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): |
September 12, 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 September 12, 2012, K12 Inc. issued a press release reporting results for its fourth quarter and full 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 September 12, 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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September 12, 2012 |
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By: /s/ Ronald J. Packard |
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Name: |
Ronald J. Packard |
||
Title: |
Chief Executive Officer (Principal Executive Officer) |
Exhibit Index
Exhibit |
Description |
|
99.1 |
Press Release of K12 Inc. dated September 12, 2012 |
Exhibit 99.1
K12 Inc. Reports Fourth Quarter and Full Year 2012 Financial Results
Annual Net Income Growth of 37.6 percent, Primarily Driven by Revenue Growth which Exceeded 35 percent
HERNDON, Va.--(BUSINESS WIRE)--September 12, 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 fourth fiscal quarter and full year ended June 30, 2012.
Financial Highlights for the Fourth Quarter of Fiscal Year 2012
Financial Highlights for the Full Fiscal Year 2012
Review of Significant Business Activities
Ron Packard, Chief Executive Officer of K12 Inc., stated, “School is now open for the 2012-13 school year and we welcome all of our students, both new and returning. I also want to thank our outstanding staff and teachers in advance for their dedication to making students’ experiences the best they can be.”
“This past fiscal year was a pivotal one for K12 as we integrated our acquisitions and furthered our infrastructure investments, positioning us well. We are pleased with our many accomplishments in fiscal year 2012. As a company, we achieved net income growth of approximately 37 percent, primarily resulting from revenue growth which exceeded 35 percent, with most of this growth being organic. Our virtual public school business remains strong and grew over 31 percent during fiscal year 2012. At the same time, our Institutional Business revenues grew more than 56 percent, while International and Private Pay Business revenues increased in excess of 80 percent. The increasing acceptance of technology-based learning has enabled us to enter Iowa and New Mexico, where we are managing two new full-time virtual public schools, as well as New Jersey, where the Newark Flex Academy recently opened. Enrollment caps were also raised or eliminated in several states.”
Significant accomplishments of Fiscal Year 2012:
Mr. Packard concluded, “Looking ahead to fiscal year 2013, we are pleased by where we are in the enrollment season for the 2012-13 school year and excited to open schools in three new states. We are encouraged by the growth across all our lines of business in fiscal year 2012 as we strive to improve operating efficiencies and scale the business. And, most importantly, we are very excited about our initiatives to improve student outcomes across the continuum of students we serve and to have the privilege of serving so many additional students.”
Financial Results for the Three Months ended June 30, 2012 (Fourth Quarter Fiscal Year 2012)
Financial Results for the Fiscal Year ended June 30, 2012
Cash, Capital Expenditures and Capital Leases
Revenue and Enrollment Data
Revenue by Business Lines
The following table sets forth revenue for the Company’s three lines of business for the periods indicated.
Growth | Growth | |||||||||||||
Year Ended June 30, | 2012 / 2011 | 2011 / 2010 | ||||||||||||
(Dollars in thousands) | 2012 | 2011 | 2010 | Change | Change % | Change | Change % | |||||||
Managed Public Schools | $596,142 | $454,001 | $362,766 | $142,141 | 31.3% | $91,235 | 25.1% | |||||||
Institutional Business | $73,150 | $46,756 | $12,665 | $26,394 | 56.5% | $34,091 | 269.2% | |||||||
International and Private Pay Business |
$39,115 | $21,677 | $9,039 | $17,438 | 80.4% | $12,638 | 139.8% | |||||||
Total Revenue | $708,407 | $522,434 | $384,470 | $185,973 | 35.6% | $137,964 | 35.9% | |||||||
The Company provides products and services primarily to three businesses that share many common attributes, including, curriculum, learning systems, management expertise, logistical systems and marketing. These businesses are: Managed Public Schools (turn-key management services provided to public schools), Institutional Business (educational products and services provided to school districts, public schools and other educational institutions that we do not manage), and International and Private Pay Business (private schools for which the Company charges student tuition and makes direct consumer sales). Since 2010, the Company’s business has evolved significantly, particularly with regard to the Institutional Business and the International and Private Pay Business. As a result, growth data for these two businesses is being presented in a different way this year as explained in further detail below.
