Q3 Revenues Increase 37 percent to $178.2 million on Continued Strong
Enrollment in All Businesses
HERNDON, Va., May 08, 2012 (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 third fiscal quarter
ended March 31, 2012.
Summary Financial Results
-
Revenues for third quarter FY 2012 grew to $178.2 million, an increase
of $47.9 million, or 36.8 percent, over the prior year period.
-
EBITDA for third quarter FY 2012 (see reconciliation below) was $26.2
million, an increase of $4.4 million, or 20.2 percent, as compared to
$21.8 million for the prior year period.
-
Operating income for third quarter FY 2012 was $11.6 million, an
increase of $0.8 million, or 7.4 percent.
-
Net income to common and Series A stockholders for third quarter FY
2012 was $7.0 million as compared to $5.6 million in the prior year
period, an increase of 25.0 percent.
-
Diluted earnings per share for third quarter FY 2012 were $0.18 as
compared to $0.16 in the prior year period.
Review of Significant Business Activities
Ron Packard, Chief Executive Officer of K12 Inc., commented: "We are
very pleased to announce an important new member of our management team.
Timothy L. Murray has joined K12 as our President and Chief Operating
Officer. We are also excited by our strong revenue growth across all of
our businesses and the infrastructure investments we have made for
future growth. Additionally, this past quarter has been one of the
strongest business development quarters in K12 history. This success,
combined with our infrastructure investments, position us well for the
future."
-
Statewide virtual schools are scheduled to open in three new states
next school year (Iowa, New Jersey and New Mexico). Enrollment caps
have been expanded or eliminated in Texas (SY 2012-2013) and Michigan
(SY 2013-2014), and in Wisconsin, open enrollment windows have been
extended (SY 2012-2013).
-
Two New Jersey-based public charter high schools will offer our
flexible and individualized learning school programs where students
will be educated through a combination of adaptive online learning and
face-to-face instruction starting in the Fall of 2012.
-
In-year enrollments continue to be stronger than forecast. This year,
the cost of obtaining leads and the overall cost of acquisition have
declined while at the same time, our conversion rates have increased.
Our student retention rates are similar to last year and all of these
metrics reflect higher customer satisfaction and greater demand for
our virtual school offerings.
-
More children are now able to benefit from our offerings as the
average full time enrollment in the virtual schools we serve grew from
approximately 101,000 during the quarter ended March 31, 2011 to
over 147,700 during the quarter ended March 31, 2012 (see table).
-
Our Institutional Business quarterly enrollment growth rate is very
strong at 49.4 percent.
-
Our private school business, which now serves students in 85
countries, continues to experience strong growth. Enrollments (FTEs)
in our K12 International Academy and Keystone Schools each grew
approximately 54% and 22%, respectively, year over year.
Financial Results for the Three Months ended March 31, 2012 (Third
Quarter Fiscal Year 2012)
-
Revenues for the third quarter of FY 2012 were $178.2 million, an
increase of $47.9 million, or 36.8 percent, over the prior year
period. Total revenue growth was supported by a 46.2% increase in
enrollments in all K12 programs. In addition, our acquisitions
contributed approximately $9.3 million in revenue growth during the
three months ended March 31, 2012. Managed Schools revenues increased
by $37.7 million to $151.8 million during the quarter ended March 31,
2012 as compared to the prior year period. Institutional Business
revenues increased by $4.5 million to $14.4 million during the quarter
ended March 31, 2012 as compared to the prior year period. Private
Schools and other revenues increased by $5.7 million to $12.0 million
during the quarter ended March 31, 2012 as compared to the prior year
period.
-
Instructional costs and services expenses for the third quarter of FY
2012 were $106.0 million, an increase of $28.3 million, or 36.4
percent, over the prior year period. This overall rise includes
increases in expenses to operate and manage schools, including the
Insight Schools acquired from Kaplan Virtual Education ("KVE") and
newly launched schools. In addition, costs to supply curriculum,
books, educational materials and computers to students, including
depreciation and amortization expense, increased $6.8 million over the
prior year period. Instructional costs and services expenses decreased
slightly as a percentage of revenue.
