K12 Inc. Reports Fiscal 2015 Revenue of $948.3 Million and Operating Income of $18.4 Million

HERNDON, Va., Aug. 4, 2015 (GLOBE NEWSWIRE) -- K12 Inc. (NYSE:LRN), a technology-based education company and leading provider of proprietary curriculum and online school programs for students in pre-K through high school, today announced its results for the fourth fiscal quarter and full fiscal year ended June 30, 2015. Financial measures are provided on a GAAP basis, followed by a summary of results excluding the impact of specific charges which had a significant impact on fourth quarter and full year results.

Financial Highlights for the Three Months Ended June 30, 2015 (Fourth Quarter Fiscal Year 2015)

  • Revenues of $235.7 million, compared to $232.0 million in the fourth quarter of FY 2014.
  • EBITDA, a non-GAAP measure (see reconciliation below), of $15.2 million, compared to $36.0 million in the fourth quarter of FY 2014.
  • Operating loss of $16.3 million, compared to income of $12.8 million in the fourth quarter of FY 2014.
  • Net loss attributable to common stockholders of $11.6 million, compared to net income of $12.4 million in the fourth quarter of FY 2014.
  • Diluted net loss attributable to common stockholders per share of $0.31, compared to net income of $0.32 in the fourth quarter of FY 2014.

During the quarter ended June 30, 2015, the Company incurred the following charges, totaling $28.4 million of which $0.5 million are cash charges.

  • Reserves and write downs related to end of life products, software and inventory of $14.3 million.
  • Incremental accounts receivable reserves of $10.7 million, primarily related to closed schools, a funding deficit in one state and the interest on a receivable.
  • Severance costs of $3.4 million.

Excluding the impact of the aforementioned charges, for the three months ended June 30, 2015 (see Appendix C below).

  • EBITDA would have been $26.6 million, compared to the $36.0 million from the fourth quarter of FY 2014.
  • Operating income would have been $8.9 million, compared to operating income of $12.8 million in the fourth quarter of FY 2014.
  • Net income attributable to common and Series A stockholders would have been $6.8 million, compared to net income of $12.4 million in the fourth quarter of FY 2014.
  • Diluted net income attributable to common stockholders per share would have been $0.18 as compared to the $0.32 in the fourth quarter of FY 2014.

Financial Highlights for the Year Ended June 30, 2015

  • Revenues of $948.3 million, compared to $919.6 million for the full fiscal year of 2014.
  • EBITDA, a non-GAAP measure (see reconciliation below), of $102.2 million, compared to $115.5 million for the full fiscal year of 2014.
  • Operating income of $18.4 million, compared to $22.9 million for the full fiscal year of 2014.
  • Net income attributable to common and Series A stockholders of $11.0 million, compared to $19.6 million for the full fiscal year of 2014.
  • Diluted net income attributable to common stockholders per share was $0.29, compared to $0.50, which includes the pro-rata effect of the Series A Special shares conversion to common shares on September 3, 2013, for the full fiscal year of 2014.

During fiscal year 2014, the Company sold certain businesses and incurred charges relating to additional reserves, accelerated amortization and severance costs. Excluding the impact of these businesses and charges, and excluding the impact of the aforementioned charges in the fourth quarter of fiscal year 2015, for the year ended June 30, 2015 (see Appendix C, D and E below).

  • EBITDA would have been $113.6 million compared to $123.6 million for the full fiscal year of 2014.
  • Operating income would have been $43.7 million compared to $54.5 million for the full fiscal year of 2014.
  • Net income attributable to common and Series A stockholders would have been $29.4 million compared to $35.6 million for the full fiscal year of 2014.
  • Diluted net income attributable to common stockholders per share would have been $0.78, compared to $0.88, which includes the pro-rata effect of the Series A Special shares conversion to common shares on September 3, 2013, for the full fiscal year of 2014.

