Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Dec. 31, 2014 | Jan. 22, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | K12 INC | |
Entity Central Index Key | 1157408 | |
Document Type | 10-Q | |
Document Period End Date | 31-Dec-14 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -24 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 38,412,246 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q2 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2014 | Jun. 30, 2014 |
In Thousands, unless otherwise specified | ||
Current assets | ||
Cash and cash equivalents | $124,234 | $196,109 |
Accounts receivable, net of allowance of $4,060 and $3,460 at December 31, 2014 and June 30, 2014, respectively | 266,760 | 194,676 |
Inventories, net | 19,515 | 33,830 |
Current portion of deferred tax asset | 3,969 | 7,732 |
Prepaid expenses | 11,610 | 7,356 |
Other current assets | 29,056 | 25,498 |
Total current assets | 455,144 | 465,201 |
Property and equipment, net | 48,127 | 48,581 |
Capitalized software, net | 56,884 | 49,920 |
Capitalized curriculum development costs, net | 59,569 | 60,782 |
Intangible assets, net | 22,464 | 23,708 |
Goodwill | 67,241 | 58,088 |
Deposits and other assets | 5,853 | 5,387 |
Total assets | 715,282 | 711,667 |
Current liabilities | ||
Current portion of capital lease obligations | 18,255 | 20,492 |
Accounts payable | 16,633 | 30,976 |
Accrued liabilities | 10,154 | 20,539 |
Accrued compensation and benefits | 19,085 | 17,400 |
Deferred revenue | 63,630 | 24,353 |
Total current liabilities | 127,757 | 113,760 |
Capital lease obligations, net of current portion | 14,109 | 16,447 |
Deferred rent, net of current portion | 8,187 | 8,488 |
Deferred tax liability | 24,218 | 22,478 |
Other long-term liabilities | 7,424 | 4,763 |
Total liabilities | 181,695 | 165,936 |
Commitments and contingencies | ||
Redeemable noncontrolling interest | 19,801 | 16,801 |
K12 Inc. stockholders' equity | ||
Common stock, par value $0.0001; 100,000,000 shares authorized; 41,841,573 and 41,144,062 shares issued and 38,338,975 and 38,948,666 shares outstanding at December 31, 2014 and June 30, 2014, respectively | 4 | 4 |
Additional paid-in capital | 645,902 | 639,036 |
Accumulated other comprehensive loss | -1,227 | -112 |
Accumulated deficit | -55,893 | -61,450 |
Treasury stock of 3,502,598 and 2,195,196 shares at cost at September 30, 2014 and June 30, 2014, respectively | -75,000 | -48,548 |
Total K12 Inc. stockholders' equity | 513,786 | 528,930 |
Total equity | 513,786 | 528,930 |
Total liabilities, redeemable noncontrolling interest and equity | $715,282 | $711,667 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2014 | Jun. 30, 2014 |
In Thousands, except Share data, unless otherwise specified | ||
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance (in dollars) | $4,060 | $3,460 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 41,841,573 | 41,144,062 |
Common stock, shares outstanding | 38,338,975 | 38,948,866 |
Treasury stock, shares | 3,502,598 | 2,195,196 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Revenues | $231,304 | $223,919 | $468,017 | $452,285 |
Cost and expenses | ||||
Instructional costs and services | 145,029 | 153,672 | 291,872 | 286,574 |
Selling, administrative, and other operating expenses | 62,557 | 75,753 | 162,101 | 173,996 |
Product development expenses | 3,245 | 3,402 | 6,727 | 9,086 |
Total costs and expenses | 210,831 | 232,827 | 460,700 | 469,656 |
Income from operations | 20,473 | -8,908 | 7,317 | -17,371 |
Interest expense, net | 151 | -28 | 182 | -112 |
Income before income tax expense and noncontrolling interest | 20,624 | -8,936 | 7,499 | -17,483 |
Income tax expense | -8,663 | 4,685 | -2,125 | 8,135 |
Net income | 11,961 | -4,251 | 5,374 | -9,348 |
Adjust net (income) loss attributable to noncontrolling interest | 370 | 586 | 183 | 643 |
Net income attributable to common stockholders, including Series A stockholders | $12,331 | ($3,665) | $5,557 | ($8,705) |
Net income (loss) attributable to common stockholders per share, excluding Series A stockholders through the conversion date September 3, 2013: | ||||
Basic (in dollars per share) | $0.33 | ($0.09) | $0.15 | ($0.22) |
Diluted (in dollars per share) | $0.33 | ($0.09) | $0.15 | ($0.22) |
Weighted average shares used in computing per share amounts: | ||||
Basic (in shares) | 37,096,480 | 39,977,228 | 37,396,081 | 38,953,671 |
Diluted (in shares) | 37,160,829 | 39,977,228 | 37,599,930 | 38,953,671 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $11,961 | ($4,251) | $5,374 | ($9,348) |
Other comprehensive income (loss), net of tax | ||||
Foreign currency translation adjustment | -569 | 88 | -1,115 | 193 |
Total other comprehensive income, net of tax | 11,392 | -4,163 | 4,259 | -9,155 |
Comprehensive (income) loss attributable to noncontrolling interest | 370 | 586 | 183 | 643 |
Comprehensive income attributable to common stockholders, including Series A stockholders | $11,762 | ($3,577) | $4,442 | ($8,512) |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (USD $) | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Retained Earnings [Member] | Treasury Stock [Member] | Total |
In Thousands, except Share data, unless otherwise specified | ||||||
Balance at Jun. 30, 2014 | $4 | $639,036 | ($112) | ($61,450) | ($48,548) | $528,930 |
Balance (in shares) at Jun. 30, 2014 | 41,144,062 | -2,195,196 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 5,557 | 5,557 | ||||
Foreign currency translation adjustment | -1,115 | -1,115 | ||||
Purchase of treasury stock | -26,452 | -26,452 | ||||
Purchase of treasury stock (in shares) | -1,307,402 | -1,307,402 | ||||
Stock-based compensation expense | 8,969 | 8,969 | ||||
Exercise of stock options | 161 | 161 | ||||
Exercise of stock options (in shares) | 63,214 | |||||
Excess tax benefit from stock-based compensation | -613 | -613 | ||||
Issuance of restricted stock awards (in shares) | 745,775 | |||||
Forfeiture of restricted stock awards (in shares) | -28,151 | |||||
Accretion of redeemable noncontrolling interests to estimated redemption value | -183 | -183 | ||||
Retirement of restricted stock for tax withholding | -1,468 | -1,468 | ||||
Retirement of restricted stock for tax withholding (in shares) | -83,327 | |||||
Balance at Dec. 31, 2014 | $4 | $645,902 | ($1,227) | ($55,893) | ($75,000) | $513,786 |
Balance (in shares) at Dec. 31, 2014 | 41,841,573 | -3,502,598 |
CONDENSED_CONSOLIDATED_STATEME3
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (Parenthetical) (USD $) | 6 Months Ended |
In Millions, unless otherwise specified | Dec. 31, 2014 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |
Redeemable noncontrolling interest related to Middlebury Interactive Languages and LearnBop | $0.20 |
CONDENSED_CONSOLIDATED_STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 |
Cash flows from operating activities | ||
Net income | $5,374 | ($9,348) |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 34,509 | 51,474 |
Stock-based compensation expense | 8,969 | 12,210 |
Excess tax expense (benefit) from stock-based compensation | 613 | 1,217 |
Deferred income taxes | 5,504 | -8,134 |
Provision for doubtful accounts | 836 | 717 |
Provision for excess and obsolete inventory | 459 | 4,124 |
Provision (benefit) for student computer shrinkage and obsolescence | -226 | -451 |
Changes in assets and liabilities: | ||
Accounts receivable | -72,415 | -68,785 |
Inventories | 13,856 | 16,908 |
Prepaid expenses | -4,255 | 1,257 |
Other current assets | -3,558 | -3,508 |
Deposits and other assets | -466 | -227 |
Accounts payable | -14,377 | -5,310 |
Accrued liabilities | -10,984 | -2,484 |
Accrued compensation and benefits | 1,684 | -1,435 |
Deferred revenue | 39,630 | 32,149 |
Deferred rent and other liabilities | 2,476 | 178 |
Net cash provided by operating activities | 7,629 | 20,552 |
Cash flows from investing activities | ||
Purchase of property and equipment | -6,687 | -5,329 |
Capitalized software development costs | -17,093 | -10,632 |
Capitalized curriculum development costs | -7,267 | -7,649 |
Investment in LearnBop Inc. | -6,512 | |
Mortgage note to managed school partner | -2,100 | |
Net cash used in investing activities | -37,559 | -25,710 |
Cash flows from financing activities | ||
Repayments on capital lease obligations | -11,487 | -11,145 |
Purchase of treasury stock | -26,452 | -5,883 |
Repayments on note payable | -390 | |
Proceeds from exercise of stock options | 161 | 7,617 |
Excess tax (expense) benefit from stock-based compensation | -613 | -1,217 |
Retirement of restricted stock for tax withholding | -1,468 | -3,223 |
Net cash used in financing activities | -39,859 | -14,241 |
Effect of foreign exchange rate changes on cash and cash equivalents | -2,086 | 808 |
Net change in cash and cash equivalents | -71,875 | -18,591 |
Cash and cash equivalents, beginning of period | 196,109 | 181,480 |
Cash and cash equivalents, end of period | $124,234 | $162,889 |
Description_of_the_Business
Description of the Business | 6 Months Ended |
Dec. 31, 2014 | |
Description of the Business | |
Description of the Business | 1.Description of the Business |
K12 Inc., together with its subsidiaries (“K12” or the “Company”), is a technology-based education company. The Company offers proprietary curriculum, software systems and educational services designed to facilitate individualized learning for students primarily in kindergarten through 12th grade (“K-12”). The Company’s mission is to maximize a child’s potential by providing access to an engaging and effective education, regardless of geographic location or socio-economic background. The Company’s learning systems combine the Company’s curriculum and offerings with an individualized learning approach well-suited for virtual and blended public schools, school district online programs, public charter schools and private schools that utilize varying degrees of online and traditional classroom instruction, and other educational applications. These unique set of products and services are provided primarily to three lines of business: Public School Programs (curriculum and services sold to managed and non-managed public schools), Institutional Sales (educational products and services provided to school districts, public schools and other educational institutions that the Company does not manage), and International and Private Pay Schools (private schools for which the Company charges student tuition and makes direct consumer sales). The Company operates Public School Programs in 33 states and the District of Columbia. In June 2014, the Company completed a sale of certain businesses, including the International School of Berne. The other businesses divested consisted of the Company’s interest in an existing Middle East joint venture and its post-secondary business. | |
The Company also works closely as partners with a growing number of public schools, school districts, private schools and charter schools enabling them to offer their students an array of solutions, including full-time virtual programs, semester course and supplemental solutions. In addition to curriculum, systems and programs, the Company provides teacher training, teaching services and other support services. | |
Basis_of_Presentation
Basis of Presentation | 6 Months Ended |
Dec. 31, 2014 | |
Basis of Presentation | |
Basis of Presentation | 2.Basis of Presentation |
The accompanying condensed consolidated balance sheet as of December 31, 2014, the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended December 31, 2014 and 2013, the condensed consolidated statements of cash flows for the six months ended December 31, 2014 and 2013, and the condensed consolidated statement of equity (deficit) for the six months ended December 31, 2014 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations for the periods presented. The results for the six months ended December 31, 2014 are not necessarily indicative of the results to be expected for the year ending June 30, 2015 or for any other interim period or for any other future fiscal year. The condensed consolidated balance sheet as of June 30, 2014 has been derived from the audited consolidated financial statements at that date. | |
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, the Company does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s condensed consolidated results of operations, financial position and cash flows. Preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and footnotes. Actual results could differ from those estimates. This quarterly report on Form 10-Q should be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on August 15, 2014, which contains the Company’s audited financial statements for the fiscal year ended June 30, 2014. | |
The Company operates in one operating and reportable business segment as a technology-based education company providing proprietary curriculum, software systems and educational services designed to facilitate individualized learning for students primarily in kindergarten through 12th grade. The Chief Operating Decision Maker evaluates profitability based only on consolidated results. | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 6 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
Summary of Significant Accounting Policies | ||||||||||||||||||||
Summary of Significant Accounting Policies | 3.Summary of Significant Accounting Policies | |||||||||||||||||||
Revenue Recognition | ||||||||||||||||||||
Revenues are principally earned from long-term contractual agreements to provide online curriculum, books, materials, computers and management services to virtual and blended public schools, traditional schools, school districts, public charter schools, and private schools. In addition to providing the curriculum, books and materials, under most contracts, the Company manages virtual and blended public schools, including monitoring academic achievement, teacher hiring and training, compensation of school personnel, financial management, enrollment processing and procurement of curriculum, equipment and required services. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenues. | ||||||||||||||||||||
Where the Company has determined that it is the primary obligor for substantially all expenses under these contracts, the Company records the associated per student revenue received by the school from its state funding school district up to the expenses incurred in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition. As a result of being the primary obligor, amounts recorded as revenues and school operating expenses for the three months ended December 31, 2014 and 2013 were $84.1 million and $67.3 million, respectively, and for the six months ended December 31, 2014 and 2013 were $152.8 million and $119.5 million, respectively. For contracts where the Company is not the primary obligor, the Company records revenue based on its net fees earned under the contractual agreement. | ||||||||||||||||||||