With the addition of the AEC and Aventa products to our Institutional Business, our business model and product mix has continued to shift to districts and schools purchasing licenses and services from us on a fixed basis rather than per student, where we host or they host the curriculum. Further, the definition of a “student” continues to evolve. The Institutional Business serves not only full-time students, but also students taking semester-long courses, students who recover credits through concentrated four to eighteen-week programs, students who use the Company’s curricula as a replacement for their traditional textbooks, and teachers who may present the Company’s lessons on an interactive whiteboard as either the core of their instruction or as an engaging supplement to their lectures. Historically, for purposes of comparability to the Managed Public Schools, the Company reported growth in the Institutional Business on the basis of full-time equivalent enrollments (“FTEs”) using a four course conversion factor. As enrollments will continue to be a less meaningful revenue driver for the Institutional Business, the Company has concluded that at this time, revenue is the most relevant metric.
The private schools business has also evolved as the Company has acquired and developed new private school offerings with different structures and price points. This has made comparability to the Company’s Managed Public Schools business more challenging and the use of full-time equivalent metrics no longer as meaningful. As a result, the Company has decided to report performance in the International and Private Pay Business on the basis of the student counts and semester-course enrollments which more accurately reflects the way revenues and expenses occur in the business. Student counts tell us how many individual students are being served at any point in time. As a result of the variation in the number of courses taken by students, we measure the total size of our schools by “semester-course enrollments” (“SCEs”). A semester-long course is counted as a single SCE, and a year-long course is counted as two SCEs. Private school students take courses ranging from a single, semester long course to a full-time, 12 course annual load. For example, a full-time student who takes six courses per semester for two semester accounts for 12 SCEs.
Managed Public Schools
The following table sets forth total average enrollment data for students in Managed Public Schools. These figures exclude enrollments from classroom pilot programs.
Growth | Growth | |||||||||||||
Year Ended June 30, | 2012 / 2011 | 2011 / 2010 | ||||||||||||
2012 | 2011 | 2010 | Change | Change % | Change | Change % | ||||||||
Average Student Enrollments | 100,686 | 71,322 | 56,962 | 29,364 | 41.2% | 14,360 | 25.2% | |||||||
International and Private Pay Business
The following table sets forth total data for students in the International and Private Pay Business. These figures exclude enrollments from consumer programs.
Growth | Growth | |||||||||||||
Year Ended June 30, | 2012 / 2011 | 2011 / 2010 | ||||||||||||
2012 | 2011 | 2010 | Change | Change % | Change | Change % | ||||||||
Student Enrollments | 29,995 | 27,009 | 1,538 | 2,986 | 11% | 25,471 | 1,656% | |||||||
Semester Course Enrollments | 82,999 | 67,381 | 10,547 | 15,618 | 23% | 56,834 | 539% | |||||||
Fiscal Year 2013 Outlook
Management intends to provide its outlook for fiscal year 2013 the week of October 8, 2012.
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. 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 September 12, 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 fourth quarter and full year 2012 financial results during a conference call scheduled for Thursday, September 13, 2012 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 (800) 706-7749 (domestic) or (617) 614-3474 at 8:20 a.m. (ET). The participant pass code is 68703532.
A replay of the call will be available starting on September 13, 2012 at 10:30 a.m. ET through September 20, 2012 11:59 p.m. ET, at (888) 286-8010 (domestic) or (617) 801-6888 (international) pass code 35311434. The replay will also be archived at www.k12.com in the investor relations section for 60 days.
Financial Statements
The financial statements set forth below are not the complete set of K12 Inc.’s financial statements for the quarter and year and are presented below without footnotes. Readers are encouraged to obtain and carefully review K12 Inc.’s Annual Report on Form 10-K for the year ended June 30, 2012, including all financial statements contained therein and the footnotes thereto, filed with the SEC. The Form 10-K may be retrieved from the SEC's website at www.sec.gov or from K12 Inc.’s website at www.k12.com.