Comments from Management

"We delivered solid financial results for the year, including double-digit revenue gains in our education technology sales to school districts and our private schools, while continuing significant investments in student academic outcomes," said Nate Davis, Chairman and Chief Executive Officer. "As we begin a new fiscal year, we will continue using our strong financial position to improve our products and services," added Davis.

Cash, Capital Expenditures and Capital Leases

For the year ended June 30, 2015, free cash flow(1) was $43.6 million, compared to $50.0 million for the full fiscal year of 2014. The Company had cash and cash equivalents of $195.9 million, a decrease of $0.2 million compared to the $196.1 million reported at June 30, 2014.

Capital expenditures for the year ended June 30, 2015 were $61.8 million, an increase of $12.4 million from the prior year's full fiscal year, and was comprised of:

$9.9 million for property and equipment,
$33.8 million for capitalized software development, and
$18.1 million for capitalized curriculum.

Capital leases of $14.7 million were incurred during the year ended June 30, 2015, primarily for student computers.

(1) Free cash flow is defined as cash flow from operations less capital expenditures and capital leases financed.

Revenue and Enrollment Data

Revenue

The Company's revenues are generally in four categories -- Managed Programs (management, technology and academic support services provided to public schools), Non-managed Programs (curriculum, technology and other educational services where K12 does not provide primary administrative oversight), Institutional Software and Services (educational software and services provided to school districts, public schools and other educational institutions), and International and Private Pay Schools (private schools for which it charges student tuition and makes direct consumer sales) -- The following table sets forth the Company's revenues for the periods indicated:

Three Months Ended Change Year Ended Change
June 30, 2015 / 2014 June 30, 2015 / 2014
($ in thousands) 2015 2014 $ % 2015 2014 $ %
Public School Programs
Managed Programs $ 201,333 $ 201,387 $ (54) 0.0% $ 813,677 $ 793,854 $ 19,823 2.5%
Non-managed Programs 8,312 6,535 1,777 27.2% 39,321 28,836 10,485 36.4%
Total Public School Programs $ 209,645 $ 207,922 $ 1,723 0.8% $ 852,998 $ 822,690 $ 30,308 3.7%
Institutional Software & Services 13,101 12,591 510 4.1% 48,770 48,545 225 0.5%
International and Private Pay Schools 12,909 11,533 1,376 11.9% 46,526 48,318 (1,792) -3.7%
Total $ 235,655 $ 232,046 $ 3,609 1.6% $ 948,294 $ 919,553 $ 28,741 3.1%

Enrollment Data

The following table sets forth average enrollment data for students in Public School Programs for the periods indicated. These figures exclude enrollments from classroom pilot programs and consumer programs.

Three Months Ended
June 30,

2015 / 2014
Year Ended
June 30,

2015 / 2014
2015 2014 Change Change % 2015 2014 Change Change %
Public School Programs
Managed Programs (3) (4) 108,913 111,381 (2,468) -2.2% 114,579 119,197 (4,618) -3.9%
Non-managed Programs (4) 19,044 14,341 4,703 32.8% 20,053 14,482 5,571 38.5%
Total Public School Programs (2) 127,957 125,722 2,235 1.8% 134,632 133,679 953 0.7%

(2) If a school changes from a Managed to a Non-managed program, the corresponding enrollment classification would change in the period in which the contract arrangement changed.

(3) Public School Programs include enrollments for which K12 receives no public funding or revenue.

(4) Managed Program enrollments are lower than those reported in our historical average student enrollments for Managed Public Schools due to reclassifying certain schools that meet the current definition of Non-managed Programs.

Revenue per Enrollment Data

The following table sets forth revenue per average enrollment data for students in Public School Programs for the periods indicated.