The Company generates revenues under turnkey management contracts with virtual and blended public schools which include multiple elements. These elements include providing each of a school’s students with access to the Company’s online school and the component of lessons; offline learning kits, which include books and materials to supplement the online lessons; the use of a personal computer and associated reclamation services; internet access and technology support services; the services of a state-certified teacher, where required; and management and technology services necessary to operate a virtual public or blended school. In certain managed school contracts, revenue is determined directly by per enrollment funding. | ||||||||||||||||||||
The Company has determined that the elements of its contracts are valuable to schools in combination, but do not have standalone value. As a result, the elements within the Company’s multiple-element contracts do not qualify as separate units of accounting. Accordingly, the Company accounts for revenues under multiple element arrangements as a single unit of accounting and recognizes the entire arrangement based upon the approximate rate at which it incurs the costs associated with each element. Revenue from certain managed schools is recognized ratably over the period services are performed. | ||||||||||||||||||||
To determine the pro rata amount of revenues to recognize in a fiscal quarter, management estimates the total funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels which are generally published on an annual basis by the state or school district. Management reviews its estimates of funding periodically, and revise as necessary, amortizing any adjustments to earned revenues over the remaining portion of the fiscal year. Actual school funding may vary from these estimates and the impact of these differences could impact the Company’s results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, the Company is generally able to base its annual revenues on actual school funding. The Company’s schools reported results are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results of these audits are incorporated into the Company’s monthly funding estimates and for the reported quarters and six months ended December 31, 2014 and 2013. | ||||||||||||||||||||
Under the contracts where the Company provides turnkey management services to schools, the Company has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school as reflected on its respective financial statements, including Company charges to the schools. To the extent a school does not receive funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenue and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school operating loss may reduce the Company’s ability to collect its management fees in full and recognized revenues are reduced accordingly to reflect the expected cash collections from such schools. The Company amortizes the estimated school operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. | ||||||||||||||||||||
For turnkey revenue service contracts, a school operating loss may reduce the Company’s ability to collect its management fees in full though as noted it does not necessarily mean that the Company incurs a loss during the period with respect to its services to that school. The Company recognizes revenue, net of its estimated portion of school operating losses, to reflect the expected cash collections from such schools. Revenue is recognized based on the Company’s performance of services under the contract, which it believes is proportionate to its incurrence of costs. The Company incurs costs directly related to the delivery of services. Most of these costs are recognized throughout the year; however, certain costs related to upfront delivery of printed materials, workbooks, laboratory materials and other items are provided at the beginning of the school year and are recognized as expense when shipped. | ||||||||||||||||||||
Each state or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company builds the funding estimates for each school, it is mindful of the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, average daily attendance, special needs enrollment, student demographics, academic progress and historical completion, student location, funding caps and other state specified categorical program funding. The estimates the Company makes each period on a school-by-school basis considers the latest information available to it and considers material relevant information at the time of the estimate. | ||||||||||||||||||||
Management periodically reviews its estimates of full-year school revenues and operating expenses and amortizes the net impact of any changes to these estimates over the remainder of the fiscal year. Actual school operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, annual revenues are generally based on actual school revenues and actual costs incurred (including costs for the Company’s services to the schools plus other costs the schools may incur) in the calculation of school operating losses. For the three months ended December 31, 2014 and 2013, the Company’s revenue included a reduction for these school operating losses of $15.1 million and $11.9 million, respectively, and for the six months ended December 31, 2014 and 2013, were $32.7 million and $25.7 million, respectively. | ||||||||||||||||||||
The Company provides certain online curriculum and services to schools and school districts under subscription and perpetual license agreements. Revenue under these agreements is recognized in accordance with the ASC 605 when all of the following conditions are met: there is persuasive evidence of an arrangement; delivery has occurred or services have been rendered; the amount of fees to be paid by the customer is fixed and determinable; and the collectability of the fee is probable. Revenue from the licensing of curriculum under subscription arrangements is recognized on a ratable basis over the subscription period. Revenue from the licensing of curriculum under non-cancelable perpetual arrangements is recognized when all revenue recognition criteria have been met. Revenue from professional consulting, training and support services are deferred and recognized ratably over the service period. | ||||||||||||||||||||
Other revenues are generated from individual customers who prepay and have access for one to two years to company-provided online curriculum. The Company recognizes these revenues pro rata over the maximum term of the customer contract. | ||||||||||||||||||||
Revenues from associated offline learning kits are recognized upon shipment. | ||||||||||||||||||||
During the three months ended December 31, 2014 and 2013, the Company had a contract with the Agora Cyber Charter School (“Agora”) that represented approximately 14% and 13% of revenue, respectively. During the six months ended December 31, 2014 and 2013, the Company had a contract with the Agora Cyber Charter School (“Agora”) that represented approximately 13% and 12% of revenue, respectively. Approximately 6% of accounts receivable was attributable to a contract with Agora as of December 31, 2014 and June 30, 2014, respectively. | ||||||||||||||||||||
In late fiscal year 2014, Agora commenced a request for proposal process for the services and products required to operate the school after the 2014-15 school year in connection with its charter renewal application. Agora had previously announced that it would absorb its general administrative services and certain human resources functions as well as name vendors for select services which are currently provided by the Company. On October 9, 2014, the Company entered into a three year contract with Agora for a reduced scope of services that will include providing the academic curriculum to Agora beginning in the 2015-16 school year. | ||||||||||||||||||||
Consolidation | ||||||||||||||||||||
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned and affiliated companies that the Company owns, directly or indirectly, and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. | ||||||||||||||||||||
Inventories | ||||||||||||||||||||
Inventories consist primarily of textbooks and curriculum materials, a majority of which are supplied to virtual public schools and blended public schools and utilized directly by students. Inventories represent items that are purchased and held for sale and are recorded at the lower of cost (first-in, first-out method) or market value. Excess and obsolete inventory reserves are established based upon the evaluation of the quantity on hand relative to demand. During the three and six months ended December 31, 2013, the Company increased the provision for excess and obsolete inventory by $6.1 million primarily related to the decision to discontinue certain products and excess inventory relative to anticipated demand. The excess and obsolete inventory reserve was $6.0 million and $9.0 million at December 31, 2014 and June 30, 2014, respectively. | ||||||||||||||||||||
Other Current Assets | ||||||||||||||||||||
Other current assets consist primarily of textbooks, curriculum materials and other supplies which are expected to be returned upon the completion of the school year. Materials not returned are expensed as part of instructional costs and services. | ||||||||||||||||||||
Property and Equipment | ||||||||||||||||||||
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is calculated using the straight-line method over the estimated useful life of the asset (or the lesser of the term of the lease and the estimated useful life of the asset under capital lease). Amortization of assets capitalized under capital lease arrangements is included in depreciation expense. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the asset. The Company determines the lease term in accordance with ASC 840, Leases, as the fixed non-cancelable term of the lease plus all periods for which failure to renew the lease imposes a penalty on the lessee in an amount such that renewal appears, at the inception of the lease, to be reasonably assured. Depreciation expense for the three and six months ended December 31, 2014 and 2013 was $7.2 million and $14.4 million, respectively, and $14.6 million and $23.4 million, respectively. | ||||||||||||||||||||
Property and equipment are depreciated over the following useful lives: | ||||||||||||||||||||
Useful Life | ||||||||||||||||||||
Student computers and tablets | 3 years | |||||||||||||||||||
Computer hardware | 3 years | |||||||||||||||||||
Computer software | 3-5 years | |||||||||||||||||||
Web site development costs | 3 years | |||||||||||||||||||
Office equipment | 5 years | |||||||||||||||||||
Furniture and fixtures | 7 years | |||||||||||||||||||
Leasehold improvements | 3-12 years | |||||||||||||||||||
During the three and six months ended December 31, 2013, the Company updated the estimate of unreturned computers based on an analysis of recent trends of returns and utilization rates, as well as information obtained from the student computer processing systems. As a result, the Company recorded accelerated depreciation of $6.3 million for computers that were estimated would not be returned by the Company’s students. During the three and six months ended December 31, 2014, the Company recorded $1.4 million and $2.7 million in accelerated depreciation, respectively, related to the estimate. | ||||||||||||||||||||
Capitalized Software Costs | ||||||||||||||||||||
The Company develops software for internal use. Software development costs incurred during the application development stage are capitalized in accordance with ASC 350, Intangibles — Goodwill and Other. The Company amortizes these costs over the estimated useful life of the software, which is generally three years. Capitalized software development costs are stated at cost less accumulated amortization. | ||||||||||||||||||||
Capitalized software development additions totaled $17.1 million and $10.6 million for the six months ended December 31, 2014 and 2013, respectively. During the three and six months ended December 31, 2013, the Company wrote down approximately $3.8 million of capitalized software projects after determining the assets either had no future use or were being sunset. During the three and six months ended December 31, 2014, there were no such write-downs of capitalized software projects. | ||||||||||||||||||||
Amortization expense for the three months ended December 31, 2014 and 2013 was $5.3 million and $7.9 million, respectively. Amortization expense for the six months ended December 31, 2014 and 2013 was $10.1 million and $11.1 million, respectively. Amortization expense for the three and six months ended December 31, 2013 included the write down. | ||||||||||||||||||||
Capitalized Curriculum Development Costs | ||||||||||||||||||||
The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content. | ||||||||||||||||||||
The Company capitalizes curriculum development costs incurred during the application development stage in accordance with ASC 350. The Company capitalizes curriculum development costs during the design and deployment phases of the project. Many of the Company’s new courses leverage off of proven delivery platforms and are primarily content, which has no technological hurdles. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs will be amortized is generally five years. | ||||||||||||||||||||
Total capitalized curriculum development additions were $7.3 million and $7.6 million for the six months ended December 31, 2014 and 2013, respectively. These amounts are recorded on the accompanying condensed consolidated balance sheets net of amortization charges. In addition, for the three and six months ended December 31, 2013 the Company wrote down approximately $2.2 million of capitalized curriculum cost due to its decision to discontinue certain curriculum. Amortization is recorded in product development expenses on the accompanying condensed consolidated statements of operations. Amortization expense for the three months ended December 31, 2014 and 2013 was $4.5 million and $6.4 million, respectively. Amortization expense for the six months ended December 31, 2014 and 2013 was $8.5 million and $10.3 million, respectively. Amortization expense for the three and six months ended December 31, 2013 included the write down. During the three and six months ended December 31, 2014, there were no such write-downs of capitalized software projects. | ||||||||||||||||||||
Income Taxes | ||||||||||||||||||||
The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. | ||||||||||||||||||||
Series A Special Stock | ||||||||||||||||||||
The Company issued 2,750,000 shares of Series A Special stock in July 2010 in connection with an acquisition. The holders of the Series A Special stock had the right to convert those shares into common stock on a one-for-one basis and the right to vote on all matters presented to K12 stockholders, other than for the election and removal of directors, for which holders of the Series A Special stock had no voting rights. These shares were converted into common stock on September 3, 2013 and no Series A Special stock remains outstanding as of December 31, 2014 and 2013. | ||||||||||||||||||||
Noncontrolling Interest | ||||||||||||||||||||
