2007'02.11.Sun
New Oriental Announces Results for the Second Fiscal Quarter Ended November 30, 2006
January 16, 2007
BEIJING, Jan. 16 /Xinhua-PRNewswire/ -- New Oriental
Education and Technology Group Inc. (NYSE: EDU), the
largest provider of private educational services in China,
today announced its unaudited financial results for the
fiscal quarter ended November 30, 2006, which is the second
quarter for New Oriental's fiscal year 2007(1).
Highlights for the Fiscal Quarter Ended November 30,
2006
-- Total net revenues increased by 32.9% year-over-year
to RMB169.0
million (US$21.6 million) from RMB127.2 million in
the second quarter
of fiscal year 2006.
-- Net income increased to RMB8.2 million (US$1.0
million) from a net
loss of RMB8.7 million in the second quarter of
fiscal year 2006, and
income attributable to holders of common shares
excluding share-based
compensation expenses (non-GAAP) increased to
RMB16.2 million (US$2.1
million) from a net loss of RMB34.2 million in the
second quarter of
fiscal year 2006.
-- Basic and diluted earnings per ADS were RMB0.23
(US$0.03) and RMB0.22
(US$0.03), respectively. Excluding share-based
compensation expenses
(non-GAAP), basic and diluted earnings per ADS were
RMB0.46 (US$0.06)
and RMB0.44 (US$0.06), respectively. Each ADS
represents four common
shares. Common shares used in calculating basic and
diluted earnings
per ADS increased in the second quarter of fiscal
2007 due to 34.5
million new shares issued and sold by the company in
its initial
public offering during the quarter.
-- Total student enrollments in language training and
test preparation
courses increased by 20.3% year-over-year to
approximately 217,500
from approximately 180,800 in the second quarter of
fiscal year 2006.
-- Opened 2 new schools in the second quarter bringing
the total number
of schools and learning centers to 34 and 121
(including the 34
schools), respectively, as of November 30, 2006, up
from 32 schools
and 115 learning centers (including the 32 schools)
as of August 31,
2006, respectively.
"During the second quarter of fiscal year 2007, we
experienced continued strong growth in our student
enrollments and net revenues enabling us to exceed our
revenue guidance by a substantial margin," said New
Oriental's Chairman and Chief Executive Officer, Mr.
Michael Yu. "In addition, we executed on our strategy
of pursuing rapid organic growth by adding two new schools,
North Star in Beijing marking New Oriental's entry into the
fragmented professional certification test preparation
market, and our second primary/secondary campus in Taixing,
which is nearby our Yangzhou school."
New Oriental's Chief Financial Officer, Mr. Louis T.
Hsieh, added, "During the second fiscal quarter, we
continued to improve our profitability by simultaneously
growing our revenues and controlling our expenses. As we
continue to expand our product offerings, student
enrollments, and geographic footprint into new markets
across China, we are confident that we will increasingly
benefit from economies of scale going forward."
Mr. Hsieh noted that the second quarter of the
Company's fiscal year is typically the slowest in terms of
revenue as students are occupied with the beginning of the
formal school year.
"We also used part of our IPO proceeds to clear
remaining debt ensuring a sound financial base for future
expansion," added Mr. Hsieh.
Financial Results for the Fiscal Quarter Ended November
30, 2006
For the second fiscal quarter of 2007, New Oriental
reported net revenues of RMB169.0 million (US$21.6
million), representing a 32.9% increase
year-over-year.
Net revenues from educational programs and services for
the second fiscal quarter were RMB152.0 million (US$19.4
million), representing a 32.5% increase year-over-year.
The growth was mainly driven by the increase in the number
of student enrollments in language training and test
preparation courses. Total student enrollments in language
training and test preparation courses in the second fiscal
quarter of 2007 increased by 20.3% year-over-year to
approximately 217,500 from approximately 180,800 in the
second quarter of fiscal year 2006.
Total operating costs and expenses for the quarter were
RMB168.8 million (US$21.5 million), a 22.9% increase
year-over-year.
Cost of revenues increased by 40.5% year-over-year to
RMB85.9 million (US$11.0 million), primarily due to the
increased number of courses offered to a larger student
base and the greater number of schools and learning centers
in operation.
Selling and marketing expenses increased by 90.8%
year-over-year to RMB25.4 million (US$3.2 million),
primarily due to a refinement in accounting process in
allocating some of the personnel and other expenses which
were included in our general and administrative expenses in
the second fiscal quarter of 2006 to our selling and
marketing expenses in the second fiscal quarter of 2007.
General and administrative expenses decreased by 8.7%
year-over-year to RMB57.5 million (US$7.3 million),
primarily due to the implementation of the refined
accounting process described above. Without such
accounting reclassification, general and administrative
expenses would have increased year-over-year.