-
Selling, administrative and other operating expenses for the third
quarter of FY 2012 were $53.6 million, an increase of $16.8 million,
or 45.7 percent, over the prior year period. The primary drivers of
this increase were: personnel costs, including salaries, benefits and
incentive compensation; marketing costs; professional fees, including
student support center costs, implementation costs related to internal
business support systems and legal costs associated with ongoing
litigation defense; and depreciation and amortization expenses,
related to purchase accounting and capital expenditures.
-
Product development expenses, including software development, for the
third quarter of FY 2012 were $7.0 million, an increase of $2.0
million, or 40.0 percent, over the prior year period. The increase was
primarily due to a decrease in the Company's capitalization rate
attributable to a change in the mix and timing of projects as compared
to the prior year period. This increase was partially offset by
decreased amortization costs for the period.
-
EBITDA, a non-GAAP measure (see reconciliation below), for the third
quarter of FY 2012 was $26.2 million, an increase of $4.4 million, or
20.2 percent, over the prior year period. EBITDA in the quarter ended
March 31, 2012 was negatively impacted by the increases in selling,
administrative and other operating expenses and product development
expenses over the prior year period as described above. In addition,
losses from new initiatives totaled $1.3 million during the period.
-
Operating income for the third quarter of FY 2012 was $11.6 million,
an increase of $0.8 million, or 7.4 percent. Depreciation and
amortization expense was $14.6 million, an increase of $3.7 million,
or 33.9 percent, over the prior year period, primarily due to
investments in curriculum, software licenses and internal business
support systems to support growth and the effects of transaction
related purchase accounting. Results give effect to the additional
expenses and startup losses as well as increased revenue described
above.
-
Income tax expense for the third quarter of FY 2012 was $4.6 million,
representing an effective tax rate of 41.0 percent. Income tax expense
for the third quarter of FY 2011 was $5.3 million, an effective tax
rate of 50.0 percent. The decrease in the tax rate year over year was
primarily due to a decrease in non-deductible transaction costs and
other non-deductible expenses in the period.
-
Net income attributable to common and Series A stockholders for the
third quarter of FY 2012 was $7.0 million as compared to net income of
approximately $5.6 million in the prior year period, due to the
factors mentioned above.
-
Diluted net income attributable to common stockholders per share for
the third quarter of FY 2012 was $0.18 as compared to $0.16 in the
prior year period 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 Nine Months ended March 31, 2012
-
Revenues for the nine months ended March 31, 2012 were $538.0 million,
an increase of $143.8 million, or 36.5 percent, over the prior year
period. This increase was primarily due to organic revenue growth in
our core schools business and enrollment growth, but was negatively
impacted by increased reserves and deficit allowances in certain
states. In addition, acquisitions contributed more than $35.5 million
to revenue growth. Managed Schools revenues increased by $105.5
million to $451.5 million during the nine months ended March 31, 2012
as compared to the prior year period. Institutional Business revenues
increased by $20.8 million to $49.7 million during the nine months
ended March 31, 2012 as compared to the prior year period. Private
Schools and other revenues increased by $17.5 million to $36.8 million
during the nine months ended March 31, 2012 as compared to the prior
year period.
-
Instructional costs and services expenses for the nine months ended
March 31, 2012 were $314.4 million, an increase of $85.4 million, or
37.3 percent, over the prior year period. This increase was primarily
attributable to an increase in expenses to operate and manage schools,
including the Insight Schools acquired from KVE and newly launched
schools. In addition, costs to supply curriculum, books, educational
materials and computers to students, including depreciation and
amortization expense, increased over the prior year period. As a
percentage of revenue, these costs remained relatively consistent over
the prior year period.
