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Commitments and Contingencies | 9 Months Ended
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Mar. 31, 2021
Commitments and Contingencies |
Commitments and Contingencies | 10. Commitments and Contingencies ​ Litigation ​ In the ordinary conduct of the Company’s business, the Company is subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company vigorously defends these claims; however, no assurances can be given as to the outcome of any pending legal proceedings. The Company believes, based on currently available information, that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on its business, financial condition, liquidity or results of operations. On November 19, 2020, a putative securities class action lawsuit captioned Yun Chau Lee v. K12 Inc., et al was filed against the Company and two of its officers in the United States District Court for the Eastern District of Virginia, Case No. 1:20-cv-01419 (“Lee Case”). The plaintiff purports to represent a class of persons who purchased or otherwise acquired the Company’s common stock between April 27, 2020 and September 18, 2020, inclusive, and alleges violations by the Company and the individual defendants of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated under the Exchange Act, and violations by the individual defendants of Section 20(a) of the Exchange Act. The complaint alleges, among other things, that the Company and the individual defendants made false or misleading statements and/or omitted to disclose material facts concerning the Company’s technological capabilities and expertise to support increased demand for virtual and blended education related to the global emergence of COVID-19, the Company’s cybersecurity protocols and protections, and the Company’s administrative support and training to teachers, students, and parents. The complaint seeks unspecified monetary damages and other relief. Additionally, on December 11, 2020, a second putative securities class action lawsuit captioned Jennifer Baig v. K12 Inc., et al was filed against the Company and the same two officers in the United States District Court for the Eastern District of Virginia, Case No. 1:20-cv-01528 (“Baig Case”). The plaintiff in the Baig Case alleges violations of the same statutes, based on the same or substantially similar alleged conduct, and on behalf of the same purported class of persons as the plaintiff in the Lee Case. Subsequently, on December 21, 2020, a related derivative lawsuit captioned Larry Shemen, et al v. Aida M. Alvarez, et al was filed by two of our shareholders in the United States District Court for the District of Delaware, Case No. 1:20-cv-01731 (“Shemen Case”). The plaintiffs in the Shemen Case allege substantially the same facts alleged in the Lee and Baig Cases, and purport to assert claims on our behalf against certain of our officers and directors for breach of fiduciary duty and waste of corporate assets, and against two of our officers for contribution under Sections 10(b) and 21D of the Exchange Act based on the purported Exchange Act violations alleged in the Lee Case. On February 17, 2021, the Court consolidated the Lee Case and the Baig Case under the caption In re K12 Inc. Securities Litigation, Case No. 1:20-cv-01419 (the “Consolidated Securities Class Action”), and appointed a lead plaintiff. Pursuant to the case management schedule previously approved by the Court, the lead plaintiff filed an amended complaint on April 5, 2021. In the interim, the Shemen Case is stayed by court order pending resolution of our anticipated motion to dismiss in the Consolidated Securities Class Action. We intend to defend vigorously against each and every allegation and asserted claim in these matters. Employment Agreements The Company has entered into employment agreements with certain executive officers that provide for severance payments and, in some cases other benefits, upon certain terminations of employment. Except for the agreement with the Company’s Executive Chairman with an amended extended term to September 30, 2022, all other agreements provide for employment on an “at-will” basis. If the employee resigns for “good reason” or is terminated without cause, the employee is entitled to salary continuation, and in some cases benefit continuation, for varying periods depending on the agreement. ​ Off-Balance Sheet Arrangements ​ As of March 31, 2021, the Company provided guarantees of approximately $0.6 million related to lease commitments on the buildings for certain of the Company’s schools. ​ In addition, the Company contractually guarantees that certain schools under the Company’s management will not have annual operating deficits and the Company’s management fees from these schools may be reduced accordingly to cover any school operating deficits. ​ Other than these lease and operating deficit guarantees, the Company did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. ​ Risks and Uncertainties ​ Impacts of COVID-19 on Stride’s Business ​ While the long-term impact of the global emergence of COVID-19 is not estimable or determinable, the Company is currently experiencing increased demand for its products and services. The Company is unable to predict to what extent, if any, this increased level of demand will remain after the pandemic subsides. It remains too early in the enrollment season to determine the impact of the pandemic on next year’s financial results. ​ The Company continues to conduct business as usual with some modifications to employee travel, employee work locations, and cancellation of certain events. The Company will continue to actively monitor the situation and may take further actions that alter its business operations as may be required by federal, state or local authorities or that it determines is in the best interests of its employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may have on the Company’s business, including the effects on its customers and prospects, or on its long-term financial results. ​ On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. The Company has evaluated the business provisions in the CARES Act and adopted the deferral of the employer portion of the social security payroll tax (6.2%) outlined within. The deferral is effective from the enactment date through December 31, 2020. The deferred amount of $14.1 million will be paid in two installments, 50% of the deferred amount by December 31, 2021 and the remainder by December 31, 2022. The deferred payroll taxes due on December 31, 2021 are recorded within accrued liabilities and the deferred payroll taxes due on December 31, 2022 are recorded within other long-term liabilities on the condensed consolidated balance sheets. ​

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