Total share-based compensation expenses, which were
allocated to related operating costs and expenses, were
RMB8.0 million (US$1.0 million) in the second quarter of
fiscal year 2007. There were no share-based compensation
expenses in the second quarter of fiscal year 2006.
Operating margin for the quarter was 0.2%, compared to
negative 8.0% in the corresponding period of the previous
year. Excluding share-based compensation expenses
(non-GAAP), operating margin for the quarter was 4.9%,
compared to negative 8.0% in the corresponding period of
the prior year. This increase was primarily due to the
improved operating efficiency as revenue growth outpaced
the growth in operating costs and expenses.
Income for the quarter was RMB8.2 million (US$1.0
million) compared to a net loss of RMB8.7 million in the
second quarter of fiscal year 2006. Basic and diluted
earnings per share amounted to RMB0.06 (US$0.01) and
RMB0.06 (US$0.01), respectively, and basic and diluted
earnings per ADS were RMB0.23 (US$0.03) and RMB0.22
(US$0.03), respectively.
Income attributable to holders of common shares
excluding share-based compensation expenses (non-GAAP) was
RMB16.2 million (US$2.1 million). Basic and diluted
earnings per ADS excluding share based compensation
expenses
(non-GAAP) were RMB0.46 (US$0.06) and RMB0.44 (US$0.06),
respectively.
Capital expenditures for the quarter were RMB7.6
million (US$1.0 million).
As of November 30, 2006, New Oriental had cash and cash
equivalents of RMB1,166.5 million (US$148.8 million), as
compared to RMB294.9 million as of August 31, 2006. The
increase in cash and cash equivalents was primarily due to
the net proceeds from our initial public offering on the
New York Stock Exchange on September 7, 2006. Net
operating cash flow for the second quarter of fiscal year
2007 was RMB42.4 million (US$5.4 million).
Financial Results for the Six Months Ended November 30,
2006
For the six months ended November 30, 2006 New Oriental
reported net revenues of RMB598.4 million (US$76.4 million),
representing a 31.8% increase year-over-year.
Total student enrollments in language training and test
preparation courses in the six months ended November 30,
2006 increased by 23.6%
year-over-year to approximately 554,900 from approximately
448,900 in the six months ended November 30, 2005.
Operating margin for the six months ended November 30,
2006 was 30.2%, compared to 18.8% for the six months ended
November 30, 2005.
Net income for the six months ended November 30, 2006
was RMB173.3 million (US$22.1 million), representing a
135.7% increase year-over-year. Basic and diluted earnings
per ADS for the six months ended November 30, 2006 amounted
to RMB5.72 (US$0.73) and RMB5.31 (US$0.68), respectively.
Common shares used in calculating basic and diluted
earnings per ADS increased in the second quarter of fiscal
year 2007 due to 34.5 million new shares issued and sold by
the company in its initial public offering during the
quarter.
Outlook for Fiscal Third Quarter 2007
New Oriental expects its total net revenues in the
third quarter of fiscal year 2007 (December 1, 2006 to
February 28, 2007) to be in the range of RMB202 million
(US$25.8 million) to RMB212 million (US$27.1 million),
representing year-over-year growth in the range of 19.8% to
25.8%, respectively. This forecast reflects New Oriental's
current and preliminary view, which is subject to change.
Conference Call Information
New Oriental's management will host an earnings
conference call at 8 AM on January 16, 2007 U.S. Eastern
Time (9 PM on January 16, 2007 Beijing/Hong Kong time).
Dial-in details for the earnings conference call are as
follows:
US: +1-617-213-8055
Hong Kong +852-3002-1672
Please dial-in 10 minutes before the call is scheduled
to begin and provide the passcode to join the call. The
passcode is "New Oriental earnings call."
A replay of the conference call may be accessed by
phone at the following number until 11 AM on January 23,
2007 U.S. Eastern Time:
International: +1-617-801-6888
Passcode: 38993793
Additionally, a live and archived webcast of the
conference call will be available at
http://investor.neworiental.org .
About New Oriental
New Oriental is the largest provider of private
educational services in China based on the number of
program offerings, total student enrollments and geographic
presence. New Oriental offers a wide range of educational
programs, services and products consisting primarily of
English and other foreign language training, test
preparation courses for major admissions and assessment
tests in the United States, the PRC and Commonwealth
countries, primary and secondary school education,
development and distribution of educational content,
software and other technology, and online education. New
Oriental's ADSs, each of which represents four common
shares, currently trade on the New York Stock Exchange
under the symbol "EDU."