-
Selling, administrative and other operating expenses for the nine
months ended March 31, 2012 were $175.8 million, an increase of $53.4
million, or 43.6 percent, over the prior year period. This increase
was primarily attributable to increases in: personnel costs, including
salaries, benefits and incentive compensation; marketing and student
enrollment counseling; third-party commissions related to the
Company's institutional sales; investment in the institutional sales
organization and distribution network; professional fees, which
included costs associated with the external sales force, the internal
business support systems' implementations, transaction costs, and
legal costs associated with ongoing litigation defense; and
depreciation and amortization expense.
-
Product development expenses for the nine months ended March 31, 2012
were $20.8 million, an increase of $8.5 million, or 69.1 percent, over
the prior year period. The increase was primarily due to a decrease in
the Company's capitalization rate attributable to a change in the mix
and timing of projects as compared to historical periods.
-
EBITDA, a non-GAAP measure (see reconciliation below), for the nine
months ended March 31, 2012 was $69.3 million, an increase of 13.8
percent over the prior year period. EBITDA in the period grew slower
than revenue because selling, administrative and other operating
expenses and product development expenses over the prior year period
grew faster than revenue as described above. Also included in these
expenses were merger integration costs and additional costs associated
with the delay in our year end filing. In addition, losses from new
initiatives totaled $6.2 million during the period.
-
Operating income for the nine months ended March 31, 2012 was $26.9
million as compared to operating income of $30.4 million for the prior
year period, a decrease of $3.5 million, or 11.5 percent. Depreciation
and amortization were $42.3 million, an increase of $11.8 million, or
38.7 percent, over the prior year period primarily due to investments
in curriculum, software licenses and internal business systems to
support growth and the effects of transaction related purchase
accounting. Results give effect to the additional expenses and startup
losses as well as increased revenue described above.
-
Income tax expense for the nine months ended March 31, 2012 was $11.3
million, representing an effective tax rate of 43.1 percent. Income
tax expense for the nine months ended March 31, 2011 was $14.3
million, an effective tax rate of 48.6 percent. The decrease in the
tax rate was primarily due to a decrease in non-deductible expenses in
the nine months ended March 31, 2012 and the final adjustments related
to the Company's prior fiscal year tax return.
-
Net income attributable to common and Series A stockholders for the
nine months ended March 31, 2012 was $15.7 million as compared to net
income of approximately $15.6 million in the prior year period due to
the factors mentioned above.
-
Diluted net income attributable to common stockholders per share for
the nine months ended March 31, 2012 was $0.41 as compared to $0.46 in
the prior year period 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 March 31, 2012, the Company had cash and cash equivalents of
$123.7 million, reflecting a decrease of $69.4 million from June 30,
2011, due to a significant increase in accounts receivable; the
funding of the acquisition of the Kaplan/Insight Assets; and to the
investment in capital expenditures and product development. Accounts
receivable as of March 31, 2012 were $205.3 million. Our collections
of accounts receivable have been delayed as some states are paying
public schools more slowly.
-
Capital expenditures for the nine months ended March 31, 2012 were
$32.8 million and were comprised of:
-
$22.5 million for property and equipment, including capitalized
software development, and
-
$10.3 million for capitalized curriculum.
-
Capital leases financed additional purchases of $25.6 million during
the nine months ended March 31, 2012 for computers and software for
students.
Enrollment Data
Our reported total average enrollments include students in Managed
Schools, students taking K12 curriculum or Aventa online programs
offered by school districts (Institutional Business), and students in
Private Schools. Students served through our Institutional Business and
Private School offerings may enroll in a single course. For better
comparability, these students are converted to full-time equivalents
(FTEs) on a four course basis. We currently exclude selected programs
from our reported enrollment. For example, we do not include students in
our consumer channel as we do not monitor the progress of these students
in the same way as we do in other programs. We typically sell our A+
curriculum (acquired with The American Education Corporation - AEC) as a
site license. As these schools are not limited in the number of students
who may access our curriculum, we do not include these students in our
enrollment totals. We also exclude students from Capital Education,
Middlebury Interactive Languages and our classroom pilots.
