We have continued our investment in curriculum and learning systems,
now a cumulative $240 million.
Mr. Packard concluded, "Looking ahead to Fiscal 2012, we are encouraged
by the robust enrollment season for the 2011 / 2012 school year. We have
seen acceleration in the organic enrollment growth rate in virtual
schools and a decrease in customer acquisition costs. We are very
pleased to open schools in two new states, Louisiana and Tennessee and
to launch the George Washington University Online High School."
Financial Results for the Fiscal Year ended June 30, 2011
-
Revenues for FY 2011 were $522.4 million, an increase of 35.9 percent.
This increase was primarily due to 23.7 percent organic revenue
growth. In addition, acquisitions contributed 10.4 percent to revenue
growth and new initiatives contributed 1.8 percent to revenue growth.
Total average enrollments including acquisitions increased 45.7% to
98,890 for the year ended June 30, 2011 from 67,878 for the same
period in the prior year.
-
Instructional costs and services expenses for FY 2011 were $307.1
million, an increase of $85.1 million or 38.3 percent. This increase
was primarily attributable to a $63.9 million increase in expenses to
operate and manage schools including the programs acquired with KCDL
and the MIL summer programs. In addition, costs to supply curriculum,
books, educational materials and computers to students increased $10.6
million, and amortization of curriculum and online learning systems
also increased $10.6 million. Included in the $85.1 million increase
in instructional costs and services expenses were start-up and launch
expenses of $7.5 million for several new initiatives.
-
Selling, administrative, and other operating expenses for FY 2011 were
$174.8 million, an increase of $57.4 million or 48.9 percent. This
increase is primarily attributable to increases in: strategic
marketing including brand awareness and student recruitment; personnel
costs, primarily those acquired with KCDL and AEC; depreciation and
amortization including the effects of purchase accounting; and
professional services. Transaction and integration expenses, financial
systems and process improvement costs; and executive stock
compensation expenses associated with a new contract totaled $9.4
million. Startup expenses of $6.6 million for several new initiatives
were also included.
-
Product development expenses for FY 2011 were $16.3 million, an
increase of $6.7 million or 70.7 percent. Included in the $6.7 million
increase in product development expenses are expenses of $1.8 million
related to new initiatives and ERP system implementation expenses of
$1.0 million.
-
EBITDA, a non-GAAP measure (see reconciliation below), for FY 2011 was
$67.1 million, an increase of 9.6 percent. EBITDA has been impacted by
$12.0 million of cumulative transaction expenses, merger integration
costs, financial systems and process improvement costs, effects of
purchase accounting, and by losses from new initiatives totaling $7.9
million.
-
Operating income was $24.2 million for FY 2011, a decrease of 31.8
percent, partially attributable to the factors above and an increase
of $17.2 million in depreciation and amortization expense primarily
due to investments in curriculum and systems to support growth and due
to the effects of purchase accounting.
-
Income tax expense was $11.3 million for FY 2011, representing an
effective tax rate of 49.3 percent. Income tax expense for the prior
year was $13.2 million, an effective tax rate of 38.8 percent. The
increase in the tax rate is primarily attributable to certain
non-deductible transaction expenses in the current period and R&D tax
credits that reduced the effective tax rate in the prior year.
-
Net income to common and Series A shareholders was $12.8 million for
FY 2011, a decrease of 40.5 percent due to the factors described above.
-
Diluted net income attributable to common stockholders per share was
$0.37 as compared to $0.71 in the prior period, a decrease of 47.9
percent, due to the factors described above. Diluted net income per
share reflects a pro rata allocation of net income to Series A Special
Stock.
Financial Results for the Three Months ended June 30, 2011 (Fourth
Quarter Fiscal Year 2011)
-
Revenues for the fourth quarter of FY 2011 were $128.3 million, an
increase of 45.2 percent. This increase was primarily due to 26.9
percent organic revenue growth. In addition, acquisitions contributed
16.4 percent to revenue growth and new initiatives contributed 1.9
percent to revenue growth.
-
Instructional costs and services expenses for the fourth quarter of FY
2011 were $78.1 million, an increase of $22.2 million or 39.8 percent.