Earnings or losses attributable to other stockholders of a consolidated affiliated company are classified separately as “noncontrolling interest” in the Company’s condensed consolidated statements of operations. Net loss attributable to noncontrolling interest reflects only its share of the after-tax earnings or losses of an affiliated company. Income taxes attributable to noncontrolling interest are determined using the applicable statutory tax rates in the jurisdictions where such operations are conducted. These rates vary from country to country. The Company’s condensed consolidated balance sheets reflect noncontrolling interests within the equity section of the condensed consolidated balance sheet, except for redeemable noncontrolling interests. Noncontrolling interest was classified separately in the Company’s condensed consolidated statements of stockholders’ equity. Except for the redeemable non-controlling interests, the businesses with non-controlling interests were sold during fiscal 2014, and therefore the Company no longer has these non-controlling interests after the sale date. | ||||||||||||||||||||
Redeemable Noncontrolling Interests | ||||||||||||||||||||
Noncontrolling interests in subsidiaries that are redeemable outside of the Company’s control for cash or other assets are classified outside of permanent equity at redeemable value which approximates fair value. The redeemable noncontrolling interests are adjusted to their fair value at each balance sheet date. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in-capital. | ||||||||||||||||||||
Goodwill and Intangible Assets | ||||||||||||||||||||
The Company records as goodwill the excess of purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended December 31, 2014 and 2013 was $0.6 million and $5.9 million, respectively. Amortization expense for the six months ended December 31, 2014 and 2013 was $1.3 million and $6.7 million, respectively. Future amortization of intangible assets is $1.4 million, $2.5 million, $1.9 million, $1.9 million and $1.9 million in the fiscal years ending June 30, 2015 through June 30, 2019, respectively, and $12.9 million thereafter. As of December 31, 2014 and June 30, 2014, goodwill balances were $67.2 million and $58.1 million, respectively. | ||||||||||||||||||||
The Company reviews its recorded finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. | ||||||||||||||||||||
ASC 350 prescribes a two-step process for impairment testing of goodwill and intangibles with indefinite lives, which is performed annually, as well as when an event triggering impairment may have occurred. ASC 350 also allows preparers to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo Step 1 of their annual goodwill impairment process. This qualitative screening process will hereinafter be referred to as “Step 0”. Goodwill and intangible assets deemed to have an indefinite life are tested for impairment on an annual basis, or earlier when events or changes in circumstances suggest the carrying amount may not be fully recoverable. The Company has elected to perform its annual assessment on May 31st. | ||||||||||||||||||||
On July 31, 2014, the Company acquired a 51% majority interest in LearnBop Inc. (“LearnBop”), for $6.5 million in cash (see Note 11). The purchase price allocation for the acquisition is preliminary; however, the Company does not expect the final purchase price allocation of LearnBop Inc. to be materially different. | ||||||||||||||||||||
The following table represents goodwill movements during the six months ended December 31, 2014: | ||||||||||||||||||||
Rollforward of Goodwill | Amount | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Balance as of June 30, 2014 | $ | 58.1 | ||||||||||||||||||
Acquisition of LearnBop, Inc. | 9.0 | |||||||||||||||||||
Adjustments due to foreign exchange translations | 0.1 | |||||||||||||||||||
Balance as of December 31, 2014 | $ | 67.2 | ||||||||||||||||||
The following table represents the balance of intangible assets as of December 31, 2014 and June 30, 2014: | ||||||||||||||||||||
Intangible Assets: | ||||||||||||||||||||
December 31, 2014 | June 30, 2014 | |||||||||||||||||||
($ in millions) | Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||
Carrying | Amortization | Carrying | Carrying | Amortization | Carrying | |||||||||||||||
Amount | Value | Amount | Value | |||||||||||||||||
Trade names | $ | 17.5 | $ | (5.1 | ) | $ | 12.4 | $ | 17.5 | $ | (4.6 | ) | $ | 12.9 | ||||||
Customer and distributor relationships | 18.2 | (8.4 | ) | 9.8 | 18.2 | (7.7 | ) | 10.5 | ||||||||||||
Developed technology | 1.2 | (1.2 | ) | — | 1.2 | (1.2 | ) | — | ||||||||||||
Other | 0.5 | (0.2 | ) | 0.3 | 0.5 | (0.2 | ) | 0.3 | ||||||||||||
$ | 37.4 | $ | (14.9 | ) | $ | 22.5 | $ | 37.4 | $ | (13.7 | ) | $ | 23.7 | |||||||
As of December 31, 2013 the Company determined that based on the rebranding of the Institutional business, the Company fully amortized certain trade names that were no longer going to be used and recorded a $5.2 million impairment charge for the three and six months ended December 31, 2013. There were no such impairment charges for the three and six months ended December 31, 2014. | ||||||||||||||||||||
Impairment of Long-Lived Assets | ||||||||||||||||||||
Long-lived assets include property, equipment, capitalized curriculum and software developed or obtained for internal use. In accordance with ASC 360, Property, Plant and Equipment, management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. | ||||||||||||||||||||
If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. There were no such impairment charges for the three and six months ended December 31, 2014 and 2013. | ||||||||||||||||||||
Fair Value Measurements | ||||||||||||||||||||
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. | ||||||||||||||||||||
ASC 820 describes three levels of inputs that may be used to measure fair value: | ||||||||||||||||||||
Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. | ||||||||||||||||||||
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. | ||||||||||||||||||||
Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instruments valuation. | ||||||||||||||||||||
The carrying values reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, receivables and short and long term debt approximate their fair values. | ||||||||||||||||||||
The redeemable noncontrolling interest is a result of the Company’s joint venture with Middlebury College to form Middlebury Interactive Languages (“MIL”) and the Company’s acquisition of LearnBop, Inc. Under the agreement, Middlebury College has an irrevocable election to sell all (but not less than all) of its membership interest to the Company (put right). As part of the acquisition agreement, LearnBop, Inc, has an irrevocable election to sell all (but not less than all) of its ownership interest to the Company (put right). The fair value of the redeemable noncontrolling interests reflects management’s best estimate of the redemption value of the put rights. | ||||||||||||||||||||
The following table summarizes certain fair value information at December 31, 2014 for assets and liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||
in Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Input | Inputs | ||||||||||||||||||
Description | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Redeemable Noncontrolling Interest in LearnBop, Inc. | $ | 3,000 | $ | — | $ | — | $ | 3,000 | ||||||||||||
Total | $ | 19,801 | $ | — | $ | — | $ | 19,801 | ||||||||||||
The following table summarizes certain fair value information at June 30, 2014 for assets and liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||
in Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Input | Inputs | ||||||||||||||||||
Description | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Total | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
The following table summarizes the activity during the six months ended December 31, 2014 for assets and liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||
Six Months Ended December 31, 2014 | ||||||||||||||||||||
Purchases, | Fair Value | |||||||||||||||||||
Fair Value | Issuances, | Unrealized | December 31, | |||||||||||||||||
Description | June 30, 2014 | and Settlements | Gains/(Losses) | 2014 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Redeemable Noncontrolling Interest in LearnBop, Inc. | — | 3,000 | — | 3,000 | ||||||||||||||||
Total | $ | 16,801 | $ | 3,000 | $ | — | $ | 19,801 | ||||||||||||
The fair values of the redeemable noncontrolling interests in the Middlebury Joint Venture and LearnBop, Inc. were measured in accordance with ASC 480-10-S99, Accounting for Redeemable Equity Instruments. The fair value of the Middlebury Joint Venture was based upon a valuation from a third-party valuation firm as of June 30, 2014. As of December 31, 2014, the Company performed an internal analysis and determined there was no underlying change in the estimated fair market value for both Middlebury and LearnBop, Inc. This analysis incorporated a number of assumptions and estimates including the financial results of the joint venture to date. | ||||||||||||||||||||
Net Income (Loss) Per Common Share | ||||||||||||||||||||
The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share. Under ASC 260, basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock awards. Diluted net income (loss) per share (“EPS”) reflect the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options. The dilutive effect of stock options and restricted stock awards was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options and restricted stock awards, the amount of compensation cost for future service not yet recognized by the Company and the amount of tax benefits that would be recorded in additional paid-in capital when the stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company’s common stock. Stock options and restricted stock awards are not included in the computation of diluted net income (loss) per share when they are antidilutive. Common stock outstanding reflected in the Company’s condensed consolidated balance sheets include restricted stock awards outstanding. Securities that may participate in undistributed net income with common stock are considered participating securities. | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
Basic and dilutive income (loss) per share: | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
(In thousands except shares and | (In thousands except shares and | |||||||||||||||||||
per share data) | per share data) | |||||||||||||||||||
Net income (loss) attributable to common stockholders, including Series A stockholders | $ | 12,331 | $ | (3,665 | ) | $ | 5,557 | $ | (8,705 | ) | ||||||||||
Weighted average common shares — basic | 37,096,480 | 39,977,228 | 37,396,081 | 38,953,671 | ||||||||||||||||
Weighted average common shares — diluted | 37,160,829 | 39,977,228 | 37,599,930 | 38,953,671 | ||||||||||||||||
Basic net income (loss) per share | $ | 0.33 | $ | (0.09 | ) | $ | 0.15 | $ | (0.22 | ) | ||||||||||
Diluted net income (loss) per share | $ | 0.33 | $ | (0.09 | ) | $ | 0.15 | $ | (0.22 | ) | ||||||||||
For the three months ended December 31, 2014 and December 31, 2013, the dilutive shares totaled 64,349 and zero, respectively. For the six months ended December 31, 2014 and December 31, 2013, the dilutive shares totaled 203,849 and zero, respectively. At December 31, 2014, the Company had 41,841,573 shares issued and 38,338,975 outstanding. | ||||||||||||||||||||
The basic and diluted weighted average common shares were the same for the three and six months ended December 31, 2013 as the inclusion of dilutive securities and Series A special stock prior to the conversion date would have been anti-dilutive. | ||||||||||||||||||||
Recent Accounting Pronouncements | ||||||||||||||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes most existing revenue recognition guidance under US GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2017. | ||||||||||||||||||||
Income_Taxes
Income Taxes | 6 Months Ended |
Dec. 31, 2014 | |
Income Taxes | |
Income Taxes | 4.Income Taxes |
The benefit (expense) for income taxes is based on income (loss) reported in the condensed consolidated financial statements. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversal of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Deferred income tax expense or benefit is measured by the change in the deferred income tax asset or liability during the period. For the three months ended December 31, 2014 and 2013, the Company’s effective income tax rate was 42.0% and 52.4%, respectively. For the six months ended December 31, 2014 and 2013, the Company’s effective income tax rate was a 28.3% and 46.5% respectively. The effective income tax rate differs from the statutory federal income tax rate primarily due to the effects of foreign operations, state taxes, non-controlling interests, prior year favorable adjustments related to tax elections on the sale of certain businesses in June 2014 and current year permanent differences between book and tax treatment. | |
Longterm_Obligations
Long-term Obligations | 6 Months Ended | ||||
Dec. 31, 2014 | |||||
Long-term Obligations | |||||
Long-term Obligations | 5.Long-term Obligations | ||||
Capital Leases | |||||
The Company incurs capital lease obligations for student computers under a lease line of credit with PNC Equipment Finance, LLC with annual borrowing limits. The Company had annual borrowing availability under the lease line of credit of $35.0 million as of December 31, 2014 and June 30, 2014, respectively. As of December 31, 2014 and June 30, 2014, the aggregate outstanding balance under the lease line of credit, including balances from prior years, was $32.4 million and $36.9 million, respectively, with lease interest rates ranging from 2.49% to 3.08%. Individual leases under the lease line of credit include 36-month payment terms with a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to secure the outstanding leases. The lease line of credit was subject to cross default compliance provisions in the Company’s line of credit agreement with PNC Bank, N.A. (see Note 6). The net carrying value of leased student computers as of December 31, 2014 and June 30, 2014 was $23.8 million and $20.9 million, respectively. | |||||
In July 2014, the Company extended its leasing agreement with an annual borrowing limit of $35 million for fiscal year 2015. This availability expires in July 2015 and interest rates on the new borrowings are based upon an initial rate of 2.34% modified by changes in the three year interest rate swaps rate as published in the Federal Reserve Statistical Release H.15, “Selected Interest Rates,” between June 25, 2014 and the Lease Commencement Date, as defined in the lease line of credit. | |||||
The following is a summary as of December 31, 2014 of the present value of the net minimum payments due on outstanding capital leases under the Company’s commitments: | |||||
Capital | |||||
As of June 30, | Leases | ||||
($ in thousands) | |||||
2015 | $ | 10,483 | |||
2016 | 14,404 | ||||
2017 | 7,063 | ||||