|
|
Three Months Ended
|
|
Growth
|
|
Nine Months Ended
|
|
Growth
|
|
|
March 31,
|
|
2012 / 2011
|
|
March 31,
|
|
2012 / 2011
|
|
|
2012
|
|
|
2011
|
|
|
Change
|
|
Change
%
|
|
2012
|
|
|
2011
|
|
|
Change
|
|
Change
%
|
K12 Average Enrollment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed Public Schools
|
|
105,912
|
|
|
72,344
|
|
|
33,568
|
|
|
46.4
|
%
|
|
105,109
|
|
|
72,332
|
|
|
32,777
|
|
|
45.3
|
%
|
Institutional Business
|
|
31,367
|
|
|
21,002
|
|
|
10,365
|
|
|
49.4
|
%
|
|
29,981
|
|
|
19,674
|
|
|
10,307
|
|
|
52.4
|
%
|
Private Schools
|
|
10,449
|
|
|
7,684
|
|
|
2,765
|
|
|
36.0
|
%
|
|
10,125
|
|
|
7,650
|
|
|
2,475
|
|
|
32.4
|
%
|
Total Average Enrollment
|
|
147,728
|
|
|
101,030
|
|
|
46,698
|
|
|
46.2
|
%
|
|
145,215
|
|
|
99,656
|
|
|
45,559
|
|
|
45.7
|
%
|
In FY 2012, a program transitioned from a K12 district program to a K12
managed school. This program had approximately 2,000 and 1,000
enrollments for the first quarters of fiscal year 2012 and 2011,
respectively.
Special Note on Forward-Looking Statements
This press release 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 (the
"SEC"). 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
May 8, 2012, 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 third quarter 2012 financial results during
a conference call scheduled for Tuesday, May 8, 2012 at 9:00 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
888-396-2384 (domestic) or 617-847-8711 (international) at 8:50 a.m.
(ET). The participant passcode is 71983639.
A replay of the call will be available starting on May 8, 2012 through
May 15, 2012 at 888-286-8010 (domestic) or 617-801-6888 (international)
passcode 24739031. It will also be archived at www.k12.com
in the investor relations section for 60 days.
The financial statements set forth below are not the complete set of the
Company's financial statements for the quarter and are presented below
without footnotes. Readers are encouraged to obtain and carefully review
the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 2012, including all financial statements contained therein and the
footnotes thereto, when it is filed with the SEC. Once filed with the
SEC, the Form 10-Q may be retrieved from the SEC's website at www.sec.gov
or from the Company's website at www.k12.com.
Financial Statements (unaudited and condensed)
|
|
|
|
|
|
|
March 31,
|
|
June 30,
|
|
|
2012
|
|
2011
|
|
|
(In thousands, except share and per share data)
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
123,653
|
|
|
$
|
193,099
|
|
Restricted cash and cash equivalents
|
|
|
1,501
|
|
|
|
1,501
|
|
Accounts receivable, net of allowance of $2,635 and $1,777 at March
31, 2012 and June 30, 2011, respectively
|
|
|
205,307
|
|
|
|
96,235
|
|
Inventories, net
|
|
|
27,525
|
|
|
|
30,554
|
|
Current portion of deferred tax asset
|
|
|
4,969
|
|
|
|
7,175
|
|
Prepaid expenses
|
|
|
14,428
|
|
|
|
10,424
|
|
Other current assets
|
|
|
12,973
|
|
|
|
9,111
|
|
Total current assets
|
|
|
390,356
|
|
|
|
348,099
|
|
Property and equipment, net
|
|
|
61,385
|
|
|
|
46,625
|
|
Capitalized software development costs, net
|
|
|
29,496
|
|
|
|
24,386
|
|