This increase was primarily attributable to an $18.6 million increase
in expenses to operate and manage schools including the programs
acquired with KCDL. Included in the $22.2 million increase in
instructional costs and services expenses are startup and launch
expenses for new initiatives of $0.9 million.
-
Selling, administrative, and other operating expenses for the fourth
quarter of FY 2011 were $52.3 million, an increase of $20.0 million or
61.8 percent. This increase is primarily attributable to increases in:
personnel costs, primarily those acquired with KCDL and AEC;
professional services; depreciation and amortization including the
effects of purchase accounting; and strategic marketing including
brand awareness and student recruitment. Transaction and integration
expenses, ERP implementation and process improvement costs totaled
$1.4 million. Start up expenses of $2.3 million for several new
initiatives were also included.
-
Product development expenses for the fourth quarter of FY 2011 were
$4.0 million, an increase of $2.0 million over the same period in the
prior year. The increase is primarily due to internal software
development projects and initiatives to support the Aventa curriculum
acquired with KCDL. Included in the $2.0 million increase in product
development expenses are expenses of $0.5 million related to new
initiatives and ERP system implementation expenses of $0.9 million.
-
EBITDA, a non-GAAP measure (see reconciliation below), for the fourth
quarter of FY 2011 was $6.3 million, an increase of 13.7 percent.
EBITDA has been impacted by $2.4 million of financial systems and
process improvement costs, transaction and integration expenses. In
addition, losses from new initiatives totaled $2.1 million during the
period described above.
-
Operating loss was ($6.2) million for the fourth quarter of FY 2011 as
compared to an operating loss of ($1.9) million for the same period in
the prior year. Depreciation and amortization were $12.5 million, an
increase of $5.1 million or 68.6 percent primarily due investments in
curriculum and systems to support growth and the effects of
transaction related purchase accounting. Results give effect to
transaction and merger integration expenses of $2.4 million and
operating losses generated by new initiatives of $2.1 million.
-
Income tax benefit was $3.0 million for the fourth quarter of FY 2011,
representing an effective tax rate of 46.2 percent. Income tax benefit
for the fourth quarter of FY 2010 was $0.4 million, an effective tax
rate of 19.7 percent. The increase in the tax rate is primarily due to
non-deductible transaction expenses in the current period and tax
credits that reduced the effective tax rate in the same period in the
prior year.
-
Net loss to common and Series A shareholders was ($2.8) million as
compared to a net loss of ($1.3) million in the prior year due to the
factors mentioned above.
-
Diluted net loss attributable to common stockholders per share was
($0.08) for the fourth quarter of FY 2011 as compared to ($0.04) in
the same period in the prior year due to the factors described above.
Diluted net income per share reflects a pro rata allocation of net
income to Series A Special Stock.
Cash, Capital Expenditures and Capital Leases
-
As of June 30, 2011, the Company had cash and cash equivalents of
$193.1 million, reflecting an increase of $111.3 million from June 30,
2010.
-
Capital expenditures for the FY 2011 was $47.6 million and was
comprised of:
-
$19.6 million for property and equipment, including enterprise
software, expanded facilities, and build-out of our second data
center
-
$18.1 million for capitalized curriculum, and
-
$9.9 million for capitalized software development.
-
Capital leases financed additional purchases of $15.6 million for the
full year FY 2011, primarily for computers and software for students
and $1.9 million related to enterprise software.
Fiscal Year 2012 Outlook
Consistent with prior practice, Management will provide its outlook for
fiscal year 2012 (FY 2012) when it announces first quarter 2012 results.
Since this release is later than in previous years, we anticipate the
organic growth rate for the 2011 / 2012 school year will be higher than
it was last year and we believe customer acquisition costs will decline
on a per customer basis. Additionally, certain costs incurred in FY
2011, particularly ERP implementation expenses, continued into the first
quarter of FY 2012. We will provide the exact enrollment numbers as well
as the 2012 guidance in our November call.