K12 INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
June 30, | ||||||||
2012 |
2011 |
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(In thousands, except share and per share data) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 144,652 | $ | 193,099 | ||||
Restricted cash and cash equivalents | 1,501 | 1,501 | ||||||
Accounts receivable, net of allowance of $1,624 and $1,777 at June 30, 2012 and June 30, 2011, respectively |
160,922 | 96,235 | ||||||
Inventories, net | 37,853 | 30,554 | ||||||
Current portion of deferred tax asset | 16,140 | 7,175 | ||||||
Prepaid expenses | 11,173 | 10,424 | ||||||
Other current assets | 14,598 | 9,111 | ||||||
Total current assets | 386,839 | 348,099 | ||||||
Property and equipment, net | 55,903 | 46,625 | ||||||
Capitalized software, net | 34,709 | 24,386 | ||||||
Capitalized curriculum development costs, net | 60,345 | 55,619 | ||||||
Intangible assets, net | 36,736 | 38,291 | ||||||
Goodwill | 61,619 | 55,627 | ||||||
Investment in Web International | 10,000 | 10,000 | ||||||
Deposits and other assets | 2,684 | 3,448 | ||||||
Total assets | $ | 648,835 | $ | 582,095 | ||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 23,951 | $ | 21,176 | ||||
Accrued liabilities | 13,802 | 14,126 | ||||||
Accrued compensation and benefits | 17,355 | 13,086 | ||||||
Deferred revenue | 25,410 | 21,907 | ||||||
Current portion of capital lease obligations | 15,950 | 11,914 | ||||||
Current portion of notes payable | 1,145 | 1,443 | ||||||
Total current liabilities | 97,613 | 83,652 | ||||||
Deferred rent, net of current portion | 6,974 | 4,698 | ||||||
Capital lease obligations, net of current portion | 15,124 | 8,552 | ||||||
Notes payable, net of current portion | 777 | 2,299 | ||||||
Deferred tax liability | 31,591 | 9,604 | ||||||
Other long term liabilities | 1,908 | 3,343 | ||||||
Total liabilities | 153,987 | 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; 36,436,933 and 35,927,452 shares issued and outstanding at June 30, 2012 and June 30, 2011, respectively |
4 | 4 | ||||||
Additional paid-in capital | 519,439 | 512,181 | ||||||
Series A Special Stock, par value $0.0001; 2,750,000 shares issued and outstanding at June 30, 2012 and 2011 |
63,112 | 63,112 | ||||||
Accumulated Other Comprehensive Income | 100 | 28 | ||||||
Accumulated deficit | (109,161 | ) | (126,704 | ) | ||||
Total K12 Inc. stockholders’ equity | 473,494 | 448,621 | ||||||
Noncontrolling interest | 4,154 | 4,126 | ||||||
Total equity | 477,648 | 452,747 | ||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 648,835 | $ | 582,095 | ||||
K12 INC. |
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
Three Months Ended June 30, | Year Ended June 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenues | $ | 170,402 | $ | 128,268 | $ | 708,407 | $ | 522,434 | ||||||||
Cost and expenses | ||||||||||||||||
Instructional costs and services | 102,588 | 78,107 | 416,999 | 307,111 | ||||||||||||
Selling, administrative, and other operating expenses | 60,999 | 52,324 | 236,835 | 174,762 | ||||||||||||
Product development expenses | 4,783 | 4,029 | 25,593 | 16,347 | ||||||||||||
Total costs and expenses | 168,370 | 134,460 | 679,427 | 498,220 | ||||||||||||
Income from operations | 2,032 | (6,192 | ) | 28,980 | 24,214 | |||||||||||
Interest expense, net | (267 | ) | (237 | ) | (989 | ) | (1,207 | ) | ||||||||
Income before income tax expense and noncontrolling interest | 1,765 | (6,429 | ) | 27,991 | 23,007 | |||||||||||
Income tax expense | (571 | ) | 2,968 | (11,882 | ) | (11,342 | ) | |||||||||
Net income - K12, Inc. | 1,194 | (3,461 | ) | 16,109 | 11,665 | |||||||||||
Add net income attributable to noncontrolling interest | 607 | 617 | 1,434 | 1,127 | ||||||||||||
Net income attributable to common stockholders, including Series A stockholders | $ | 1,801 | $ | (2,844 | ) | $ | 17,543 | $ | 12,792 | |||||||
Net income attributable to common stockholders per share, excluding Series A stockholders: | ||||||||||||||||