Capitalized curriculum development costs, net
|
|
|
56,962
|
|
|
|
55,619
|
|
Intangible assets, net
|
|
|
37,912
|
|
|
|
38,291
|
|
Goodwill
|
|
|
62,404
|
|
|
|
55,627
|
|
Investment in Web International
|
|
|
10,000
|
|
|
|
10,000
|
|
Deposits and other assets
|
|
|
3,219
|
|
|
|
3,448
|
|
Total assets
|
|
$
|
651,734
|
|
|
$
|
582,095
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable
|
|
$
|
17,276
|
|
|
$
|
21,176
|
|
Accrued liabilities
|
|
|
16,252
|
|
|
|
14,126
|
|
Accrued compensation and benefits
|
|
|
16,127
|
|
|
|
13,086
|
|
Deferred revenue
|
|
|
46,558
|
|
|
|
21,907
|
|
Current portion of capital lease obligations
|
|
|
16,571
|
|
|
|
11,914
|
|
Current portion of notes payable
|
|
|
1,137
|
|
|
|
1,443
|
|
Total current liabilities
|
|
|
113,921
|
|
|
|
83,652
|
|
Deferred rent, net of current portion
|
|
|
5,499
|
|
|
|
4,698
|
|
Capital lease obligations, net of current portion
|
|
|
17,541
|
|
|
|
8,552
|
|
Notes payable, net of current portion
|
|
|
1,162
|
|
|
|
2,299
|
|
Deferred tax liability
|
|
|
15,283
|
|
|
|
9,604
|
|
Other long term liabilities
|
|
|
3,191
|
|
|
|
3,343
|
|
Total liabilities
|
|
|
156,597
|
|
|
|
112,148
|
|
Commitments and contingencies
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
17,200
|
|
|
|
17,200
|
|
Equity:
|
|
|
|
|
K12 Inc. stockholders' equity
|
|
|
|
|
Common stock, par value $0.0001; 100,000,000 shares authorized;
36,389,121 and 35,927,452 shares issued and outstanding at March 31,
2012 and June 30, 2011, respectively
|
|
|
4
|
|
|
|
4
|
|
Additional paid-in capital
|
|
|
521,503
|
|
|
|
512,181
|
|
Series A Special Stock, par value $0.0001; 2,750,000 issued and
outstanding at March 31, 2012 and June 30, 2011
|
|
|
63,112
|
|
|
|
63,112
|
|
Accumulated other comprehensive income
|
|
|
157
|
|
|
|
28
|
|
Accumulated deficit
|
|
|
(110,961
|
)
|
|
|
(126,704
|
)
|
Total K12 Inc. stockholders' equity
|
|
|
473,815
|
|
|
|
448,621
|
|
Noncontrolling interest
|
|
|
4,122
|
|
|
|
4,126
|
|
Total equity
|
|
|
477,937
|
|
|
|
452,747
|
|
Total liabilities, redeemable noncontrolling interest and equity
|
|
$
|
651,734
|
|
|
$
|
582,095
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
March 31,
|
|
March 31,
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
(In thousands, except share and per share data)
|
Revenues
|
$
|
178,175
|
|
|
$
|
130,293
|
|
|
$
|
538,005
|
|
|
$
|
394,167
|
|
Cost and expenses
|
|
|
|
|
|
|
|
Instructional costs and services
|
|
105,955
|
|
|
|
77,727
|
|
|
|
314,410
|
|
|
|
229,004
|
|
Selling, administrative, and other operating expenses
|
|
53,619
|
|
|
|
36,763
|
|
|
|
175,836
|
|
|
|
122,438
|
|
Product development expenses
|
|
7,012
|
|
|
|
4,972
|
|
|
|
20,810
|
|
|
|
12,318
|
|
Total costs and expenses
|
|
166,586
|
|
|
|
119,462
|
|
|
|
511,056
|
|
|
|
363,760
|
|
Income from operations
|
|
11,589
|
|
|
|
10,831
|
|
|
|
26,949
|
|
|
|
30,407
|
|
Interest expense, net
|
|
(265
|
)
|
|
|
(307
|
)
|
|
|
(722
|
)
|
|
|
(970
|
)
|
Income before income tax expense and noncontrolling interest
|
|
11,324
|
|
|
|
10,524
|
|
|
|
26,227
|
|
|
|
29,437
|
|
Income tax expense
|
|
(4,638
|
)
|
|
|
(5,260
|
)
|
|
|
(11,311
|
)
|
|
|
(14,310
|
)
|
Net income - K12 Inc.