Special Note on Forward-Looking Statements
This Annual Report contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. We
have tried, whenever possible, to identify these forward-looking
statements using words such as "anticipates," "believes," "estimates,"
"continues," "likely," "may," "opportunity," "potential," "projects,"
"will," "expects," "plans," "intends" and similar expressions to
identify forward looking statements, whether in the negative or the
affirmative. These statements reflect our current beliefs and are based
upon information currently available to us. Accordingly, such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which could cause our actual results,
performance or achievements to differ materially from those expressed
in, or implied by, such statements. These risks, uncertainties, factors
and contingencies include, but are not limited to: our potential
inability to further develop, maintain and enhance our products and
brands; the reduction of per pupil funding amounts at the schools we
serve; reputation harm resulting from poor performance or misconduct by
operators in any school in our industry and in any school in which we
operate; challenges from virtual public school or hybrid school
opponents; failure of the schools we serve to comply with regulations
resulting in a loss of funding or an obligation to repay funds
previously received; 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 enter into new contracts or renew existing contracts
with schools; risks associated with entering into and executing mergers,
acquisitions and joint ventures; failure to successfully integrate
mergers, acquisitions and joint ventures; inability to recruit, train
and retain quality teachers and employees; uncertainty regarding our
ability to protect our proprietary technologies; risks of new, changing
and competitive technologies; increased competition in our industry; 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
October 7, 2011, 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.
Conference Call
The Company will discuss its fourth quarter 2011 financial results
during a conference call scheduled for Monday, October 10, 2011 at 8:30
a.m. eastern time (ET).
The conference call will be webcast and available on the K12
web site at www.k12.com
through the Investor Relations link. Please access the web site at least
15 minutes prior to the start of the call to register and download and
install any necessary software.
To participate in the live call, investors and analysts should dial
866.356.3377 (domestic) or 617.597.5392 (international) at 8:20 a.m.
(ET). The participant passcode is 37833441.
A replay of the call will be available starting on October 10, 2011,
through October 17, 2011, at 888-286-8010 (domestic) or 617-801-6888
(international) passcode 14587907. It will also be archived at www.k12.com
in the Investor Relations section for 60 days.
Enrollment Data
The following table sets forth total average enrollment data by
distribution channel for each of the periods indicated. Our reported
total average enrollments include students in Managed Schools (Virtual
Public Schools and Hybrid Schools), students taking K12 or Aventa online
programs offered by school districts (Institutional Business), and
students in Private Schools. These figures exclude enrollments from our
consumer, A+, post-secondary and classroom pilot programs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4th Quarter |
|
|
|
FY Year Ending |
|
|
|
2011 |
|
2010 |
|
Change %
|
|
2011 |
|
2010 |
|
Change%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Average Enrollment |
|
|
|
|
|
|
|
|
|
|
|
|
K12 Managed Schools
|
|
64,805
|
|
54,009
|
|
20.0
|
%
|
|
68,189
|
|
56,962
|
|
19.7
|
%
|
K12 Institutional Business
|
|
13,136
|
|
9,499
|
|
38.3
|
%
|
|
13,082
|
|
9,850
|
|
32.8
|
%
|
K12 Private Schools
|
|
1,966
|
|
1,068
|
|
84.2
|
%
|
|
1,739
|
|
1,066
|
|
63.2
|
%
|
K12 Total Average Enrollment |
|
79,906
|
|
64,575
|
|
23.7
|
%
|
|
83,010
|
|
67,877
|
|
22.3
|
%
|
Total Acquired Enrollment |
|
16,307
|
|
-
|
|
NM
|
|
|
15,880
|
|
-
|
|
NM
|
|
Total Average Enrollment |
|
96,213 |
|
64,575 |
|
49.0
|
%
|
|
98,890 |
|
67,877 |
|
45.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
K12 and Acquired Enrollment |
|
|
|
|
|
|
|
|
|
|
|
|
Managed Schools
|
|
67,791
|
|
54,009
|
|
25.5
|
%
|
|
71,322
|
|
56,962
|
|
25.2
|
%
|
Institutional Business
|
|
20,522
|
|
9,499
|
|
116.0
|
%
|
|
19,862
|
|
9,850
|
|
101.7
|
%
|
Private Schools
|
|
7,900
|
|
1,068
|
|
640.0
|
%
|
|
7,706
|
|
1,066
|
|
623.2
|
%
|
Total Average Enrollment |
|
96,213 |
|
64,575 |
|
49.0
|
%
|
|
98,890 |
|
67,877 |
|
45.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain totals may not add due to the effects of rounding.
