UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): |
May 8, 2012 |
K12 Inc. |
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(Exact name of registrant as specified in its charter) |
Delaware |
001-33883 |
95-4774688 |
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
2300 Corporate Park Drive, Herndon, |
20171 |
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: | (703) 483-7000 |
Not Applicable |
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Former name or former address, if changed since last report |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On May 8, 2012, K12 Inc. issued a press release reporting results for its third quarter of fiscal year 2012. A copy of this release is attached and incorporated by reference.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. 99.1 - Press Release dated May 8, 2012 of K12 Inc.
Disclaimer
Internet addresses in the release are for information purposes only and
are not intended to be hyperlinks to other K12 Inc. information.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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K12 Inc. |
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May 8, 2012 |
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By: /s/ Ronald J. Packard |
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Name: |
Ronald J. Packard |
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Title: |
Chief Executive Officer (Principal Executive Officer) |
Exhibit Index
Exhibit No. |
Description |
|
99.1 |
Press Release of K12 Inc. dated May 8, 2012 |
Exhibit 99.1
K12 Inc. Reports Third Quarter Fiscal 2012 Results
Q3 Revenues Increase 37 percent to $178.2 million on Continued Strong Enrollment in All Businesses
HERNDON, Va.--(BUSINESS WIRE)--May 8, 2012--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
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.”
Financial Results for the Three Months ended March 31, 2012 (Third Quarter Fiscal Year 2012)
Financial Results for the Nine Months ended March 31, 2012
Cash, Capital Expenditures and Capital Leases
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) |
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March 31, | June 30, | |||||||
2012 |
2011 |
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(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 |
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(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 |
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(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:
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 |
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(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.
CONTACT:
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