|
|
6,686
|
|
|
|
5,264
|
|
|
|
14,916
|
|
|
|
15,127
|
|
Add net loss attributable to noncontrolling interest
|
|
291
|
|
|
|
335
|
|
|
|
827
|
|
|
|
509
|
|
Net income attributable to common stockholders, including Series
A stockholders
|
$
|
6,977
|
|
|
$
|
5,599
|
|
|
$
|
15,743
|
|
|
$
|
15,636
|
|
Net income attributable to common stockholders per share,
excluding Series A stockholders:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.18
|
|
|
$
|
0.17
|
|
|
$
|
0.41
|
|
|
$
|
0.47
|
|
Diluted
|
$
|
0.18
|
|
|
$
|
0.16
|
|
|
$
|
0.41
|
|
|
$
|
0.46
|
|
Weighted average shares used in computing per share amounts:
|
|
|
|
|
|
|
|
Basic
|
|
35,876,629
|
|
|
|
30,958,807
|
|
|
|
35,753,156
|
|
|
|
30,620,330
|
|
Diluted
|
|
35,913,576
|
|
|
|
31,758,313
|
|
|
|
36,023,023
|
|
|
|
31,327,544
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended March 31,
|
|
2012
|
|
2011
|
|
(In thousands)
|
Cash flows from operating activities
|
|
|
|
Net income
|
$
|
14,916
|
|
|
$
|
15,127
|
|
Adjustments to reconcile net income to net cash (used
in)/provided by operating activities:
|
|
|
|
Depreciation and amortization expense
|
|
42,312
|
|
|
|
30,463
|
|
Stock based compensation expense
|
|
7,339
|
|
|
|
7,453
|
|
Excess tax benefit from stock based compensation
|
|
(1,289
|
)
|
|
|
(5,443
|
)
|
Deferred income taxes
|
|
9,571
|
|
|
|
13,329
|
|
Provision for doubtful accounts
|
|
480
|
|
|
|
569
|
|
Provision for inventory obsolescence
|
|
464
|
|
|
|
729
|
|
Provision for student computer shrinkage and obsolescence
|
|
427
|
|
|
|
182
|
|
Changes in assets and liabilities:
|
|
|
|
Accounts receivable
|
|
(109,128
|
)
|
|
|
(52,728
|
)
|
Inventories
|
|
2,565
|
|
|
|
7,235
|
|
Prepaid expenses
|
|
(4,004
|
)
|
|
|
545
|
|
Other current assets
|
|
(3,635
|
)
|
|
|
(1,994
|
)
|
Deposits and other assets
|
|
229
|
|
|
|
(105
|
)
|
Accounts payable
|
|
(3,901
|
)
|
|
|
(4,150
|
)
|
Accrued liabilities
|
|
2,124
|
|
|
|
1,516
|
|
Accrued compensation and benefits
|
|
3,040
|
|
|
|
(4,377
|
)
|
Deferred revenue
|
|
24,310
|
|
|
|
14,478
|
|
Cash invested in restricted cash and cash equivalents
|
|
-
|
|
|
|
1,712
|
|
Deferred rent and other long term liabilities
|
|
650
|
|
|
|
2,483
|
|
Net cash (used in)/provided by operating activities
|
|
(13,530
|
)
|
|
|
27,024
|
|
Cash flows from investing activities
|
|
|
|
Purchase of property, equipment and software development costs
|
|
(22,478
|
)
|
|
|
(20,295
|
)
|
Capitalized curriculum development costs
|
|
(10,341
|
)
|
|
|
(11,728
|
)
|
Purchase of AEC, net of cash acquired of $3,841
|
|
-
|
|
|
|
(24,544
|
)
|
Cash advanced for AEC performance escrow
|
|
-
|
|
|
|
(6,825
|
)
|
Cash returned from AEC performance escrow
|
|
-
|
|
|
|
6,825
|
|
Cash paid for investment in Web
|
|
-
|
|
|
|