NM -- Not Meaningful
Financial Statements
|
|
|
|
|
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(In thousands, except share and per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Year Ended June 30, |
|
|
|
2011 |
|
|
|
2010 |
|
|
|
2011 |
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
128,268 |
|
|
$ |
88,321 |
|
|
$ |
522,434 |
|
|
$ |
384,470 |
|
Cost and expenses |
|
|
|
|
|
|
|
|
Instructional costs and services
|
|
|
78,107
|
|
|
|
55,868
|
|
|
|
307,111
|
|
|
|
222,029
|
|
Selling, administrative, and other operating expenses
|
|
|
52,324
|
|
|
|
32,329
|
|
|
|
174,762
|
|
|
|
117,398
|
|
Product development expenses
|
|
|
4,029 |
|
|
|
1,999 |
|
|
|
16,347 |
|
|
|
9,576 |
|
Total costs and expenses |
|
|
134,460 |
|
|
|
90,196 |
|
|
|
498,220 |
|
|
|
349,003 |
|
(Loss) Income from operations |
|
|
(6,192
|
)
|
|
|
(1,875
|
)
|
|
|
24,214
|
|
|
|
35,467
|
|
Interest expense, net |
|
|
(237 |
) |
|
|
(289 |
) |
|
|
(1,207 |
) |
|
|
(1,331 |
) |
(Loss) Income before income tax expense and noncontrolling
interest |
|
|
(6,429
|
)
|
|
|
(2,164
|
)
|
|
|
23,007
|
|
|
|
34,136
|
|
Income tax benefit (expense) |
|
|
2,968 |
|
|
|
427 |
|
|
|
(11,342 |
) |
|
|
(13,249 |
) |
Net (loss) income - K12, Inc. |
|
|
(3,461
|
)
|
|
|
(1,737
|
)
|
|
|
11,665
|
|
|
|
20,887
|
|
Add net loss attributable to noncontrolling interest
|
|
|
617 |
|
|
|
412 |
|
|
|
1,127 |
|
|
|
638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to common stockholders, including
Series A stockholders |
|
$ |
(2,844 |
) |
|
$ |
(1,325 |
) |
|
$ |
12,792 |
|
|
$ |
21,525 |
|
Net (loss) income attributable to common stockholders per share,
excluding Series A stockholders: |
|
|
|
Basic
|
|
$ |
(0.08 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.37 |
|
|
$ |
0.72 |
|
Diluted
|
|
$ |
(0.08 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.37 |
|
|
$ |
0.71 |
|
Weighted average shares used in computing per share amounts: |
|
|
|
|
|
|
Basic
|
|
|
34,460,563 |
|
|
|
30,195,130 |
|
|
|
31,577,758 |
|
|
|
29,791,973 |
|
Diluted
|
|
|
34,460,563 |
|
|
|
30,195,130 |
|
|
|
32,114,761 |
|
|
|
30,248,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Computation |
|
Three Months Ended |
|
Year Ended |
|
|
June 30, |
|
June 30, |
|
|
2011 |
|
|
2010 |
|
2011 |
|
|
2010 |
|
|
(In thousands, except share and per share data)
|
|
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income - K12 Inc.