2018 | 1,312 | ||||
Total minimum payments | 33,262 | ||||
Less amount representing interest (imputed weighted average capital lease interest rate of 2.73%) | (898 | ) | |||
Net minimum payments | 32,364 | ||||
Less current portion | (18,255 | ) | |||
Present value of minimum payments, less current portion | $ | 14,109 | |||
Line_of_Credit
Line of Credit | 6 Months Ended |
Dec. 31, 2014 | |
Line of Credit. | |
Line of Credit | 6.Line of Credit |
The Company had a $35 million unsecured line of credit that expired on December 31, 2013 with PNC Bank, N.A. which was available for general corporate operating purposes. On January 31, 2014, the Company executed a $100 million unsecured line of credit with Bank of America, N.A. to be used for general corporate operating purposes. The line has a five year term and bears interest at the higher of the banks’ Prime Rate, the Federal Funds Rate plus 0.50% or the LIBOR Rate plus 1.00%; plus the applicable rate. The Credit Agreement includes a $10 million letter of credit facility. Issuance of letters of credit reduces the availability of permitted borrowings under the Credit Agreement. The Company had no amounts outstanding on the line of credit and $0.2 million outstanding on the letter of credit facilities during the six month period ended December 31, 2014. | |
The Credit Agreement contains a number of financial and other covenants that, among other things; restrict the Company and its subsidiaries’ ability to incur additional indebtedness, grant liens or other security interests, make certain investments, make specified restricted payments including dividends, dispose of assets or stock including the stock of its subsidiaries, make capital expenditures above specified limits and engage in other matters customarily restricted in senior credit facilities. The agreement incorporates | |
customary financial and other covenants, including but not limited to maximum debt leverage and minimum fixed charge coverage ratios. As of December 31, 2014 and June 30, 2014, the Company was in compliance with these covenants. | |
Equity_Transactions
Equity Transactions | 6 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Equity Transactions | ||||||||||||
Equity Transactions | 7.Equity Transactions | |||||||||||
Stock Options | ||||||||||||
Stock option activity during the six months ended December 31, 2014 was as follows: | ||||||||||||
Weighted- | ||||||||||||
Weighted- | Average | |||||||||||
Average | Remaining | Aggregate | ||||||||||
Exercise | Contractual | Intrinsic | ||||||||||
Shares | Price | Life (Years) | Value | |||||||||
Outstanding, June 30, 2014 | 2,578,401 | $ | 21.44 | 4.57 | $ | 42,754 | ||||||
Granted | 454,485 | 13.97 | ||||||||||
Exercised | (63,214 | ) | 2.55 | |||||||||
Forfeited or canceled | (92,206 | ) | 27.33 | |||||||||
Outstanding, December 31, 2014 | 2,877,466 | $ | 20.49 | 4.79 | $ | 79 | ||||||
Stock options exercisable at December 31, 2014 | 1,867,447 | $ | 20.48 | 3.64 | $ | 66 | ||||||
The aggregate intrinsic value of options exercised during the six months ended December 31, 2014 was $0.3 million. The weighted-average grant date fair value of options granted during the six months ended December 31, 2014 was $7.20. | ||||||||||||
As of December 31, 2014, there was $7.1 million of total unrecognized compensation expense related to unvested stock options granted. The cost is expected to be recognized over a weighted average period of 2.7 years. During the three and six months ended December 31, 2013 the Company recorded additional stock-based compensation of $1.5 million associated with the accelerated vesting of option awards to its former Chief Executive Officer and other employees upon termination of employment. During the three months ended December 31, 2014 and December 31, 2013, the Company recognized $0.9 million and $2.7 million, respectively, of stock-based compensation expense related to stock options. During the six months ended December 31, 2014 and 2013, the Company recognized $2.0 million and $3.7 million, respectively, of stock-based compensation expense related to stock options. | ||||||||||||
Restricted Stock Awards | ||||||||||||
Restricted stock award activity during the six months ended December 31, 2014 was as follows: | ||||||||||||
Weighted- | ||||||||||||
Average | ||||||||||||
Shares | Fair Value | |||||||||||
Outstanding, June 30, 2014 | 979,595 | $ | 22.97 | |||||||||
Granted | 745,775 | 18.14 | ||||||||||
Vested | (235,600 | ) | 25.88 | |||||||||
Forfeited or canceled | (28,151 | ) | 23.15 | |||||||||
Outstanding, December 31, 2014 | 1,461,619 | $ | 23.31 | |||||||||
As of December 31, 2014, there was $22.0 million of total unrecognized compensation expense related to unvested restricted stock awards granted. The cost is expected to be recognized over a weighted average period of 2.0 years. The total fair value of shares vested during the six months ended December 31, 2014 was $4.2 million. During the three and six months ended December 31, 2013 the Company recorded additional stock-based compensation of $2.5 million associated with the accelerated vesting of equity awards to its former Chief Executive Officer and other employees upon termination of employment. | ||||||||||||
During the three months ended December 31, 2014 and December 31, 2013, the Company recognized $3.8 million and $5.8 million, respectively, of stock-based compensation expense related to restricted stock awards. During the six months ended December 31, 2014 and 2013, the Company recognized $6.9 million and $8.5 million, respectively, of stock-based compensation expense related to restricted stock awards. | ||||||||||||
Related_Party_Transactions
Related Party Transactions | 6 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions | |
Related Party Transactions | 8.Related Party Transactions |
During the six months ended December 31, 2013, in accordance with the original terms of the joint venture agreement, the Company loaned $1.0 million to its 60% owned joint venture, MIL. At December 31, 2014 and June 30, 2014, the loan totaled $4.0 million and was repayable under terms and conditions specified in the loan agreement. The loan balance and related interest are eliminated since MIL is consolidated in the Company’s financial statements; however, repayment of the loan is dependent on the continued liquidity of MIL. | |
On September 11, 2013, the Company issued a mortgage note (“Mortgage”) lending $2.1 million to a managed school partner. The note bears interest at a fixed rate of 5.25% per year and has a term of five years. Monthly principal and interest payments began in October 2013 with a final balloon payment of $1.8 million at the term of the loan. The Mortgage is primarily secured by the underlying property. | |
Commitments_and_Contingencies
Commitments and Contingencies | 6 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 9.Commitments and Contingencies |
Litigation | |
In the ordinary conduct of business, the Company is subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company expenses legal costs as incurred. | |
IpLearn | |
On October 26, 2011, IpLearn, LLC (“IpLearn”) filed a complaint for patent infringement against the Company in the United States District Court for the District of Delaware, IpLearn, LLC v. K12 Inc., Case No. 1:11-1026-RGA, which it subsequently amended on November 18, 2011. IpLearn is a privately-held technology development and licensing company for web and computer-based learning technologies. On December 17, 2014, the Court granted the Company’s motion for summary judgment on the basis that the asserted patent was invalid. On January 16, 2015, the Court approved a Stipulation of Dismissal whereby all counts in IpLearn’s amended complaint have been dismissed with prejudice and the appeal period was concluded. | |
Oklahoma Firefighters Complaint | |
On January 30, 2014, a securities class-action lawsuit captioned Oklahoma Firefighters Pension & Retirement System v. K12 Inc., et al., was filed against the Company, four of its officers and directors, and a former officer, in the United States District Court for the Eastern District of Virginia, In re K12 Inc. Securities Litigation, Case No. 1:14-CV-108-AJT-JFA. On June 24, 2014 the Court appointed the Oklahoma Firefighters Pension and Retirement System as lead plaintiff, and on May 23, 2014 the lead plaintiff filed an amended class action complaint (“Amended Complaint”). On November 5, 2014, the Court granted the Company’s motion to dismiss the Amended Complaint and the deadline for the plaintiff to appeal the Court’s decision has expired. | |
Investments
Investments | 6 Months Ended |
Dec. 31, 2014 | |
Investments | |
Investments | 10.Investments |
Investment in Web International Education Group, Ltd. | |
In January 2011, the Company invested $10.0 million to obtain a 20% minority interest in Web International Group, Ltd. (“Web”), a provider of English language learning centers in cities throughout China. From January 2011 through May 2013, the Company recorded its investment in Web as an available for sale debt security because of the ability to put the investment to other Web shareholders in return for the original $10.0 million investment plus interest. The Company’s option to purchase no less than 51% of Web expired on March 31, 2013 and on May 6, 2013, the Company exercised its right to put its investment back to Web for return of its original $10.0 million investment plus interest of 8%, which Web was contractually required to pay by May 31, 2014, as amended. The Company reclassified this $10.0 million investment plus accrued interest of $3.2 million to a receivable, which is included in other current assets. The receivable is due and continues to accrue interest while Web works to administratively process the payment. During the three months ended December 31, 2014 and 2013, the Company recorded interest income of $0.2 million and $0.2 million, respectively, associated with Web. During the six months ended December 31, 2014 and 2013, the Company recorded interest income of $0.4 million and $0.4 million, respectively. | |
Investment in School Mortgage | |
On September 11, 2013, the Company issued a mortgage note (“Mortgage”) lending $2.1 million to a managed school partner. The note bears interest at a fixed rate of 5.25% per year and has a term of five years. Monthly principal and interest payments will be made beginning October 2013 with a final balloon payment of $1.8 million at the term of the loan. The Mortgage is primarily secured by the underlying property. | |
The Mortgage and ancillary documents include customary affirmative and financial covenants for secured transactions of this type. The Company has recorded this as a held to maturity investment and the current amounts are included in other current assets while the non-current amounts are included in deposits and other assets on the condensed consolidated balance sheets. | |
In January 2015, a Delaware judge’s ruling affirmed that the school’s charter would be revoked effective June 30, 2015. Therefore, the Company anticipates the school closing unless there is a change in current circumstances. The Company will exercise its rights under the existing arrangement. | |
Redeemable_Noncontrolling_Inte
Redeemable Noncontrolling Interest | 6 Months Ended | ||||
Dec. 31, 2014 | |||||
Redeemable Noncontrolling Interest | |||||
Redeemable Noncontrolling Interest | 11.Redeemable Noncontrolling Interest | ||||
Investment in LearnBop Inc. | |||||
On July 31, 2014, the Company acquired a majority interest in LearnBop Inc. (“LearnBop”), for $6.5 million in cash in return for a 51% interest in LearnBop. The purpose of the acquisition is to complement the Company’s K-12 math curriculum as LearnBop has developed an adaptive math curriculum learning software. As part of this transaction, the non-controlling shareholders have a non-transferable put option, which is exercisable between July 31, 2018 and December 31, 2018 for the remaining minority interest. The price of the put option will be determined based on the trailing twelve month revenue and contribution margin as defined in the Stockholders’ Agreement between the Company and LearnBop. Additionally, the Company has a non-transferable call option for the remaining minority interest at a price of $3.0 million, which becomes exercisable January 1, 2019 or thereafter. Acquisition costs incurred by the Company related to this transaction included in selling, administrative and other operating expenses were $0.1 million. | |||||
The purchase price of $6.5 million was preliminarily allocated to the underlying assets and liabilities based on their estimated fair value at the date of acquisition. The Company is still evaluating the fair value of assets acquired and liabilities assumed, and the Company expects to finalize these amounts in a subsequent period. The Company preliminarily recorded goodwill of $9.0 million, which will be non-deductible for tax purposes. Recognition of goodwill is largely attributed to the value paid for LearnBop’s capabilities in providing adaptive learning software for math curriculum to K-12 students. The Company has not disclosed current period or pro-forma revenue and earnings attributable to LearnBop as they are immaterial. | |||||
The following table represents the preliminary purchase price allocation for LearnBop in millions: | |||||
As of July 31, 2014 | Amount | ||||
Current assets | $ | 0.2 | |||
Property and equipment, net | 0.4 | ||||
Goodwill | 9 | ||||
Current liabilities | (0.1 | ) | |||
Redeemable noncontrolling interest | (3.0 | ) | |||
Fair value of total consideration transferred | $ | 6.5 | |||
Middlebury College Joint Venture | |||||
In April 2010, a subsidiary of the Company entered into an agreement to establish a venture with Middlebury College (Middlebury) to form a new entity named Middlebury Interactive Languages LLC (MIL) effective May 2010. The Company’s investment into this venture consisted of $4.0 million in cash and contributed assets, including substantially all of its foreign languages subsidiary, in return for a 60% ownership interest. Middlebury’s investment in the venture consisted of $4.0 million in cash, $0.6 million in assumed liabilities and contributed assets, including a license to use its trademark and a foreign language instruction summer camps business, in return for a 40% ownership interest. The purpose of the venture is to create and distribute innovative, high-quality online language courses under the trademark Middlebury and other marks. Transaction expenses incurred by the Company related to this transaction included in selling, administrative and other operating expenses were $0.2 million. | |||||
At any time after the fifth (5th) anniversary of the agreement, Middlebury may give written notice of its irrevocable election to sell all (but not less than all) of its Membership Interest to the Company (put right). The purchase price for Middlebury’s Membership Interest shall be its fair market value and the Company may, in its sole discretion, pay the purchase price in cash or shares of the Company’s common stock. At June 30, 2014, MIL had not met certain milestones associated with its Language Academy summer camp programs. As such, Middlebury may exercise its option to either repurchase the camp programs at fair market value along with other contractual rights. Middlebury has neither exercised nor expressed an intent to exercise the option. | |||||