Three Months Ended Change Year Ended Change
June 30, 2015 / 2014 June 30, 2015 / 2014
2015 2014 $ % 2015 2014 $ %
Public School Programs
Managed Programs $ 1,849 $ 1,808 $ 41 2.3% $ 7,101 $ 6,660 $ 441 6.6%
Non-managed Programs 436 456 (20) -4.4% 1,961 1,991 (30) -1.5%
Total Public School Programs $ 1,638 $ 1,654 $ (16) -1.0% $ 6,336 $ 6,154 $ 182 3.0%

FY 2016 Outlook

The Company will provide an outlook for fiscal 2016 results in the Fall of this year.

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: reduction of per pupil funding amounts at the schools we serve; inability to achieve sufficient levels of new enrollments to sustain or to grow our business model; failure of the schools we serve to comply with regulations resulting in a loss of funding or an obligation to repay funds previously received; declines or variations in academic performance outcomes as curriculum and testing standards evolve; harm to our reputation resulting from poor performance or misconduct by operators or us in any school in our industry and in any school in which we operate; legal and regulatory challenges from opponents of virtual public education, public charter schools or for-profit education companies; 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 school contracts or renew existing contracts, in part or in their entirety; unsuccessful integration of mergers, acquisitions and joint ventures; failure to further develop, maintain and enhance our technology, products, services and brands; inadequate recruiting, training and retention of effective teachers and employees; infringement of our intellectual property; non-compliance with laws and regulations related to operating schools in a foreign jurisdiction; entry of new competitors with superior competitive technologies and lower prices; 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 August 4, 2015, 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 fiscal year 2015 financial results during a conference call scheduled for Tuesday, August 4, 2015 at 8:30 a.m. eastern time (ET).

The conference call will be webcast and available at http://public.viavid.com/index.php?id=115414. Please access the web site at least 15 minutes prior to the start of the call.

To participate in the live call, investors and analysts should dial (877) 407-4019 (domestic) or (201) 689-8337 (international) at 8:15 a.m. (ET). No passcode is required.

A replay of the call will be available starting on August 4, 2015 at 11:00 a.m. ET through September 4, 2015 at 11:00 a.m. ET, at (877) 660-6853 (domestic) or (201) 612-7415 (international) using conference ID 13614346. A webcast replay of the call will be available at http://public.viavid.com/index.php?id=115414 for 30 days.