|
|
$
|
(2,844
|
)
|
|
|
$
|
(1,325
|
)
|
|
$
|
|
12,792
|
|
|
|
$
|
|
21,525
|
Amount allocated to participating Series A stockholders
|
|
|
210
|
|
|
|
|
--
|
|
|
|
|
(1,031
|
)
|
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income available to common stockholders
|
|
$
|
(2,634
|
)
|
|
|
$
|
(1,325
|
)
|
|
$
|
|
11,761
|
|
|
|
$
|
|
21,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares -- basic
|
|
|
34,460,563
|
|
|
|
|
30,195,130
|
|
|
|
|
31,577,758
|
|
|
|
|
|
29,791,973
|
Basic net income per share
|
|
$
|
(0.08
|
)
|
|
|
$
|
(0.04
|
)
|
|
$
|
|
0.37
|
|
|
|
$
|
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares -- diluted
|
|
|
34,460,563
|
|
|
|
|
30,195,130
|
|
|
|
|
32,114,761
|
|
|
|
|
|
30,248,683
|
Diluted net income per share
|
|
$
|
(0.08
|
)
|
|
|
$
|
(0.04
|
)
|
|
$
|
|
0.37
|
|
|
|
$
|
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
K12 INC. |
CONSOLIDATED BALANCE SHEETS |
|
|
|
June 30, |
|
2011 |
|
2010 |
|
(In thousands, except share |
|
and per share data) |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents
|
$
|
193,099
|
|
|
$
|
81,751
|
|
Restricted cash and cash equivalents
|
|
1,501
|
|
|
|
3,343
|
|
Accounts receivable, net of allowance of $1,777 and $1,363 at June
30, 2011 and June 30, 2010, respectively
|
|
96,235
|
|
|
|
71,184
|
|
Inventories, net
|
|
30,554
|
|
|
|
26,193
|
|
Current portion of deferred tax asset
|
|
7,175
|
|
|
|
4,672
|
|
Prepaid expenses
|
|
10,424
|
|
|
|
8,849
|
|
Other current assets
|
|
9,111
|
|
|
|
7,286
|
|
|
|
|
|
Total current assets |
|
348,099
|
|
|
|
203,278
|
|
Property and equipment, net
|
|
46,625
|
|
|
|
24,260
|
|
Capitalized software, net
|
|
24,386
|
|
|
|
16,453
|
|
Capitalized curriculum development costs, net
|
|
55,619
|
|
|
|
39,860
|
|
Deferred tax asset, net of current portion
|
|
--
|
|
|
|
5,912
|
|
Intangible assets, net
|
|
38,291
|
|
|
|
14,081
|
|
Goodwill
|
|
55,627
|
|
|
|
1,825
|
|
Investment in Web International
|
|
10,000
|
|
|
|
--
|
|
Deposits and other assets
|
|
3,448
|
|
|
|
2,213
|
|
|
|
|
|
Total assets |
$
|
582,095
|
|
|
$
|
307,882
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable
|
$
|
21,176
|
|
|
$
|
12,691
|
|
Accrued liabilities
|
|
14,126
|
|
|
|
8,840
|
|
Accrued compensation and benefits
|
|
13,086
|
|
|
|
10,563
|
|
Deferred revenue
|
|
21,907
|
|
|
|
9,593
|
|
Current portion of capital lease obligations
|
|
11,914
|
|
|
|
10,996
|
|
Current portion of notes payable
|
|
1,443
|
|
|
|
1,251
|
|
|
|
|
|
Total current liabilities |
|
83,652
|
|
|
|
53,934
|
|
Deferred rent, net of current portion
|
|
4,698
|
|
|
|
1,782
|
|
Capital lease obligations, net of current portion
|
|
8,552
|
|
|
|
7,710
|
|
Notes payable, net of current portion
|
|
2,299
|
|
|
|
655
|
|
Deferred tax liability
|
|
9,604
|
|
|
|
--
|
|
Other long term liabilities
|
|
3,343
|
|
|
|
435
|
|
|
|
|
|
Total liabilities |
|
112,148
|
|
|
|
64,516
|
|
|
|
|
|
Commitments and contingencies |
|
--
|
|
|
|
--
|
|
Redeemable noncontrolling interest |
|
17,200
|
|
|
|
17,374
|
|
|
|
|
|
Equity: |
|
|
|
K12 Inc. stockholders' equity |
|
|
|
Common stock, par value $0.0001; 100,000,000 shares authorized;
35,927,452 and 30,441,412 shares issued and outstanding at June 30,
2011 and June 30, 2010, respectively
|
|
4
|
|
|
|
3
|
|
Additional paid-in capital
|
|
512,181
|
|
|
|
361,344
|
|
Series A Special Stock, par value $0.0001; 2,750,000 and 0 shares
issued and outstanding at June 30, 2011 and June 30, 2010,
respectively
|
|
63,112
|
|
|
|
--
|
|
Accumulated Other Comprehensive Income
|
|
28
|
|
|
|
--
|
|
Accumulated deficit
|
|
(126,704
|
)
|
|
|
(139,496
|
)
|
|
|
|
|
Total K12 Inc. stockholders' equity |
|
448,621
|
|
|
|
221,851
|
|
Noncontrolling interest
|
|
4,126
|
|
|
|
4,141
|
|
|
|
|
|
Total equity |
|
452,747
|
|
|
|
225,992
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interest and equity |
$
|
582,095
|
|
|
$
|
307,882
|
|
|
|
|
|
|
|
|
|
See accompanying summary of accounting policies and notes to
consolidated financial statements in Form 10-K.