Given the provision of the put rights, the redeemable noncontrolling interests are redeemable outside of the Company’s control and are recorded outside of permanent equity at their redemption value fair value in accordance with ASC 480-10-S99, Accounting for Redeemable Equity Instruments. The Company will adjust the redeemable noncontrolling interests to redemption value on each balance sheet date with changes in redemption values recognized as an adjustment to retained earnings, or in the absence of retained earnings, by adjustment to additional paid-in-capital. | |||||
Supplemental_Disclosure_of_Cas
Supplemental Disclosure of Cash Flow Information | 6 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Supplemental Disclosure of Cash Flow Information | ||||||||
Supplemental Disclosure of Cash Flow Information | 12.Supplemental Disclosure of Cash Flow Information | |||||||
Six Months Ended | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
(In thousands) | ||||||||
Cash paid for interest | $ | 428 | $ | 569 | ||||
Cash paid for taxes, net of refunds | $ | 8,188 | $ | 2,747 | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
New capital lease obligations | $ | 6,912 | $ | 17,290 | ||||
Supplemental disclosure of non-cash investing activities: | ||||||||
Business Combinations: | ||||||||
— Current assets | $ | 27 | $ | — | ||||
— Property and equipment | $ | 350 | $ | — | ||||
— Intangible assets | $ | 27 | $ | — | ||||
— Goodwill | $ | 8,982 | $ | — | ||||
— Assumed liabilities | $ | (50 | ) | $ | — | |||
— Deferred revenue | $ | (23 | ) | $ | — | |||
Common_Stock_Repurchases
Common Stock Repurchases | 6 Months Ended |
Dec. 31, 2014 | |
Common Stock Repurchases | |
Common Stock Repurchases | 13.Common Stock Repurchases |
On November 4, 2013, the Board of Directors authorized the repurchase of up to $75 million of the Company’s outstanding common stock over a two year period. The stock purchases under the buyback were dependent upon business and market conditions and other factors. The stock purchases were made from time to time and may be made through a variety of methods including open market purchases and in accordance with the SEC’s Rule 10b5-1. For the six months ended December 31, 2014, the Company paid approximately $26.5 million for the repurchase of 1,307,402 shares, at an average cost of $20.21 per share. As of December 31, 2014 total shares purchased under the plan were 3,502,598, at an average cost of $21.41 per share, and there were no shares remaining to be repurchased under the plan. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 6 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
Summary of Significant Accounting Policies | ||||||||||||||||||||
Revenue Recognition | Revenue Recognition | |||||||||||||||||||
Revenues are principally earned from long-term contractual agreements to provide online curriculum, books, materials, computers and management services to virtual and blended public schools, traditional schools, school districts, public charter schools, and private schools. In addition to providing the curriculum, books and materials, under most contracts, the Company manages virtual and blended public schools, including monitoring academic achievement, teacher hiring and training, compensation of school personnel, financial management, enrollment processing and procurement of curriculum, equipment and required services. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenues. | ||||||||||||||||||||
Where the Company has determined that it is the primary obligor for substantially all expenses under these contracts, the Company records the associated per student revenue received by the school from its state funding school district up to the expenses incurred in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition. As a result of being the primary obligor, amounts recorded as revenues and school operating expenses for the three months ended December 31, 2014 and 2013 were $84.1 million and $67.3 million, respectively, and for the six months ended December 31, 2014 and 2013 were $152.8 million and $119.5 million, respectively. For contracts where the Company is not the primary obligor, the Company records revenue based on its net fees earned under the contractual agreement. | ||||||||||||||||||||
The Company generates revenues under turnkey management contracts with virtual and blended public schools which include multiple elements. These elements include providing each of a school’s students with access to the Company’s online school and the component of lessons; offline learning kits, which include books and materials to supplement the online lessons; the use of a personal computer and associated reclamation services; internet access and technology support services; the services of a state-certified teacher, where required; and management and technology services necessary to operate a virtual public or blended school. In certain managed school contracts, revenue is determined directly by per enrollment funding. | ||||||||||||||||||||
The Company has determined that the elements of its contracts are valuable to schools in combination, but do not have standalone value. As a result, the elements within the Company’s multiple-element contracts do not qualify as separate units of accounting. Accordingly, the Company accounts for revenues under multiple element arrangements as a single unit of accounting and recognizes the entire arrangement based upon the approximate rate at which it incurs the costs associated with each element. Revenue from certain managed schools is recognized ratably over the period services are performed. | ||||||||||||||||||||
To determine the pro rata amount of revenues to recognize in a fiscal quarter, management estimates the total funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels which are generally published on an annual basis by the state or school district. Management reviews its estimates of funding periodically, and revise as necessary, amortizing any adjustments to earned revenues over the remaining portion of the fiscal year. Actual school funding may vary from these estimates and the impact of these differences could impact the Company’s results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, the Company is generally able to base its annual revenues on actual school funding. The Company’s schools reported results are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results of these audits are incorporated into the Company’s monthly funding estimates and for the reported quarters and six months ended December 31, 2014 and 2013. | ||||||||||||||||||||
Under the contracts where the Company provides turnkey management services to schools, the Company has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school as reflected on its respective financial statements, including Company charges to the schools. To the extent a school does not receive funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenue and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school operating loss may reduce the Company’s ability to collect its management fees in full and recognized revenues are reduced accordingly to reflect the expected cash collections from such schools. The Company amortizes the estimated school operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. | ||||||||||||||||||||
For turnkey revenue service contracts, a school operating loss may reduce the Company’s ability to collect its management fees in full though as noted it does not necessarily mean that the Company incurs a loss during the period with respect to its services to that school. The Company recognizes revenue, net of its estimated portion of school operating losses, to reflect the expected cash collections from such schools. Revenue is recognized based on the Company’s performance of services under the contract, which it believes is proportionate to its incurrence of costs. The Company incurs costs directly related to the delivery of services. Most of these costs are recognized throughout the year; however, certain costs related to upfront delivery of printed materials, workbooks, laboratory materials and other items are provided at the beginning of the school year and are recognized as expense when shipped. | ||||||||||||||||||||
Each state or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company builds the funding estimates for each school, it is mindful of the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, average daily attendance, special needs enrollment, student demographics, academic progress and historical completion, student location, funding caps and other state specified categorical program funding. The estimates the Company makes each period on a school-by-school basis considers the latest information available to it and considers material relevant information at the time of the estimate. | ||||||||||||||||||||
Management periodically reviews its estimates of full-year school revenues and operating expenses and amortizes the net impact of any changes to these estimates over the remainder of the fiscal year. Actual school operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, annual revenues are generally based on actual school revenues and actual costs incurred (including costs for the Company’s services to the schools plus other costs the schools may incur) in the calculation of school operating losses. For the three months ended December 31, 2014 and 2013, the Company’s revenue included a reduction for these school operating losses of $15.1 million and $11.9 million, respectively, and for the six months ended December 31, 2014 and 2013, were $32.7 million and $25.7 million, respectively. | ||||||||||||||||||||
The Company provides certain online curriculum and services to schools and school districts under subscription and perpetual license agreements. Revenue under these agreements is recognized in accordance with the ASC 605 when all of the following conditions are met: there is persuasive evidence of an arrangement; delivery has occurred or services have been rendered; the amount of fees to be paid by the customer is fixed and determinable; and the collectability of the fee is probable. Revenue from the licensing of curriculum under subscription arrangements is recognized on a ratable basis over the subscription period. Revenue from the licensing of curriculum under non-cancelable perpetual arrangements is recognized when all revenue recognition criteria have been met. Revenue from professional consulting, training and support services are deferred and recognized ratably over the service period. | ||||||||||||||||||||
Other revenues are generated from individual customers who prepay and have access for one to two years to company-provided online curriculum. The Company recognizes these revenues pro rata over the maximum term of the customer contract. | ||||||||||||||||||||
Revenues from associated offline learning kits are recognized upon shipment. | ||||||||||||||||||||
During the three months ended December 31, 2014 and 2013, the Company had a contract with the Agora Cyber Charter School (“Agora”) that represented approximately 14% and 13% of revenue, respectively. During the six months ended December 31, 2014 and 2013, the Company had a contract with the Agora Cyber Charter School (“Agora”) that represented approximately 13% and 12% of revenue, respectively. Approximately 6% of accounts receivable was attributable to a contract with Agora as of December 31, 2014 and June 30, 2014, respectively. | ||||||||||||||||||||
In late fiscal year 2014, Agora commenced a request for proposal process for the services and products required to operate the school after the 2014-15 school year in connection with its charter renewal application. Agora had previously announced that it would absorb its general administrative services and certain human resources functions as well as name vendors for select services which are currently provided by the Company. On October 9, 2014, the Company entered into a three year contract with Agora for a reduced scope of services that will include providing the academic curriculum to Agora beginning in the 2015-16 school year. | ||||||||||||||||||||
Consolidation | Consolidation | |||||||||||||||||||
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned and affiliated companies that the Company owns, directly or indirectly, and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. | ||||||||||||||||||||
Inventories | Inventories | |||||||||||||||||||
Inventories consist primarily of textbooks and curriculum materials, a majority of which are supplied to virtual public schools and blended public schools and utilized directly by students. Inventories represent items that are purchased and held for sale and are recorded at the lower of cost (first-in, first-out method) or market value. Excess and obsolete inventory reserves are established based upon the evaluation of the quantity on hand relative to demand. During the three and six months ended December 31, 2013, the Company increased the provision for excess and obsolete inventory by $6.1 million primarily related to the decision to discontinue certain products and excess inventory relative to anticipated demand. The excess and obsolete inventory reserve was $6.0 million and $9.0 million at December 31, 2014 and June 30, 2014, respectively. | ||||||||||||||||||||
Other Current Assets | Other Current Assets | |||||||||||||||||||
Other current assets consist primarily of textbooks, curriculum materials and other supplies which are expected to be returned upon the completion of the school year. Materials not returned are expensed as part of instructional costs and services. | ||||||||||||||||||||
Property and Equipment | Property and Equipment | |||||||||||||||||||
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is calculated using the straight-line method over the estimated useful life of the asset (or the lesser of the term of the lease and the estimated useful life of the asset under capital lease). Amortization of assets capitalized under capital lease arrangements is included in depreciation expense. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the asset. The Company determines the lease term in accordance with ASC 840, Leases, as the fixed non-cancelable term of the lease plus all periods for which failure to renew the lease imposes a penalty on the lessee in an amount such that renewal appears, at the inception of the lease, to be reasonably assured. Depreciation expense for the three and six months ended December 31, 2014 and 2013 was $7.2 million and $14.4 million, respectively, and $14.6 million and $23.4 million, respectively. | ||||||||||||||||||||
Property and equipment are depreciated over the following useful lives: | ||||||||||||||||||||
Useful Life | ||||||||||||||||||||
Student computers and tablets | 3 years | |||||||||||||||||||