Financial Statements

The financial statements set forth below are not the complete set of K12 Inc.'s financial statements for the three months and full fiscal year ended June 30, 2015, and is presented below without footnotes. Readers are encouraged to obtain and carefully review K12 Inc.'s Form 10-K for the year ended June 30, 2015, 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.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,
2015 2014
(In thousands, except share and per share data)
ASSETS
Current assets
Cash and cash equivalents $ 195,852 $ 196,109
Accounts receivable, net of allowance of $9,657 and $3,460 at June 30, 2015 and June 30, 2014, respectively. 188,246 194,676
Inventories, net 29,571 33,830
Deferred tax asset 8,989 7,732
Prepaid expenses 11,428 7,356
Other current assets 24,877 25,498
Total current assets 458,963 465,201
Property and equipment, net 34,407 48,581
Capitalized software, net 62,683 49,920
Capitalized curriculum development costs, net 58,696 60,782
Intangible assets, net 21,195 23,708
Goodwill 66,160 58,088
Deposits and other assets 6,495 5,387
Total assets $ 708,599 $ 711,667
Current liabilities
Accounts payable $ 29,819 $ 30,976
Accrued liabilities 12,486 20,539
Accrued compensation and benefits 26,790 17,400
Deferred revenue 24,927 24,353
Current portion of capital lease obligations 16,635 20,492
Total current liabilities 110,657 113,760
Deferred rent, net of current portion 7,692 8,488
Capital lease obligations, net of current portion 13,022 16,447
Deferred tax liability 22,456 22,478
Other long term liabilities 8,233 4,763
Total liabilities 162,060 165,936
Redeemable noncontrolling interest 9,601 16,801
Equity:
K12 Inc. stockholders' equity
Common stock, par value $0.0001; 100,000,000 shares authorized; 41,837,894 and 41,144,062 shares issued and 38,335,296 and 38,948,866 shares outstanding at June 30, 2015 and June 30, 2014, respectively 4 4
Additional paid-in capital 663,461 639,036
Accumulated other comprehensive loss (1,065) (112)
Accumulated deficit (50,462) (61,450)
Treasury stock of 3,502,598 and 2,195,196 shares at cost at June 30, 2015 and June 30, 2014, respectively (75,000) (48,548)
Total K12 Inc. stockholders' equity 536,938 528,930
Total liabilities, redeemable noncontrolling interest and equity $ 708,599 $ 711,667
K12 INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Year Ended
June 30, June 30,
2015 2014 2015 2014
(In thousands, except share and per share data)
Revenues $ 235,655 $ 232,046 $ 948,294 $ 919,553
Cost and expenses
Instructional costs and services 166,900 142,053 607,756 569,219
Selling, administrative, and other operating expenses 80,756 74,847 307,730 313,258
Product development expenses 4,317 2,303 14,381 14,220
Total costs and expenses 251,973 219,203 929,867 896,697
Income (loss) from operations (16,318) 12,843 18,427 22,856
Realized gain on sale of assets -- 6,404 -- 6,404
Interest (expense), net and other (3,158) 55 (3,291) (69)
Income before income tax expense and noncontrolling interest (19,476) 19,302 15,136 29,191
Income tax benefit (expense) 6,901 (7,349) (5,810) (11,075)
Net income (loss) (12,575) 11,953 9,326 18,116
Adjust net loss attributable to noncontrolling interest 995 403 1,662 1,484
Net income (loss) attributable to common stockholders, including Series A stockholders $ (11,580) $ 12,356 $ 10,988 $ 19,600
Net income (loss) attributable to common stockholders per share, excluding Series A stockholders, through the conversion date September 3, 2013:
Basic and Diluted $ (0.31) $ 0.32 $ 0.29 $ 0.50
Diluted $ (0.31) $ 0.32 $ 0.29 $ 0.50
Weighted average shares used in computing per share amounts:
Basic 37,318,085 38,540,464 37,330,569 38,987,470
Diluted 37,318,085 38,742,379 37,625,425 39,230,516
K12 INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
2015 2014
(In thousands)
Cash flows from operating activities
Net income $ 9,326 $ 18,116
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 83,801 86,267
Stock-based compensation expense 21,299 22,828
Excess tax benefit from stock-based compensation (118) (1,679)
Deferred income taxes (3,094) (5,754)
Provision for doubtful accounts 9,300 1,439
Provision for inventory obsolescence 1,406 4,293
Provision for student computer shrinkage and obsolescence (430) (526)
Impairment loss on other assets 3,200 --
Realized gain on sale of assets -- (6,404)
Changes in assets and liabilities:
Accounts receivable (1,892) (12,257)
Inventories 2,853 6,272
Prepaid expenses (4,073) 2,735
Other current assets (2,579) (1,645)
Deposits and other assets (1,440) (212)
Accounts payable (1,192) 9,778
Accrued liabilities (7,854) 5,474
Accrued compensation and benefits 9,389 (4,214)
Deferred revenue 621 (1,429)
Deferred rent 1,562 (209)
Net cash provided by operating activities 120,085 122,873
Cash flows from investing activities
Purchases of property and equipment (9,928) (7,405)
Capitalized software development costs (33,755) (26,553)
Capitalized curriculum development costs (18,057) (15,411)
Mortgage note to a managed school partner -- (2,100)
Net cash received on sale of assets -- 5,665
Acquisition of LearnBop Inc. (6,512) --
Net cash used in investing activities (68,252) (45,804)
Cash flows from financing activities
Repayments on capital lease obligations (21,939) (22,694)
Repayments on notes payable -- (390)
Purchase of treasury stock (26,452) (48,548)
Proceeds from exercise of stock options 553 10,294
Net proceeds from investment in noncontrolling interest -- 1,275
Excess tax benefit from stock-based compensation 118 1,679
Retirement of restricted stock for tax withholding (2,672) (5,018)
Net cash used in financing activities (50,392) (63,402)
Effect of foreign exchange rate changes on cash and cash equivalents (1,698) 962
Net change in cash and cash equivalents (257) 14,629
Cash and cash equivalents, beginning of year 196,109 181,480
Cash and cash equivalents, end of year $ 195,852 $ 196,109