|
K12 INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
Year Ended June 30, |
|
|
2011 |
|
2010 |
|
2009 |
|
|
(In thousands) |
Cash flows from operating activities |
|
|
|
|
|
|
Net income
|
|
$
|
11,665
|
|
|
$
|
20,887
|
|
|
$
|
11,729
|
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
42,934
|
|
|
|
25,761
|
|
|
|
20,835
|
|
Stock based compensation expense
|
|
|
9,466
|
|
|
|
5,934
|
|
|
|
2,790
|
|
Excess tax benefit from stock based compensation
|
|
|
(4,954
|
)
|
|
|
(3,935
|
)
|
|
|
(6,998
|
)
|
Deferred income taxes
|
|
|
10,978
|
|
|
|
11,858
|
|
|
|
9,584
|
|
Provision for (reduction of) doubtful accounts
|
|
|
1,472
|
|
|
|
308
|
|
|
|
(403
|
)
|
Provision for inventory obsolescence
|
|
|
1,060
|
|
|
|
1,019
|
|
|
|
149
|
|
Provision for (reduction of) student computer shrinkage and
obsolescence
|
|
|
219
|
|
|
|
(178
|
)
|
|
|
243
|
|
Impairment of capitalized curriculum development cost
|
|
|
--
|
|
|
|
--
|
|
|
|
261
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(15,810
|
)
|
|
|
(18,460
|
)
|
|
|
(21,999
|
)
|
Inventories
|
|
|
(4,621
|
)
|
|
|
4,840
|
|
|
|
(11,529
|
)
|
Prepaid expenses
|
|
|
363
|
|
|
|
327
|
|
|
|
(5,529
|
)
|
Other current assets
|
|
|
(1,825
|
)
|
|
|
(5,199
|
)
|
|
|
(1,859
|
)
|
Deposits and other assets
|
|
|
(1,037
|
)
|
|
|
30
|
|
|
|
(1,828
|
)
|
Accounts payable
|
|
|
2,726
|
|
|
|
2,326
|
|
|
|
(4,022
|
)
|
Accrued liabilities
|
|
|
615
|
|
|
|
1,012
|
|
|
|
3,145
|
|
Accrued compensation and benefits
|
|
|
1,976
|
|
|
|
2,271
|
|
|
|
(1,758
|
)
|
Deferred revenue
|
|
|
6,760
|
|
|
|
6,203
|
|
|
|
275
|
|
Cash invested in restricted cash and cash equivalents
|
|
|
1,842
|
|
|
|
(843
|
)
|
|
|
(2,500
|
)
|
Deferred rent
|
|
|
3,384
|
|
|
|
519
|
|
|
|
59
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
67,213
|
|
|
|
54,680
|
|
|
|
(9,355
|
)
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Purchase of property, and equipment
|
|
|
(29,563
|
)
|
|
|
(10,357
|
)
|
|
|
(13,939
|
)
|
Capitalized curriculum development costs
|
|
|
(18,086
|
)
|
|
|
(13,904
|
)
|
|
|
(13,931
|
)
|
Purchase of AEC, net of cash acquired of $3,841
|
|
|
(24,543
|
)
|
|
|
--
|
|
|
|
--
|
|
Purchase of IS Berne, net of cash acquired of $1,563
|
|
|
(839
|
)
|
|
|
--
|
|
|
|
--
|
|
Cash advanced for AEC performance escrow
|
|
|
(6,825
|
)
|
|
|
--
|
|
|
|
--
|
|
Cash returned for AEC performance escrow
|
|
|
6,825
|
|
|
|
--
|
|
|
|
--
|
|
Cash paid for investment in Web
|
|
|
(10,000
|
)
|
|
|
--
|
|
|
|
--
|
|
Purchase of domain name
|
|
|
--
|
|
|
|
--
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(83,031
|
)
|
|
|
(24,261
|
)
|
|
|
(27,886
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Proceeds from issuance of common stock, net
|
|
|
125,618
|
|
|
|
--
|
|
|
|
--
|
|
Repayments on capital lease obligations
|
|
|
(15,135
|
)
|
|
|
(12,945
|
)
|
|
|
(9,133
|
)
|
Repayments on notes payable
|
|
|
(1,969
|
)
|
|
|
(1,029
|
)
|
|
|
(804
|
)
|
Proceeds from notes payable
|
|
|
1,933
|
|
|
|
--
|
|
|
|
3,135
|
|
Borrowings from line of credit
|
|
|
15,000
|
|
|
|
--
|
|
|
|
--
|
|
Repayments under the line of credit
|
|
|
(15,000
|
)
|
|