Basic | $ | 0.05 | $ | (0.08 | ) | $ | 0.46 | $ | 0.37 | |||||||
Diluted | $ | 0.05 | $ | (0.08 | ) | $ | 0.45 | $ | 0.37 | |||||||
Weighted average shares used in computing per share amounts: | ||||||||||||||||
Basic | 35,952,162 | 34,460,563 | 35,802,678 | 31,577,758 | ||||||||||||
Diluted | 35,973,316 | 34,460,563 | 35,990,863 | 32,114,761 | ||||||||||||
K12 INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Year Ended June 30, | ||||||||
2012 | 2011 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities | ||||||||
Net income | $ | 16,109 | $ | 11,665 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization expense | 58,033 | 42,934 | ||||||
Stock based compensation expense | 10,067 | 9,466 | ||||||
Excess tax benefit from stock based compensation | 3,122 | (4,954 | ) | |||||
Deferred income taxes | 10,297 | 10,978 | ||||||
Provision for doubtful accounts | 204 | 1,472 | ||||||
Provision for inventory obsolescence | 1,618 | 1,060 | ||||||
Provision for (reduction of) student computer shrinkage and obsolescence | 1,038 | 219 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (64,270 | ) | (15,810 | ) | ||||
Inventories | (8,918 | ) | (4,621 | ) | ||||
Prepaid expenses | (784 | ) | 363 | |||||
Other current assets | (5,260 | ) | (1,825 | ) | ||||
Deposits and other assets | 764 | (1,037 | ) | |||||
Accounts payable | 2,794 | 2,726 | ||||||
Accrued liabilities | (292 | ) | 615 | |||||
Accrued compensation and benefits | 4,275 | 1,976 | ||||||
Deferred revenue | 3,351 | 6,760 | ||||||
Cash invested in restricted cash | - | 1,842 | ||||||
Deferred rent | 843 | 3,384 | ||||||
Net cash provided by operating activities | 32,991 | 67,213 | ||||||
Cash flows from investing activities | ||||||||
Purchase of property, equipment and software development costs | (32,477 | ) | (29,563 | ) | ||||
Capitalized curriculum development costs | (16,123 | ) | (18,086 | ) | ||||
Purchase of Kaplan | (12,641 | ) | - | |||||
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 | ) | |||||
Net cash used in investing activities | (61,241 | ) | (83,031 | ) | ||||
Cash flows provided by (used in) financing activities | ||||||||
Proceeds from issuance of common stock | - | 125,619 | ||||||
Repayments on capital lease obligations | (16,600 | ) | (15,135 | ) | ||||
Repayments on notes payable | (1,820 | ) | (1,969 | ) | ||||
Proceeds from notes payable | - | 1,932 | ||||||
Borrowings from line of credit | - | 15,000 | ||||||
Repayments under the line of credit | - | (15,000 | ) | |||||
Proceeds from exercise of stock options | 3,380 | 13,364 | ||||||
Payment of stock registration expense | (313 | ) | - | |||||
Excess tax benefit from stock based compensation | (3,122 | ) | 4,954 | |||||
Repurchase of restricted stock for income tax withholding | (1,292 | ) | (1,627 | ) | ||||
Net cash provided by (used in) financing activities | (19,767 | ) | 127,138 | |||||
Effect of foreign exchange rate changes on cash and cash equivalents | (430 | ) | 28 | |||||
Net change in cash and cash equivalents | (48,447 | ) | 111,348 | |||||
Cash and cash equivalents, beginning of year | 193,099 | 81,751 | ||||||
Cash and cash equivalents, end of year | $ | 144,652 | $ | 193,099 | ||||
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:
The following tables provide a reconciliation of net income to EBITDA.
Three Months Ended June 30, | Year Ended June 30, | |||||||
2012 |
2011 |
2012 |
2011 |
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(In thousands) | ||||||||
Net income | $ 1,801 | $ (2,844) | $ 17,543 | $ 12,792 | ||||
Interest expense, net | 267 | 237 | 989 | 1,207 | ||||
Income tax expense (benefit) | 571 | (2,968) | 11,882 | 11,342 | ||||
Depreciation and amortization | 15,708 | 12,471 | 58,033 | 42,934 | ||||
Noncontrolling interest | (607) | (617) | (1,434) | (1,127) | ||||
EBITDA | $ 17,740 | $ 6,279 | $ 87,013 | $ 67,148 | ||||
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