Non-GAAP Financial Measures

EBITDA

EBITDA consists of net income plus net interest expense and other, plus income tax expense, minus income tax benefit, plus depreciation and amortization and non-controlling interest. Interest expense primarily consists of interest expense for capital leases. 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. Not all companies use identical calculations for EBITDA, therefore 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; and
  • 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.

The following tables provide a reconciliation of net income to EBITDA:

Three Months Ended June 30, Year Ended June 30,
2015 2014 2015 2014
(In thousands) (In thousands)
Net income (loss) — K12 Inc. $ (11,580) $ 12,356 $ 10,988 $ 19,600
Interest income (expense), net and other 3,158 (55) 3,291 69
Income tax expense (benefit) (6,901) 7,349 5,810 11,075
Depreciation and amortization 31,528 16,776 83,801 86,267
Net loss attributable to noncontrolling interest (995) (403) (1,662) (1,484)
EBITDA $ 15,210 $ 36,023 $ 102,228 $ 115,527

Appendix

(A) The following tables are provided for reference only and conform to the disclosure provided in previous years.

Revenue

The following table sets forth the Company's revenues -- Managed Public Schools (turn-key management services provided to public schools), Institutional Sales (educational products and services provided to school districts, public schools and other educational institutions that it does not manage), and International and Private Pay Schools (private schools for which it charges student tuition and makes direct consumer sales) -- for the periods indicated:

Three Months Ended Change Year Ended Change
June 30, 2015/ 2014 June 30, 2015 / 2014
($ in thousands) 2015 2014 $ % 2015 2014 $ %
Managed School Programs $ 204,752 $ 203,722 $ 1,030 0.5% $ 828,286 $ 804,470 $ 23,816 3.0%
Institutional Sales 17,993 16,791 1,202 7.2% 73,482 66,765 6,717 10.1%
International and Private Pay Schools 12,910 11,533 1,377 11.9% 46,526 48,318 (1,792) -3.7%
Total $ 235,655 $ 232,046 $ 3,609 1.6% $ 948,294 $ 919,553 $ 28,741 3.1%

Enrollment Data

The following table sets forth average enrollment data for students in Managed Public Schools. These figures exclude enrollments from classroom pilot programs and consumer programs.

Three Months Ended
June 30,

2015 / 2014
Year Ended
June 30,

2015 / 2014
2015 2014 Change Change % 2015 2014 Change Change %
Managed Public Schools
Average Student Enrollments (1) 114,330 115,367 (1,037) -0.9% 120,257 123,259 (3,002) -2.4%

(1) Managed Public Schools include enrollments for which K12 may receive no public funding. Managed Public School enrollments include all programs which had been classified as turn-key programs or where substantial management services are performed in accordance with the contract.

(B) The following table is provided for reference only and is related to the new disclosure format. The table sets forth average enrollment data for students in Public School Programs for fiscal year 2014. All student enrollment figures include enrollments for which K12 receives no public funding or revenue. These figures exclude enrollments from classroom pilot programs and consumer programs.

Three Months Ended
9/30/2013 12/31/2013 3/31/2014 6/30/2014
Public School Programs
Managed Programs (1) 124,448 120,994 120,862 111,381
Non-managed Programs (1) (4) 14,857 14,330 14,603 14,341
Total Public School Programs (2) (3) 139,305 135,324 135,465 125,722

(1) If a school changes from a Managed to a Non-managed program, the corresponding enrollment classification would change in the period in which the contract arrangement changed.