|
--
|
|
|
|
--
|
|
Net proceeds from noncontrolling interest contribution
|
|
|
--
|
|
|
|
3,374
|
|
|
|
5,000
|
|
Proceeds from exercise of stock options
|
|
|
13,364
|
|
|
|
8,544
|
|
|
|
9,824
|
|
Proceeds from exercise of stock warrants
|
|
|
--
|
|
|
|
50
|
|
|
|
--
|
|
Excess tax benefit from stock based compensation
|
|
|
4,954
|
|
|
|
3,935
|
|
|
|
6,998
|
|
Retirement of restricted stock for income tax withholding
|
|
|
(1,627
|
)
|
|
|
(58
|
)
|
|
|
--
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
127,138
|
|
|
|
1,871
|
|
|
|
15,020
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents |
|
|
28
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
111,348
|
|
|
|
32,290
|
|
|
|
(22,221
|
)
|
Cash and cash equivalents, beginning of year |
|
|
81,751
|
|
|
|
49,461
|
|
|
|
71,682
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year |
|
$
|
193,099
|
|
|
$
|
81,751
|
|
|
$
|
49,461
|
|
See accompanying summary of accounting policies and notes to
consolidated financial statements in Form 10-K.
Non-GAAP Financial Measures
EBITDA
EBITDA consists of net income (loss), plus net interest expense, plus
income tax expense, minus income tax benefit, plus depreciation and
amortization and noncontrolling interest charges. Interest expense
primarily consists of interest expense for capital leases, long-term and
short-term borrowings. We use EBITDA in addition to income from
operations and net income as a measure of operating performance.
However, EBITDA is not a recognized measurement under U.S. generally
accepted accounting principles, or GAAP, and when analyzing our
operating performance, investors should use EBITDA in addition to, and
not as an alternative for, net income (loss) as determined in accordance
with GAAP. Because not all companies use identical calculations, our
presentation of EBITDA may not be comparable to similarly titled
measures of other companies. Furthermore, EBITDA is not intended to be a
measure of free cash flow for our management's discretionary use, as it
does not consider certain cash requirements such as capital
expenditures, tax payments, interest payments, or other working capital.
We believe EBITDA is useful to an investor in evaluating our operating
performance because it is widely used to measure a company's operating
performance without regard to items such as depreciation and
amortization, which can vary depending upon accounting methods and the
book value of assets, and to present a meaningful measure of corporate
performance exclusive of our capital structure and the method by which
assets were acquired. Our management uses EBITDA:
-
as an additional measurement of operating performance because it
assists us in comparing our performance on a consistent basis;
-
in presentations to the members of our Board of Directors to enable
our Board to have the same measurement basis of operating performance
as is used by management to compare our current operating results with
corresponding prior periods and with the results of other companies in
our industry; and,
-
on an adjusted basis in determining compliance with the terms of our
credit agreement.