Computer hardware | 3 years | |||||||||||||||||||
Computer software | 3-5 years | |||||||||||||||||||
Web site development costs | 3 years | |||||||||||||||||||
Office equipment | 5 years | |||||||||||||||||||
Furniture and fixtures | 7 years | |||||||||||||||||||
Leasehold improvements | 3-12 years | |||||||||||||||||||
During the three and six months ended December 31, 2013, the Company updated the estimate of unreturned computers based on an analysis of recent trends of returns and utilization rates, as well as information obtained from the student computer processing systems. As a result, the Company recorded accelerated depreciation of $6.3 million for computers that were estimated would not be returned by the Company’s students. During the three and six months ended December 31, 2014, the Company recorded $1.4 million and $2.7 million in accelerated depreciation, respectively, related to the estimate. | ||||||||||||||||||||
Capitalized Software | Capitalized Software Costs | |||||||||||||||||||
The Company develops software for internal use. Software development costs incurred during the application development stage are capitalized in accordance with ASC 350, Intangibles — Goodwill and Other. The Company amortizes these costs over the estimated useful life of the software, which is generally three years. Capitalized software development costs are stated at cost less accumulated amortization. | ||||||||||||||||||||
Capitalized software development additions totaled $17.1 million and $10.6 million for the six months ended December 31, 2014 and 2013, respectively. During the three and six months ended December 31, 2013, the Company wrote down approximately $3.8 million of capitalized software projects after determining the assets either had no future use or were being sunset. During the three and six months ended December 31, 2014, there were no such write-downs of capitalized software projects. | ||||||||||||||||||||
Amortization expense for the three months ended December 31, 2014 and 2013 was $5.3 million and $7.9 million, respectively. Amortization expense for the six months ended December 31, 2014 and 2013 was $10.1 million and $11.1 million, respectively. Amortization expense for the three and six months ended December 31, 2013 included the write down. | ||||||||||||||||||||
Capitalized Curriculum Development Costs | Capitalized Curriculum Development Costs | |||||||||||||||||||
The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content. | ||||||||||||||||||||
The Company capitalizes curriculum development costs incurred during the application development stage in accordance with ASC 350. The Company capitalizes curriculum development costs during the design and deployment phases of the project. Many of the Company’s new courses leverage off of proven delivery platforms and are primarily content, which has no technological hurdles. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs will be amortized is generally five years. | ||||||||||||||||||||
Total capitalized curriculum development additions were $7.3 million and $7.6 million for the six months ended December 31, 2014 and 2013, respectively. These amounts are recorded on the accompanying condensed consolidated balance sheets net of amortization charges. In addition, for the three and six months ended December 31, 2013 the Company wrote down approximately $2.2 million of capitalized curriculum cost due to its decision to discontinue certain curriculum. Amortization is recorded in product development expenses on the accompanying condensed consolidated statements of operations. Amortization expense for the three months ended December 31, 2014 and 2013 was $4.5 million and $6.4 million, respectively. Amortization expense for the six months ended December 31, 2014 and 2013 was $8.5 million and $10.3 million, respectively. Amortization expense for the three and six months ended December 31, 2013 included the write down. During the three and six months ended December 31, 2014, there were no such write-downs of capitalized software projects. | ||||||||||||||||||||
Income Taxes | Income Taxes | |||||||||||||||||||
The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. | ||||||||||||||||||||
Series A Special Stock | Series A Special Stock | |||||||||||||||||||
The Company issued 2,750,000 shares of Series A Special stock in July 2010 in connection with an acquisition. The holders of the Series A Special stock had the right to convert those shares into common stock on a one-for-one basis and the right to vote on all matters presented to K12 stockholders, other than for the election and removal of directors, for which holders of the Series A Special stock had no voting rights. These shares were converted into common stock on September 3, 2013 and no Series A Special stock remains outstanding as of December 31, 2014 and 2013. | ||||||||||||||||||||
Noncontrolling Interest | Noncontrolling Interest | |||||||||||||||||||
Earnings or losses attributable to other stockholders of a consolidated affiliated company are classified separately as “noncontrolling interest” in the Company’s condensed consolidated statements of operations. Net loss attributable to noncontrolling interest reflects only its share of the after-tax earnings or losses of an affiliated company. Income taxes attributable to noncontrolling interest are determined using the applicable statutory tax rates in the jurisdictions where such operations are conducted. These rates vary from country to country. The Company’s condensed consolidated balance sheets reflect noncontrolling interests within the equity section of the condensed consolidated balance sheet, except for redeemable noncontrolling interests. Noncontrolling interest was classified separately in the Company’s condensed consolidated statements of stockholders’ equity. Except for the redeemable non-controlling interests, the businesses with non-controlling interests were sold during fiscal 2014, and therefore the Company no longer has these non-controlling interests after the sale date. | ||||||||||||||||||||
Redeemable Noncontrolling Interests | Redeemable Noncontrolling Interests | |||||||||||||||||||
Noncontrolling interests in subsidiaries that are redeemable outside of the Company’s control for cash or other assets are classified outside of permanent equity at redeemable value which approximates fair value. The redeemable noncontrolling interests are adjusted to their fair value at each balance sheet date. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in-capital. | ||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets | |||||||||||||||||||
The Company records as goodwill the excess of purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended December 31, 2014 and 2013 was $0.6 million and $5.9 million, respectively. Amortization expense for the six months ended December 31, 2014 and 2013 was $1.3 million and $6.7 million, respectively. Future amortization of intangible assets is $1.4 million, $2.5 million, $1.9 million, $1.9 million and $1.9 million in the fiscal years ending June 30, 2015 through June 30, 2019, respectively, and $12.9 million thereafter. As of December 31, 2014 and June 30, 2014, goodwill balances were $67.2 million and $58.1 million, respectively. | ||||||||||||||||||||
The Company reviews its recorded finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. | ||||||||||||||||||||
ASC 350 prescribes a two-step process for impairment testing of goodwill and intangibles with indefinite lives, which is performed annually, as well as when an event triggering impairment may have occurred. ASC 350 also allows preparers to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo Step 1 of their annual goodwill impairment process. This qualitative screening process will hereinafter be referred to as “Step 0”. Goodwill and intangible assets deemed to have an indefinite life are tested for impairment on an annual basis, or earlier when events or changes in circumstances suggest the carrying amount may not be fully recoverable. The Company has elected to perform its annual assessment on May 31st. | ||||||||||||||||||||
On July 31, 2014, the Company acquired a 51% majority interest in LearnBop Inc. (“LearnBop”), for $6.5 million in cash (see Note 11). The purchase price allocation for the acquisition is preliminary; however, the Company does not expect the final purchase price allocation of LearnBop Inc. to be materially different. | ||||||||||||||||||||
The following table represents goodwill movements during the six months ended December 31, 2014: | ||||||||||||||||||||
Rollforward of Goodwill | Amount | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Balance as of June 30, 2014 | $ | 58.1 | ||||||||||||||||||
Acquisition of LearnBop, Inc. | 9.0 | |||||||||||||||||||
Adjustments due to foreign exchange translations | 0.1 | |||||||||||||||||||
Balance as of December 31, 2014 | $ | 67.2 | ||||||||||||||||||
The following table represents the balance of intangible assets as of December 31, 2014 and June 30, 2014: | ||||||||||||||||||||
Intangible Assets: | ||||||||||||||||||||
December 31, 2014 | June 30, 2014 | |||||||||||||||||||
($ in millions) | Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||
Carrying | Amortization | Carrying | Carrying | Amortization | Carrying | |||||||||||||||
Amount | Value | Amount | Value | |||||||||||||||||
Trade names | $ | 17.5 | $ | (5.1 | ) | $ | 12.4 | $ | 17.5 | $ | (4.6 | ) | $ | 12.9 | ||||||
Customer and distributor relationships | 18.2 | (8.4 | ) | 9.8 | 18.2 | (7.7 | ) | 10.5 | ||||||||||||
Developed technology | 1.2 | (1.2 | ) | — | 1.2 | (1.2 | ) | — | ||||||||||||
Other | 0.5 | (0.2 | ) | 0.3 | 0.5 | (0.2 | ) | 0.3 | ||||||||||||
$ | 37.4 | $ | (14.9 | ) | $ | 22.5 | $ | 37.4 | $ | (13.7 | ) | $ | 23.7 | |||||||
As of December 31, 2013 the Company determined that based on the rebranding of the Institutional business, the Company fully amortized certain trade names that were no longer going to be used and recorded a $5.2 million impairment charge for the three and six months ended December 31, 2013. There were no such impairment charges for the three and six months ended December 31, 2014. | ||||||||||||||||||||
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets | |||||||||||||||||||
Long-lived assets include property, equipment, capitalized curriculum and software developed or obtained for internal use. In accordance with ASC 360, Property, Plant and Equipment, management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. | ||||||||||||||||||||
If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. There were no such impairment charges for the three and six months ended December 31, 2014 and 2013. | ||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements | |||||||||||||||||||
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. | ||||||||||||||||||||
ASC 820 describes three levels of inputs that may be used to measure fair value: | ||||||||||||||||||||
Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. | ||||||||||||||||||||
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. | ||||||||||||||||||||
Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instruments valuation. | ||||||||||||||||||||
The carrying values reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, receivables and short and long term debt approximate their fair values. | ||||||||||||||||||||
The redeemable noncontrolling interest is a result of the Company’s joint venture with Middlebury College to form Middlebury Interactive Languages (“MIL”) and the Company’s acquisition of LearnBop, Inc. Under the agreement, Middlebury College has an irrevocable election to sell all (but not less than all) of its membership interest to the Company (put right). As part of the acquisition agreement, LearnBop, Inc, has an irrevocable election to sell all (but not less than all) of its ownership interest to the Company (put right). The fair value of the redeemable noncontrolling interests reflects management’s best estimate of the redemption value of the put rights. | ||||||||||||||||||||
The following table summarizes certain fair value information at December 31, 2014 for assets and liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||
in Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Input | Inputs | ||||||||||||||||||
Description | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Redeemable Noncontrolling Interest in LearnBop, Inc. | $ | 3,000 | $ | — | $ | — | $ | 3,000 | ||||||||||||
Total | $ | 19,801 | $ | — | $ | — | $ | 19,801 | ||||||||||||
The following table summarizes certain fair value information at June 30, 2014 for assets and liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||
in Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Input | Inputs | ||||||||||||||||||
Description | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Total | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
The following table summarizes the activity during the six months ended December 31, 2014 for assets and liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||
Six Months Ended December 31, 2014 | ||||||||||||||||||||
Purchases, | Fair Value | |||||||||||||||||||
Fair Value | Issuances, | Unrealized | December 31, | |||||||||||||||||
Description | June 30, 2014 | and Settlements | Gains/(Losses) | 2014 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Redeemable Noncontrolling Interest in LearnBop, Inc. | — | 3,000 | — | 3,000 | ||||||||||||||||
Total | $ | 16,801 | $ | 3,000 | $ | — | $ | 19,801 | ||||||||||||
The fair values of the redeemable noncontrolling interests in the Middlebury Joint Venture and LearnBop, Inc. were measured in accordance with ASC 480-10-S99, Accounting for Redeemable Equity Instruments. The fair value of the Middlebury Joint Venture was based upon a valuation from a third-party valuation firm as of June 30, 2014. As of December 31, 2014, the Company performed an internal analysis and determined there was no underlying change in the estimated fair market value for both Middlebury and LearnBop, Inc. This analysis incorporated a number of assumptions and estimates including the financial results of the joint venture to date. | ||||||||||||||||||||
Net Income Per Common Share | Net Income (Loss) Per Common Share | |||||||||||||||||||
The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share. Under ASC 260, basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock awards. Diluted net income (loss) per share (“EPS”) reflect the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options. The dilutive effect of stock options and restricted stock awards was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options and restricted stock awards, the amount of compensation cost for future service not yet recognized by the Company and the amount of tax benefits that would be recorded in additional paid-in capital when the stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company’s common stock. Stock options and restricted stock awards are not included in the computation of diluted net income (loss) per share when they are antidilutive. Common stock outstanding reflected in the Company’s condensed consolidated balance sheets include restricted stock awards outstanding. Securities that may participate in undistributed net income with common stock are considered participating securities. | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