(2) Public School Programs include enrollments for which K12 receives no public funding or revenue.

(3) Public School Program enrollments for the three months ended September 30, 2013, are equal to the official count date number, which is the first Wednesday of October in a year, or October 2, 2013.

(4) The number of students enrolled in Non-managed Programs has been changed in each quarter of FY14 from those previously reported. These adjustments are not material.

The following table sets forth the Company's revenues for fiscal year 2014 in the new disclosure format -- Managed Programs (management, technology and academic support services provided to public schools), Non-managed Programs (curriculum, technology and other educational services where K12 does not offer primary administrative oversight), Institutional Software and Services (educational software and services provided to school districts, public schools and other educational institutions), and International and Private Pay Schools (private schools for which it charges student tuition and makes direct consumer sales) -- for the periods indicated:

Three Months Ended Year Ended
($ in thousands) 9/30/2013 12/31/2013 3/31/2014 6/30/2014 6/30/2014
Public School Programs
Managed Programs $ 193,558 $ 192,939 $ 205,970 $ 201,387 $ 793,854
Non-managed Programs (1) 8,597 6,940 6,764 6,535 28,836
Total Public School Programs $ 202,155 $ 199,879 $ 212,734 $ 207,922 $ 822,690
Institutional Software & Services (1) 14,499 11,968 9,487 12,591 48,545
International and Private Pay Schools 11,712 12,072 13,001 11,533 48,318
Total $ 228,366 $ 223,919 $ 235,222 $ 232,046 $ 919,553

(1) The revenue for Non-managed Programs has been changed and a corresponding amount changed in Institutional Software & Services in each quarter of FY14 from those previously reported. These adjustments are not material.

In fiscal 2014 K12 Inc. announced the sale of certain businesses. In aggregate, these businesses were responsible for $16.9 million in revenue. The following table sets forth the Company's revenues for fiscal year 2014 in the new disclosure format excluding these certain businesses.

Three Months Ended Year Ended
($ in thousands) 9/30/2013 12/31/2013 3/31/2014 6/30/2014 6/30/2014
Public School Programs
Managed Programs $ 193,558 $ 192,939 $ 205,970 $ 201,387 $ 793,854
Non-managed Programs (1) 8,597 6,940 6,764 6,535 28,836
Total Public School Programs $ 202,155 $ 199,879 $ 212,734 $ 207,922 $ 822,690
Institutional Software & Services (1) 13,590 10,914 8,129 11,852 44,485
International and Private Pay Schools 9,187 8,361 9,080 8,810 35,438
Total $ 224,932 $ 219,154 $ 229,943 $ 228,584 $ 902,613

(1) The revenue for Non-managed Programs has been changed and a corresponding amount changed in Institutional Software & Services in each quarter of FY14 from those previously reported. These adjustments are not material.

(C) The following tables are provided as reference only and adjusts fourth quarter and full year 2015 results for the removal of $28.4 million charges incurred in the fourth quarter of FY 2015.