The following table provides a reconciliation of net income to EBITDA.
|
|
|
|
|
|
|
($ thousands) |
|
3 months ended June 30,
|
|
Year Ended June 30,
|
|
|
|
2011
|
|
|
|
2010
|
|
|
|
2011
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Net income-K12 Inc.
|
|
$
|
(2,844
|
)
|
|
$
|
(1,325
|
)
|
|
$
|
12,792
|
|
|
$
|
21,525
|
|
Interest expense, net
|
|
|
237
|
|
|
|
289
|
|
|
|
1,207
|
|
|
|
1,331
|
|
Income tax (benefit) expense
|
|
|
(2,968
|
)
|
|
|
(427
|
)
|
|
|
11,342
|
|
|
|
13,249
|
|
Depreciation and amortization
|
|
|
12,471
|
|
|
|
7,396
|
|
|
|
42,934
|
|
|
|
25,761
|
|
Noncontrolling interest
|
|
|
(617
|
)
|
|
|
(412
|
)
|
|
|
(1,127 |
) |
|
|
(638 |
)
|
EBITDA
|
|
$
|
6,279
|
|
|
$
|
5,521
|
|
|
$ |
67,148 |
|
|
$ |
61,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
About K12 Inc.
K12 Inc. (NYSE: LRN), a technology-based education company, is the
largest provider of online education programs primarily for students in
kindergarten through high school in the U.S. These programs deliver
individualized education to students through public and private online
schools, traditional classrooms, blended school programs, and directly
to families through direct purchase. Founded in 2000, K12 has
provided over 2 million courses - core subjects, AP(R), world languages,
credit recovery, and electives - to more than 200,000 students
worldwide. Over 90 percent of parents surveyed are satisfied with the K12
program and agree that their children have benefited academically with K12.
Students graduating from virtual schools supported by K12
have been accepted to hundreds of higher education institutions
including many of the nation's top-ranked colleges and universities.
K12 also distributes its extensive course catalog directly to
school districts, as well as the course catalogs of Aventa LearningTM,
acquired in July 2010, and American Education Corporation, a leading
provider of instructional and assessment software for kindergarten
through adult learners, which was acquired in December 2010.
K12 also owns, operates or provides services to several
private schools: the K12 International AcademyTM,
is an accredited, diploma-granting online private school; the KeystoneTM
School, an accredited school with more than 35 years of distance and
online learning success; and the George Washington University Online
High School, an online school recently formed with the George Washington
University.
K12's language initiatives are executed through strategic
alliances. K12 has partnered with Middlebury College in a new
venture called Middlebury Interactive Languages to create and distribute
innovative online language courses for pre-college students. K12
has a strategic investment in Web International English, a leader in
English language training for students in China.
K12's educational products are built on a strong research
foundation by teams of highly credentialed and experienced academic and
functional experts. Together, these teams have created over 60,000 hours
of content across 480 course titles, and their specialized expertise is
calibrated closely to the wide range of learning needs and environments
where K12's products are used. By leveraging technology
appropriately, and using all available instructional modalities (from
online courseware to offline print, including manipulatives and
interactive media), K12 provides engaging instructional
experiences where students can learn at their own pace whether in
institutionally structured or individually prompted learning
environments.
K12 also owns and distributes curriculum and services to
post-secondary institutions through Capital Education and through a
joint venture with Blackboard.
K12 is accredited through AdvancED, the world's largest
education community. More information on K12 can be found at: www.K12.com
SOURCE: K12 Inc.
K12 Inc.
Investor Contact:
Keith Haas
SVP, Finance and Investor Relations
703-483-7077
khaas@k12.com
or
Press Contact:
Jeff Kwitowski
VP, Public Affairs
703-483-7281
jkwitowski@k12.com