(10,000
|
)
|
Cash paid for other investment
|
|
-
|
|
|
|
(2,040
|
)
|
Purchase of Kaplan/Insight Assets
|
|
(12,641
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
(45,460
|
)
|
|
|
(68,607
|
)
|
Cash flows from financing activities
|
|
|
|
Repayments on capital lease obligations
|
|
(11,950
|
)
|
|
|
(11,113
|
)
|
Repayments on notes payable
|
|
(1,443
|
)
|
|
|
(1,251
|
)
|
Borrowings from line of credit
|
|
-
|
|
|
|
15,000
|
|
Repayments under line of credit
|
|
-
|
|
|
|
(15,000
|
)
|
Proceeds from exercise of stock options
|
|
3,123
|
|
|
|
8,252
|
|
Excess tax benefit from stock based compensation
|
|
1,289
|
|
|
|
5,443
|
|
Repurchase of restricted stock for income tax withholding
|
|
(1,291
|
)
|
|
|
(1,595
|
)
|
Payment of stock registration expense
|
|
(313
|
)
|
|
|
-
|
|
Net cash used in financing activities
|
|
(10,585
|
)
|
|
|
(264
|
)
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
129
|
|
|
|
176
|
|
Net change in cash and cash equivalents
|
|
(69,446
|
)
|
|
|
(41,671
|
)
|
Cash and cash equivalents, beginning of period
|
|
193,099
|
|
|
|
81,751
|
|
Cash and cash equivalents, end of period
|
$
|
123,653
|
|
|
$
|
40,080
|
|
|
|
|
|
Non-GAAP Financial Measures
EBITDA
EBITDA consists of net income, 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 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 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.
|
|
Three Months Ended March 31,
|
|
|
Nine Months Ended March 31,
|
|
|
2012
|
|
2011
|
|
|
2012
|
|
2011
|
|
|
(In thousands)
|
|
|
(In thousands)
|
Net income-K12 Inc.
|
|
$
|
6,977
|
|
|
$
|
5,599
|
|
|
|
$
|
15,743
|
|
|
$
|
15,636
|
|
Interest expense, net
|
|
|
265
|
|
|
|
307
|
|
|
|
|
722
|
|
|
|
970
|
|
Income tax expense
|
|
|
4,638
|
|
|
|
5,260
|
|
|
|
|
11,311
|
|
|
|
14,310
|
|
Depreciation and amortization
|
|
|
14,644
|
|
|
|
10,950
|
|
|
|
|
42,312
|
|
|
|
30,463
|
|
Noncontrolling interest
|
|
|
(291
|
)
|
|
|
(335
|
)
|
|
|
|
(827
|
)
|
|
|
(509
|
)
|
EBITDA
|
|
$
|
26,233
|
|
|
$
|
21,781
|
|
|
|
$
|
69,261
|
|
|
$
|
60,870
|
|
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. Using 21st
century tools to prepare 21st century students, K12 provides a new
choice for students to learn in a flexible and innovative way, at an
individualized pace. K12 provides curriculums and academic services to
public and private online schools and districts, traditional classrooms,
blended school programs, and directly to families. K12 is accredited
through AdvancED, the world's largest education community. Additional
information on K12 can be found at www.K12.com.
SOURCE: K12 Inc.
K12 Inc.
Investor:
Christi Parker, 703-483-7077
VP,
Investor Relations
chparker@k12.com
or
Press:
Jeff
Kwitowski, 703-483-7281
SVP, Public Affairs
jkwitowski@k12.com