Three Months Ended June 30, 2015

Reported Results

Specific Charges
Results
Excluding Charges

Reported Results
Results
Excluding Charges
(In thousands, except share and per share data) (% of Revenue)
Revenues $ 235,655 $ -- $ 235,655 100.0% 100.0%
Cost and expenses
Instructional costs and services 166,900 9,565 157,335 70.8% 66.8%
Selling, administrative, and other operating expenses 80,756 15,670 65,086 34.3% 27.6%
Product development expenses 4,317 -- 4,317 1.8% 1.8%
Total costs and expenses 251,973 25,235 226,738 106.9% 96.2%
Income (loss) from operations (16,318) (25,235) 8,917 (6.9%) 3.8%
Realized gain on sale of assets -- -- -- 0.0% 0.0%
Interest (expense), net and other (3,158) (3,200) 42 (1.3%) 0.0%
Income (loss) before income tax expense and noncontrolling interest (19,476) (28,435) 8,959 (8.3%) 3.8%
Income tax (expense) benefit 6,901 10,006 (3,105) 2.9% (1.3%)
Net income (loss) (12,575) (18,429) 5,854 (5.3%) 2.5%
Adjust net loss attributable to noncontrolling interest 995 -- 995 0.4% 0.4%
Net income (loss) attributable to common stockholders, including Series A stockholders $ (11,580) $ (18,429) $ 6,849 (4.9%) 2.9%
Net income (loss) attributable to common stockholders per share, excluding Series A stockholders, through the conversion date September 3, 2013:
Basic $ (0.31) $ (0.49) $ 0.18
Diluted $ (0.31) $ (0.49) $ 0.18
Weighted average shares used in computing per share amounts:
Basic 37,318,085 37,318,085 37,318,085
Diluted 37,318,085 37,318,085 37,318,085
Year Ended June 30, 2015

Reported Results

Specific Charges
Results
Excluding Charges

Reported Results
Results
Excluding Charges
(In thousands, except share and per share data) (% of Revenue)
Revenues $ 948,294 $ -- $ 948,294 100.0% 100.0%
Cost and expenses
Instructional costs and services 607,756 9,565 598,191 64.1% 63.1%
Selling, administrative, and other operating expenses 307,730 15,670 292,060 32.5% 30.8%
Product development expenses 14,381 -- 14,381 1.5% 1.5%
Total costs and expenses 929,867 25,235 904,632 98.1% 95.4%
Income (loss) from operations 18,427 (25,235) 43,662 1.9% 4.6%
Realized gain on sale of assets -- -- -- 0.0% 0.0%
Interest (expense), net and other (3,291) (3,200) (91) (0.3%) (0.0%)
Income (loss) before income tax expense and noncontrolling interest 15,136 (28,435) 43,571 1.6% 4.6%
Income tax (expense) benefit (5,810) 10,006 (15,816) (0.6%) (1.7%)
Net income (loss) 9,326 (18,429) 27,755 1.0% 2.9%
Adjust net loss attributable to noncontrolling interest 1,662 -- 1,662 0.2% 0.2%
Net income (loss) attributable to common stockholders, including Series A stockholders $ 10,988 $ (18,429) $ 29,417 1.2% 3.1%
Net income (loss) attributable to common stockholders per share, excluding Series A stockholders, through the conversion date September 3, 2013:
Basic $ 0.29 $ (0.49) $ 0.79
Diluted $ 0.29 $ (0.49) $ 0.78
Weighted average shares used in computing per share amounts:
Basic 37,330,569 37,330,569 37,330,569
Diluted 37,625,425 37,625,425 37,625,425

(D) The following table is provided as reference only and adjusts full-year 2014 results for the removal of $32.2 million charges incurred in the second quarter of FY 2014 and the sale of certain businesses.

Year Ended June 30, 2014




Reported Results

Specific
Charges &
Sale of
Certain Businesses
Results
Excluding
Charges &
Sale of
Certain Businesses