Basic and dilutive income (loss) per share: | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
(In thousands except shares and | (In thousands except shares and | |||||||||||||||||||
per share data) | per share data) | |||||||||||||||||||
Net income (loss) attributable to common stockholders, including Series A stockholders | $ | 12,331 | $ | (3,665 | ) | $ | 5,557 | $ | (8,705 | ) | ||||||||||
Weighted average common shares — basic | 37,096,480 | 39,977,228 | 37,396,081 | 38,953,671 | ||||||||||||||||
Weighted average common shares — diluted | 37,160,829 | 39,977,228 | 37,599,930 | 38,953,671 | ||||||||||||||||
Basic net income (loss) per share | $ | 0.33 | $ | (0.09 | ) | $ | 0.15 | $ | (0.22 | ) | ||||||||||
Diluted net income (loss) per share | $ | 0.33 | $ | (0.09 | ) | $ | 0.15 | $ | (0.22 | ) | ||||||||||
For the three months ended December 31, 2014 and December 31, 2013, the dilutive shares totaled 64,349 and zero, respectively. For the six months ended December 31, 2014 and December 31, 2013, the dilutive shares totaled 203,849 and zero, respectively. At December 31, 2014, the Company had 41,841,573 shares issued and 38,338,975 outstanding. | ||||||||||||||||||||
The basic and diluted weighted average common shares were the same for the three and six months ended December 31, 2013 as the inclusion of dilutive securities and Series A special stock prior to the conversion date would have been anti-dilutive. | ||||||||||||||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements | |||||||||||||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes most existing revenue recognition guidance under US GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2017. | ||||||||||||||||||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 6 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
Summary of Significant Accounting Policies | ||||||||||||||||||||
Schedule of useful lives of property and equipment | ||||||||||||||||||||
Useful Life | ||||||||||||||||||||
Student computers and tablets | 3 years | |||||||||||||||||||
Computer hardware | 3 years | |||||||||||||||||||
Computer software | 3-5 years | |||||||||||||||||||
Web site development costs | 3 years | |||||||||||||||||||
Office equipment | 5 years | |||||||||||||||||||
Furniture and fixtures | 7 years | |||||||||||||||||||
Leasehold improvements | 3-12 years | |||||||||||||||||||
Schedule of goodwill activity | ||||||||||||||||||||
Rollforward of Goodwill | Amount | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Balance as of June 30, 2014 | $ | 58.1 | ||||||||||||||||||
Acquisition of LearnBop, Inc. | 9.0 | |||||||||||||||||||
Adjustments due to foreign exchange translations | 0.1 | |||||||||||||||||||
Balance as of December 31, 2014 | $ | 67.2 | ||||||||||||||||||
Schedule of intangible assets | ||||||||||||||||||||
December 31, 2014 | June 30, 2014 | |||||||||||||||||||
($ in millions) | Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||
Carrying | Amortization | Carrying | Carrying | Amortization | Carrying | |||||||||||||||
Amount | Value | Amount | Value | |||||||||||||||||
Trade names | $ | 17.5 | $ | (5.1 | ) | $ | 12.4 | $ | 17.5 | $ | (4.6 | ) | $ | 12.9 | ||||||
Customer and distributor relationships | 18.2 | (8.4 | ) | 9.8 | 18.2 | (7.7 | ) | 10.5 | ||||||||||||
Developed technology | 1.2 | (1.2 | ) | — | 1.2 | (1.2 | ) | — | ||||||||||||
Other | 0.5 | (0.2 | ) | 0.3 | 0.5 | (0.2 | ) | 0.3 | ||||||||||||
$ | 37.4 | $ | (14.9 | ) | $ | 22.5 | $ | 37.4 | $ | (13.7 | ) | $ | 23.7 | |||||||
Schedule of assets and liabilities measured at fair value on a recurring basis | The following table summarizes certain fair value information at December 31, 2014 for assets and liabilities measured at fair value on a recurring basis: | |||||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||
in Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Input | Inputs | ||||||||||||||||||
Description | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Redeemable Noncontrolling Interest in LearnBop, Inc. | $ | 3,000 | $ | — | $ | — | $ | 3,000 | ||||||||||||
Total | $ | 19,801 | $ | — | $ | — | $ | 19,801 | ||||||||||||
The following table summarizes certain fair value information at June 30, 2014 for assets and liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||
in Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Input | Inputs | ||||||||||||||||||
Description | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Total | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
The following table summarizes the activity during the six months ended December 31, 2014 for assets and liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||
Six Months Ended December 31, 2014 | ||||||||||||||||||||
Purchases, | Fair Value | |||||||||||||||||||
Fair Value | Issuances, | Unrealized | December 31, | |||||||||||||||||
Description | June 30, 2014 | and Settlements | Gains/(Losses) | 2014 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Redeemable Noncontrolling Interest in Middlebury Joint Venture | $ | 16,801 | $ | — | $ | — | $ | 16,801 | ||||||||||||
Redeemable Noncontrolling Interest in LearnBop, Inc. | — | 3,000 | — | 3,000 | ||||||||||||||||
Total | $ | 16,801 | $ | 3,000 | $ | — | $ | 19,801 | ||||||||||||
Schedule of calculation of basic and diluted net income per share | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
Basic and dilutive income (loss) per share: | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
(In thousands except shares and | (In thousands except shares and | |||||||||||||||||||
per share data) | per share data) | |||||||||||||||||||
Net income (loss) attributable to common stockholders, including Series A stockholders | $ | 12,331 | $ | (3,665 | ) | $ | 5,557 | $ | (8,705 | ) | ||||||||||
Weighted average common shares — basic | 37,096,480 | 39,977,228 | 37,396,081 | 38,953,671 | ||||||||||||||||
Weighted average common shares — diluted | 37,160,829 | 39,977,228 | 37,599,930 | 38,953,671 | ||||||||||||||||
Basic net income (loss) per share | $ | 0.33 | $ | (0.09 | ) | $ | 0.15 | $ | (0.22 | ) | ||||||||||
Diluted net income (loss) per share | $ | 0.33 | $ | (0.09 | ) | $ | 0.15 | $ | (0.22 | ) | ||||||||||
Longterm_Obligations_Tables
Long-term Obligations (Tables) | 6 Months Ended | ||||
Dec. 31, 2014 | |||||
Long-term Obligations | |||||
Summary of present value of the net minimum payments due on outstanding capital leases and note payable | |||||
Capital | |||||
As of June 30, | Leases | ||||
($ in thousands) | |||||
2015 | $ | 10,483 | |||
2016 | 14,404 | ||||
2017 | 7,063 | ||||
2018 | 1,312 | ||||
Total minimum payments | 33,262 | ||||
Less amount representing interest (imputed weighted average capital lease interest rate of 2.73%) | (898 | ) | |||
Net minimum payments | 32,364 | ||||
Less current portion | (18,255 | ) | |||
Present value of minimum payments, less current portion | $ | 14,109 | |||
Equity_Transactions_Tables
Equity Transactions (Tables) | 6 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Stock Option Plan | ||||||||||||
Schedule of stock option activity | ||||||||||||
Weighted- | ||||||||||||
Weighted- | Average | |||||||||||
Average | Remaining | Aggregate | ||||||||||
Exercise | Contractual | Intrinsic | ||||||||||
Shares | Price | Life (Years) | Value | |||||||||
Outstanding, June 30, 2014 | 2,578,401 | $ | 21.44 | 4.57 | $ | 42,754 | ||||||
Granted | 454,485 | 13.97 | ||||||||||
Exercised | (63,214 | ) | 2.55 | |||||||||
Forfeited or canceled | (92,206 | ) | 27.33 | |||||||||
Outstanding, December 31, 2014 | 2,877,466 | $ | 20.49 | 4.79 | $ | 79 | ||||||
Stock options exercisable at December 31, 2014 | 1,867,447 | $ | 20.48 | 3.64 | $ | 66 | ||||||
Schedule of restricted stock award activity | ||||||||||||
Weighted- | ||||||||||||
Average | ||||||||||||
Shares | Fair Value | |||||||||||
Outstanding, June 30, 2014 | 979,595 | $ | 22.97 | |||||||||
Granted | 745,775 | 18.14 | ||||||||||
Vested | (235,600 | ) | 25.88 | |||||||||
Forfeited or canceled | (28,151 | ) | 23.15 | |||||||||
Outstanding, December 31, 2014 | 1,461,619 | $ | 23.31 | |||||||||
Redeemable_Noncontrolling_Inte1
Redeemable Noncontrolling Interest (Tables) | 6 Months Ended | ||||
Dec. 31, 2014 | |||||
Redeemable Noncontrolling Interest | |||||
Summary of the activity of the redeemable noncontrolling interest | |||||
The following table represents the preliminary purchase price allocation for LearnBop in millions: | |||||
As of July 31, 2014 | Amount | ||||
Current assets | $ | 0.2 | |||
Property and equipment, net | 0.4 | ||||
Goodwill | 9 | ||||
Current liabilities | (0.1 | ) | |||
Redeemable noncontrolling interest | (3.0 | ) | |||
Fair value of total consideration transferred | $ | 6.5 | |||
Supplemental_Disclosure_of_Cas1
Supplemental Disclosure of Cash Flow Information (Tables) | 6 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Supplemental Disclosure of Cash Flow Information | ||||||||
Schedule of supplemental disclosure of cash flow information | ||||||||
Six Months Ended | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
(In thousands) | ||||||||
Cash paid for interest | $ | 428 | $ | 569 | ||||
Cash paid for taxes, net of refunds | $ | 8,188 | $ | 2,747 | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
New capital lease obligations | $ | 6,912 | $ | 17,290 | ||||
Supplemental disclosure of non-cash investing activities: | ||||||||
Business Combinations: | ||||||||
— Current assets | $ | 27 | $ | — | ||||
— Property and equipment | $ | 350 | $ | — | ||||
— Intangible assets | $ | 27 | $ | — | ||||
— Goodwill | $ | 8,982 | $ | — | ||||
— Assumed liabilities | $ | (50 | ) | $ | — | |||
— Deferred revenue | $ | (23 | ) | $ | — | |||
Description_of_the_Business_De
Description of the Business (Details) | 6 Months Ended |
Dec. 31, 2014 | |
item | |
Description of the Business | |
Number of states in which Company provides management services to public schools | 33 |
Basis_of_Presentation_Details
Basis of Presentation (Details) | 6 Months Ended |
Dec. 31, 2014 | |
item | |
Basis of Presentation | |
Number of operating segments | 1 |
Number of reportable business segments | 1 |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Revenue recognition | ||||
Amounts recorded as revenues and school operating expenses | $84.10 | $67.30 | $152.80 | $119.50 |
Reduction in school operating losses included in the entity's revenue | $15.10 | $11.90 | $32.70 | $25.70 |
Minimum | ||||
Revenue recognition | ||||
Duration of contracts providing access to curriculum via the entity's Web site | 1 year | |||
Maximum | ||||
Revenue recognition | ||||
Duration of contracts providing access to curriculum via the entity's Web site | 2 years |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Details 2) (USD $) | 0 Months Ended | 3 Months Ended | 6 Months Ended | 0 Months Ended | 3 Months Ended | 6 Months Ended | |
In Millions, unless otherwise specified | Oct. 09, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2014 |
Concentration of revenues | |||||||
Period of contract entered to provide academic curriculum | 3 years | ||||||
Inventories | |||||||
Increase in provision for excess and obsolete inventory | $6.10 | $6.10 | |||||
Excess and obsolete inventory reserve | 6 | 9 | 6 | 6 | |||
Accounts Receivable | |||||||
Concentration of revenues | |||||||
Concentration risk (as a percent) | 6.00% | 6.00% | |||||
Customer A | Sales Revenue, Services, Net | Customer Concentration Risk | |||||||
Concentration of revenues | |||||||
Concentration risk (as a percent) | 13.00% | 12.00% | 14.00% | 13.00% |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Details 3) (USD $) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Property and equipment | ||||
Depreciation expense | $7,200,000 | $14,400,000 | $14,600,000 | $23,400,000 |
Accelerated depreciation | 1,400,000 | 2,700,000 | ||
Capitalized Curriculum Development Costs | ||||
Estimated useful life of the software | 5 years | |||
Capitalized curriculum development costs | 7,267,000 | 7,649,000 | ||
Capitalized curriculum development costs write down | 0 | 2,200,000 | 0 | 2,200,000 |
Amortization expense | 4,500,000 | 6,400,000 | 8,500,000 | 10,300,000 |
Student Computer | ||||
Property and equipment | ||||
Useful Life | 3 years | |||
Computer Equipment | ||||
Property and equipment | ||||
Useful Life | 3 years | |||
Software and Software Development Costs | Minimum | ||||
Property and equipment | ||||
Useful Life | 3 years | |||
Software and Software Development Costs | Maximum | ||||
Property and equipment | ||||
Useful Life | 5 years | |||
Software Development Costs Internet Domain | ||||
Property and equipment | ||||
Useful Life | 3 years | |||
Office Equipment Excluding Computers | ||||
Property and equipment | ||||
Useful Life | 5 years | |||
Furniture and Fixtures | ||||
Property and equipment | ||||
Useful Life | 7 years | |||
Leasehold Improvements | Minimum | ||||
Property and equipment | ||||
Useful Life | 3 years | |||
Leasehold Improvements | Maximum | ||||
Property and equipment | ||||
Useful Life | 12 years | |||
Software Development | ||||
Property and equipment | ||||
Useful Life | 3 years | |||
Capitalized software development additions | 17,100,000 | 10,600,000 | ||
Capitalized software write down | 3,800,000 | 3,800,000 | ||
Amortization expense | 5,300,000 | 7,900,000 | 10,100,000 | 11,100,000 |
Capitalized Curriculum Development Costs | ||||
Capitalized curriculum development costs write down | $0 | $0 |
Summary_of_Significant_Account6
Summary of Significant Accounting Policies (Details 4) (Series A Special Stock) | 1 Months Ended | 6 Months Ended | |
Jul. 31, 2010 | Dec. 31, 2014 | Dec. 31, 2013 | |
Series A Special Stock | |||
Series A Special Stock | |||
Issuance of Special A Stock in connection with acquisition (in shares) | 2,750,000 | ||
Conversion into common stock ratio | 1 | ||
Number of Series A Special stock outstanding (in shares) | 0 | 0 |
Summary_of_Significant_Account7
Summary of Significant Accounting Policies (Details 5) (USD $) | 6 Months Ended | 0 Months Ended |
Dec. 31, 2014 | Jul. 31, 2014 | |
Rollforward of Goodwill | ||
Balance at the beginning of the period | $58,088,000 | |
Acquisition of LearnBop, Inc. | 9,000,000 | |
Adjustments due to other foreign exchange translations | 100,000 | |
Balance at the end of the period | 67,241,000 | |
LearnBop | ||
Rollforward of Goodwill | ||
Balance at the beginning of the period | 9,000,000 | |
Cash purchase price | $6,500,000 | |
Equity Method Investment, Ownership Percentage | 51.00% |
Summary_of_Significant_Account8
Summary of Significant Accounting Policies (Details 6) (USD $) | 3 Months Ended | 6 Months Ended | ||||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Jun. 30, 2013 | Jun. 30, 2014 |
Intangible Assets: | ||||||
Amortization expense | $0.60 | $5.90 | $1.30 | $6.70 | ||
Gross Carrying Amount | 37.4 | 37.4 | 37.4 | |||
Accumulated Amortization | -14.9 | -14.9 | -13.7 | |||