Reported Results
Results
Excluding
Charges &
Sale of
Certain Businesses
(In thousands, except share and per share data) (% of Revenue)
Revenues $ 919,553 $ 16,941 $ 902,612 100.0% 100.0%
Cost and expenses
Instructional costs and services 569,219 26,690 542,529 61.9% 60.1%
Selling, administrative, and other operating expenses 313,258 21,272 291,986 34.1% 32.3%
Product development expenses 14,220 630 13,590 1.5% 1.5%
Total costs and expenses 896,697 48,592 848,105 97.5% 94.0%
Income (loss) from operations 22,856 (31,651) 54,507 2.5% 6.0%
Realized gain on sale of asset 6,404 6,404 -- 0.7% 0.0%
Interest (expense), net and other (69) -- (69) (0.0%) (0.0%)
Income (loss) before income tax expense and noncontrolling interest 29,191 (25,247) 54,438 3.2% 6.0%
Income tax (expense) benefit (11,075) 10,156 (21,231) (1.2%) (2.4%)
Net income (loss) 18,116 (15,091) 33,207 2.0% 3.7%
Adjust net loss attributable to noncontrolling interest 1,484 -- 1,484 0.2% 0.2%
Net income (loss) attributable to common stockholders, including Series A stockholders $ 19,600 $ (15,091) $ 34,691 2.1% 3.8%
Net income (loss) attributable to common stockholders per share, excluding Series A stockholders, through the conversion date September 3, 2013:
Basic $ 0.50 $ (0.39) $ 0.89
Diluted $ 0.50 $ (0.38) $ 0.88
Weighted average shares used in computing per share amounts:
Basic 38,987,470 38,987,470 38,987,470
Diluted 39,230,516 39,230,516 39,230,516

(E) The following table is provided as reference only and compares year ended June 30, 2015, excluding the $28.4 million charges recorded in the fourth quarter of FY2015, to year ended June 30, 2014, excluding $32.2 million charges incurred in the second quarter of FY 2014 and the sale of certain businesses.




FY15 Results Excluding
Charges
FY14 Results
Excluding
Charges &
Sale of
Certain Businesses



FY15 Results Excluding
Charges
FY14 Results
Excluding
Charges &
Sale of
Certain Businesses
(In thousands, except share and per share data) (% of Revenue)
Revenues $ 948,294 $ 902,612 100.0% 100.0%
Cost and expenses
Instructional costs and services 598,191 542,529 63.1% 60.1%
Selling, administrative, and other operating expenses 292,060 291,986 30.8% 32.3%
Product development expenses 14,381 13,590 1.5% 1.5%
Total costs and expenses 904,632 848,105 95.4% 94.0%
Income from operations 43,662 54,507 4.6% 6.0%
Realized gain on sale of asset -- -- 0.0% 0.0%
Interest (expense), net and other (91) (69) (0.0%) (0.0%)
Income before income tax expense and noncontrolling interest 43,571 54,438 4.6% 6.0%
Income tax expense (15,816) (21,231) (1.7%) (2.4%)
Net income 27,755 33,207 2.9% 3.7%
Adjust net loss attributable to noncontrolling interest 1,662 1,484 0.2% 0.2%
Net income attributable to common stockholders, including Series A stockholders $ 29,417 $ 34,691 3.1% 3.8%
Net income attributable to common stockholders per share, excluding Series A stockholders, through the conversion date September 3, 2013:
Basic $ 0.79 $ 0.89
Diluted $ 0.78 $ 0.88
Weighted average shares used in computing per share amounts:
Basic 37,330,569 38,987,470
Diluted 37,625,425 39,230,516

About K12 Inc.

K12 Inc. (NYSE:LRN) is driving innovation and advancing the quality of education by delivering state-of-the-art, digital learning platforms and technology to students and school districts across the globe. K12's award winning curriculum serves over 2,000 schools and school districts and has delivered more than four million courses over the past decade. K12 is a company of educators with the nation's largest network of K-12 online school teachers, providing instruction, academic services, and learning solutions to public schools and districts, traditional classrooms, blended school programs, and directly to families. The K12 program is offered through K12 partner public schools in approximately two-thirds of the states and the District of Columbia, and through private schools serving students in all 50 states and more than 100 countries. More information can be found at K12.com.

CONTACT: K12 Inc. Investor Contact: Mike Kraft, 571-353-7778 VP Finance & Corporate Treasurer mkraft@k12.com or Press Contact: Frank Giancamilli, 703-483-1529 Senior Manager Corporate Communications fgiancamilli@k12.com

Source:K12 Inc.