Net Carrying Value | 22.5 | 22.5 | 23.7 | |||
Impairment | 0 | 5.2 | 0 | 5.2 | ||
Asset Impairment Charges | 0 | 0 | 0 | 0 | ||
Future amortization of intangible assets | ||||||
2015 | 1.4 | 1.4 | ||||
2016 | 2.5 | 2.5 | ||||
2017 | 1.9 | 1.9 | ||||
2018 | 1.9 | 1.9 | ||||
2019 | 1.9 | 1.9 | ||||
Thereafter | 12.9 | 12.9 | ||||
Trade Names | ||||||
Intangible Assets: | ||||||
Gross Carrying Amount | 17.5 | 17.5 | 17.5 | |||
Accumulated Amortization | -5.1 | -5.1 | -4.6 | |||
Net Carrying Value | 12.4 | 12.4 | 12.9 | |||
Customer Relationships | ||||||
Intangible Assets: | ||||||
Gross Carrying Amount | 18.2 | 18.2 | 18.2 | |||
Accumulated Amortization | -8.4 | -8.4 | -7.7 | |||
Net Carrying Value | 9.8 | 9.8 | 10.5 | |||
Developed Technology Rights | ||||||
Intangible Assets: | ||||||
Gross Carrying Amount | 1.2 | 1.2 | 1.2 | |||
Accumulated Amortization | -1.2 | -1.2 | -1.2 | |||
Other Intangible Assets | ||||||
Intangible Assets: | ||||||
Gross Carrying Amount | 0.5 | 0.5 | 0.5 | |||
Accumulated Amortization | -0.2 | -0.2 | -0.2 | |||
Net Carrying Value | $0.30 | $0.30 | $0.30 |
Summary_of_Significant_Account9
Summary of Significant Accounting Policies (Detail 7) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2014 | Jun. 30, 2014 |
Assets and liabilities measured at fair value on a recurring basis | ||
Redeemable Noncontrolling Interest | $19,801 | $16,801 |
Fair Value, Measurements, Recurring | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Total | 3,000 | 16,801 |
Fair Value, Measurements, Recurring | Middlebury Interactive Languages LLC | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Redeemable Noncontrolling Interest | 16,801 | |
Fair Value, Measurements, Recurring | LearnBop | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Purchases, Issuances and Settlements | 3,000 | |
Fair Value, Measurements, Recurring | Estimate of Fair Value Measurement | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Redeemable Noncontrolling Interest | 19,801 | |
Fair Value, Measurements, Recurring | Estimate of Fair Value Measurement | Middlebury Interactive Languages LLC | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Redeemable Noncontrolling Interest | 16,801 | |
Fair Value, Measurements, Recurring | Estimate of Fair Value Measurement | LearnBop | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Redeemable Noncontrolling Interest | 3,000 | |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Redeemable Noncontrolling Interest | 19,801 | |
Total | 19,801 | 16,801 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | Middlebury Interactive Languages LLC | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Redeemable Noncontrolling Interest | 16,801 | 16,801 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | LearnBop | ||
Assets and liabilities measured at fair value on a recurring basis | ||
Redeemable Noncontrolling Interest | 3,000 | |
Purchases, Issuances and Settlements | $3,000 |
Recovered_Sheet1
Summary of Significant Accounting Policies (Details 8) (USD $) | 3 Months Ended | 6 Months Ended | |||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Jun. 30, 2014 |
Additional disclosures | |||||
Common stock, shares issued | 41,841,573 | 41,841,573 | 41,144,062 | ||
Common stock, shares outstanding | 38,338,975 | 38,338,975 | 38,948,866 | ||
Basic and dilutive earning (loss) per share computation: | |||||
Net income - K12 | $12,331 | ($3,665) | $5,557 | ($8,705) | |
Weighted average common shares, basic | 37,096,480 | 39,977,228 | 37,396,081 | 38,953,671 | |
Weighted average common shares, diluted | 37,160,829 | 39,977,228 | 37,599,930 | 38,953,671 | |
Basic net income per share (in dollars per share) | $0.33 | ($0.09) | $0.15 | ($0.22) | |
Diluted net income per share (in dollars per share) | $0.33 | ($0.09) | $0.15 | ($0.22) | |
Anti-dilutive shares | 64,349 | 0 | 203,849 | 0 |
Income_Taxes_Details
Income Taxes (Details) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Reconciliation to income tax at the statutory rate: | ||||
Effective income tax rate (as a percent) | 42.00% | 52.40% | 28.30% | 46.50% |
Longterm_Obligations_Details
Long-term Obligations (Details) (USD $) | 6 Months Ended | |
Dec. 31, 2014 | Jun. 30, 2014 | |
Long-term obligations | ||
Interest rate (as a percent) | 2.34% | |
Computer Equipment | ||
Long-term obligations | ||
Net carrying value of leased student computers | $23,800,000 | $20,900,000 |
Computer Equipment | Line of Credit | ||
Long-term obligations | ||
Maximum borrowing capacity | 35,000,000 | 35,000,000 |
Aggregate outstanding balance under the lease line of credit | 32,400,000 | 36,900,000 |
Interest rate, minimum (as a percent) | 2.49% | |
Interest rate, maximum (as a percent) | 3.08% | |
Payment terms of equipment lease line of credit | 36 months | |
Purchase option at the end of payment terms | $1 |
Longterm_Obligations_Details_2
Long-term Obligations (Details 2) (USD $) | Dec. 31, 2014 | Jun. 30, 2014 |
In Thousands, unless otherwise specified | ||
Minimum lease payments on capital leases | ||
Less current portion | ($18,255) | ($20,492) |
Present value of minimum payments, less current portion | 14,109 | 16,447 |
PNC Equipment Finance LLC Lease Line of Credit [Member] | ||
Minimum lease payments on capital leases | ||
2015 | 10,483 | |
2016 | 14,404 | |
2017 | 7,063 | |
2018 | 1,312 | |
Total minimum payments | 33,262 | |
Less amount representing interest (imputed weighted average capital lease interest rate of 2.8%) | -898 | |
Net minimum payments | 32,364 | |
Less current portion | -18,255 | |
Present value of minimum payments, less current portion | $14,109 |
Line_of_Credit_Details
Line of Credit (Details) (USD $) | 0 Months Ended | |||
Jan. 31, 2014 | Dec. 31, 2014 | Jan. 31, 2014 | Dec. 31, 2013 | |
Line of Credit | ||||
Line of credit | ||||
Maximum borrowing capacity | $100,000,000 | $100,000,000 | $35,000,000 | |
Line of credit, amount outstanding | 0 | |||
Term of debt | 5 years | |||
Line of Credit | Prime Rate [Member] | ||||
Line of credit | ||||
Interest rate base | Prime Rate | |||
Line of Credit | Base Rate [Member] | ||||
Line of credit | ||||
Interest rate base | Federal Funds Rate | |||
Interest rate spread added to base rate (as a percent) | 0.50% | |||
Line of Credit | London Interbank Offered Rate (LIBOR) [Member] | ||||
Line of credit | ||||
Interest rate base | LIBOR | |||
Interest rate spread added to base rate (as a percent) | 1.00% | |||
Letter of Credit | ||||
Line of credit | ||||
Maximum borrowing capacity | 10,000,000 | 10,000,000 | ||
Letter of credit, amount outstanding | $200,000 |
Equity_Transactions_Details
Equity Transactions (Details) (Employee and Non Employees Stock Option, USD $) | 0 Months Ended | 6 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Jun. 30, 2014 | Dec. 31, 2014 | Jun. 30, 2014 |
Employee and Non Employees Stock Option | |||
Shares | |||
Outstanding at the beginning of the period (in shares) | 2,578,401 | 2,578,401 | |
Granted (in shares) | 454,485 | ||
Exercised (in shares) | -63,214 | ||
Forfeited or canceled (in shares) | -92,206 | ||
Outstanding at the end of the period (in shares) | 2,877,466 | ||
Weighted Average Exercise Price | |||
Outstanding at the beginning of the period (in dollars per share) | $21.44 | $21.44 | |
Granted (in dollars per share) | $13.97 | ||
Exercised (in dollars per share) | $2.55 | ||
Forfeited or canceled (in dollars per share) | $27.33 | ||
Outstanding at the end of the period (in dollars per share) | $20.49 | ||
Additional information | |||
Average Remaining Contractual Life | 4 years 6 months 26 days | 4 years 9 months 15 days | |
Aggregate Intrinsic Value | $42,754 | $79 | $42,754 |
Stock options exercisable, Shares | 1,867,447 | ||
Stock options exercisable, Weighted Average Exercise Price (in dollars per share) | $20.48 | ||
Stock options exercisable, Average Remaining Contractual Life | 3 years 7 months 21 days | ||
Stock options exercisable, Aggregate Intrinsic Value | $66 |
Equity_Transactions_Details_2
Equity Transactions (Details 2) (Employee and Non Employees Stock Option, USD $) | 3 Months Ended | 6 Months Ended | ||
In Millions, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Stock option plan | ||||
Intrinsic value of options exercised | $0.30 | |||
Weighted-average grant date fair value of options granted (in dollars per share) | $7.20 | |||
Unrecognized compensation | 7.1 | 7.1 | ||
Weighted average period for recognization of total unrecognized compensation expense related to unvested stock options granted | 2 years 8 months 12 days | |||
Chief Executive Officer and other Employees | ||||
Stock option plan | ||||
Stock based compensation expense | 0.9 | 2.7 | 2 | 3.7 |
Vesting Based on Performance | Chief Executive Officer and other Employees | ||||
Stock option plan | ||||
Stock based compensation expense | $1.50 | $1.50 |
Equity_Transactions_Details_3
Equity Transactions (Details 3) (Restricted Stock, USD $) | 6 Months Ended | |
Dec. 31, 2014 | Sep. 30, 2014 | |
Restricted Stock | ||
Shares | ||
Outstanding at the beginning of the period (in shares) | 979,595 | 1,461,619 |
Granted (in shares) | 745,775 | |
Vested (in shares) | -235,600 | |
Forfeited or canceled (in shares) | -28,151 | |
Outstanding at the end of the period (in shares) | 1,461,619 | |
Weighted-Average Fair Value | ||
Outstanding at the beginning of the period (in dollars per share) | $22.97 | $23.31 |
Granted (in dollars per share) | $18.14 | |
Vested (in dollars per share) | $25.88 | |
Forfeited or canceled (in dollars per share) | $23.15 | |
Outstanding at the end of the period (in dollars per share) | $23.31 |
Equity_Transactions_Details_4
Equity Transactions (Details 4) (Restricted Stock, USD $) | 3 Months Ended | 6 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Stock option plan | ||||
Unrecognized compensation | $22 | $22 | ||
Weighted average period for recognization of total unrecognized compensation expense related to unvested restricted stock awards granted | 2 years | |||
Fair value of share-based compensation awards vested in period | 4.2 | |||
Chief Executive Officer and other Employees | ||||
Stock option plan | ||||
Stock based compensation expense | 3.8 | 5.8 | 6.9 | 8.5 |
Vesting Based on Performance | Chief Executive Officer and other Employees | ||||
Stock option plan | ||||
Stock based compensation expense | $2.50 | $2.50 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 6 Months Ended | 0 Months Ended | |||
Dec. 31, 2013 | Sep. 11, 2013 | Sep. 11, 2013 | Dec. 31, 2014 | Jun. 30, 2014 | |
Related Party Transactions | |||||
Issuance of a mortgage note | $2,100,000 | ||||
School Mortgage Note | |||||
Related Party Transactions | |||||
Issuance of a mortgage note | 2,100,000 | 2,100,000 | |||
Interest on investment (as a percent) | 5.25% | 5.25% | |||
Note Receivable Term | 5 years | 5 years | |||
Final payment due at term of loan | 1,800,000 | 1,800,000 | |||
Corporate Joint Venture | |||||
Related Party Transactions | |||||
Amount of loan advanced | 1,000,000 | ||||
Ownership interest in joint venture (as a percent) | 60.00% | ||||
Amount due from joint venture | $4,000,000 | $4,000,000 |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) (Oklahoma Firefighters Pension and Retirement System V K12 Inc) | Jan. 30, 2014 |
item | |
Oklahoma Firefighters Pension and Retirement System V K12 Inc | |
Commitments and contingencies | |
Number of Employees | 4 |
Investments_Details
Investments (Details) (USD $) | 6 Months Ended | 1 Months Ended | 0 Months Ended | 3 Months Ended | 6 Months Ended | 0 Months Ended | ||
Dec. 31, 2013 | Jan. 31, 2011 | 6-May-13 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Sep. 11, 2013 | Sep. 11, 2013 | |
Investments | ||||||||
Issuance of a mortgage note | $2,100,000 | |||||||
Web International Education Group Ltd | ||||||||
Investments | ||||||||
Investment in Web | 10,000,000 | |||||||
Ownership percentage | 20.00% | |||||||
Option to purchase investment interest in investee (as a percent) | 51.00% | |||||||
Interest on investment (as a percent) | 8.00% | |||||||
Web International Education Group Ltd | Other Current Assets | ||||||||
Investments | ||||||||
Investment reclassified | 10,000,000 | |||||||
Accrued interest reclassified | 3,200,000 | |||||||
Interest income on investment | 400,000 | 200,000 | 200,000 | 400,000 | ||||
School Mortgage Note | ||||||||
Investments | ||||||||
Interest on investment (as a percent) | 5.25% | 5.25% | ||||||
Issuance of a mortgage note | 2,100,000 | 2,100,000 | ||||||
Note receivable term | 5 years | 5 years | ||||||
Final payment due at term of loan | $1,800,000 | $1,800,000 |
Redeemable_Noncontrolling_Inte2
Redeemable Noncontrolling Interest (Details) (USD $) | 0 Months Ended | 1 Months Ended | |||
Jul. 31, 2014 | Jul. 31, 2014 | Apr. 30, 2013 | Dec. 31, 2014 | Jun. 30, 2014 | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||||
Goodwill | $67,241,000 | $58,088,000 | |||
LearnBop | |||||
Cash purchase price | 6,500,000 | ||||
Equity Method Investment, Ownership Percentage | 51.00% | 51.00% | |||
Period for determination of put option | 12 months | ||||
Amount of non-transferable call option remaining minority interest which becomes exercisable January 1, 2019 or thereafter | 3,000,000 | ||||
Transaction cost | 100,000 | 100,000 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||||
Current assets | 200,000 | 200,000 | |||
Property and equipment, net | 400,000 | 400,000 | |||
Goodwill | 9,000,000 | 9,000,000 | |||
Current liabilities | -100,000 | -100,000 | |||
Redeemable noncontrolling interest | -3,000,000 | -3,000,000 | |||
Fair value of total consideration transferred | 6,500,000 | ||||
Middlebury Interactive Languages LLC | |||||
Cash purchase price | 4,000,000 | ||||
Liabilities assumed | 600,000 | ||||
Equity Method Investment, Ownership Percentage | 40.00% | ||||
Transaction cost | 200,000 | ||||
Middlebury Interactive Languages LLC | Subsidiaries | |||||
Cash purchase price | $4,000,000 | ||||
Equity Method Investment, Ownership Percentage | 60.00% |
Supplemental_Disclosure_of_Cas2
Supplemental Disclosure of Cash Flow Information (Details) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid for interest | $428 | $569 |
Cash paid for taxes, net of refunds | 8,188 | 2,747 |
Supplemental disclosure of non-cash investing and financing activities: | ||
New capital lease obligations | 6,912 | 17,290 |
Business Combinations: | ||
Current assets | 27 | |
Property and equipment | 350 | |
Intangible assets | 27 | |
Goodwill | 8,982 | |
Assumed liabilities | -50 | |
Deferred revenue | ($23) |
Common_Stock_Repurchases_Detai
Common Stock Repurchases (Details) (USD $) | 0 Months Ended | 6 Months Ended | ||
Dec. 31, 2014 | Nov. 04, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Authorized share repurchased amount | ||||
Share repurchase term | 2 years | |||
Amount paid to repurchase common stock | $26,452,000 | $5,883,000 | ||
Common stock repurchase (in shares) | 3,502,598 | 1,307,402 | ||
Common stock repurchase, average price (in dollars per share) | $21.41 | $20.21 | ||
Common stock amount yet to be repurchased under the plan | 0 | |||
Maximum | ||||
Authorized share repurchased amount | ||||
Authorized share repurchased amount | 75,000,000 |