For more information about New Oriental, please visit
http://english.neworiental.org .
Safe Harbor Statement
This announcement contains forward-looking statements.
These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform
Act of 1995. These forward-looking statements can be
identified by terminology such as "will,"
"expects," "anticipates,"
"future," "intends," "plans,"
"believes," "estimates" and similar
statements. Among other things, the outlook for third
quarter of fiscal year 2007 and quotations from management
in this announcement, as well as New Oriental's strategic
and operational plans, contain forward-looking statements.
New Oriental may also make written or oral forward-looking
statements in its periodic reports to the U.S. Securities
and Exchange Commission in its annual report to
shareholders, in press releases and other written materials
and in oral statements made by its officers, directors or
employees to third parties. Statements that are not
historical facts, including statements about New Oriental's
beliefs and expectations, are forward-looking statements.
Forward-looking statements involve inherent risks and
uncertainties. A number of factors could cause actual
results to differ materially from those contained in any
forward-looking statement, including but not limited to the
following: our growth strategies; our future business
development, results of operations and financial condition;
our ability to attract students without a significant
decrease in course fees; our ability to continue to hire,
train and retain qualified teachers; our ability to
maintain and enhance our "New Oriental" brand;
our ability to effectively and efficiently manage the
expansion of our school network and successfully execute
our growth strategy; the outcome of ongoing, or any future,
litigation or arbitration, including those relating to
copyright and other intellectual property rights;
competition in the private education sector in China;
changes in our revenues and certain cost or expense items
as a percentage of our revenues; the expected growth of the
Chinese private education market; and Chinese governmental
policies relating to private educational services and
providers of such services. Further information regarding
these and other risks is included in our registration
statement on Form F-1 and other documents filed with the
Securities and Exchange Commission. New Oriental does not
undertake any obligation to update any forward-looking
statement, except as required under applicable law. All
information provided in this press release and in the
attachments is as of January 15, 2007, and New Oriental
undertakes no duty to update such information, except as
required under applicable law.
About Non-GAAP Financial Measures
To supplement New Oriental's consolidated financial
results presented in accordance with GAAP, New Oriental
uses the following measures defined as
non-GAAP financial measures by the SEC: net income
excluding share-based compensation expenses and basic and
diluted earnings per share and per ADS excluding
share-based compensation expenses. The presentation of
these
non-GAAP financial measures is not intended to be
considered in isolation or as a substitute for the
financial information prepared and presented in accordance
with GAAP. For more information on these non-GAAP
financial measures, please see the table captioned
"Reconciliations of non-GAAP measures to the most
comparable GAAP measures" set forth at the end of this
release.
New Oriental believes that these non-GAAP financial
measures provide meaningful supplemental information
regarding its performance and liquidity by excluding
share-based expenses that may not be indicative of its
operating performance from a cash perspective. New
Oriental believes that both management and investors
benefit from referring to these non-GAAP financial measures
in assessing its performance and when planning and
forecasting future periods. These non-GAAP financial
measures also facilitate management's internal comparisons
to New Oriental's historical performance and liquidity.
New Oriental computes its non-GAAP financial measures using
the same consistent method from quarter to quarter. New
Oriental believes these non-GAAP financial measures are
useful to investors in allowing for greater transparency
with respect to supplemental information used by management
in its financial and operational decision making. A
limitation of using non-GAAP net income excluding
share-based compensation expenses, and basic and diluted
earnings per share and per ADS excluding share-based
compensation expenses is that these non-GAAP measures
exclude share-based compensation charge that has been and
will continue to be for the foreseeable future a
significant recurring expense in our business. Management
compensates for these limitations by providing specific
information regarding the GAAP amounts excluded from each
non-GAAP measure. The accompanying tables have more
details on the reconciliations between GAAP financial
measures that are most directly comparable to non-GAAP
financial measures.
(1) This announcement contains translations of certain
RMB amounts into
U.S. dollars at specified rates solely for the
convenience of
readers. Unless otherwise noted, all translations
from RMB to U.S.
dollars for the entities with the functional
currency of RMB are
made at a rate of RMB7.834 to US$1.00, the
effective noon buying
rate as of November 30, 2006 in The City of New
York for cable
transfers of RMB as certified for customs purposes
by the Federal
Reserve Bank of New York.
NEW ORIENTAL EDUCATION & TECHNOLOGY
GROUP INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
As of
As of November
30 August 31
2006
2006
(Unaudited)
(Unaudited)
RMB
USD RMB
ASSETS:
Current assets:
Cash and cash equivalents 1,166,510
148,766 294,948
Restricted cash 3,064
391 3,000
Term deposits --
-- 1,000
Accounts receivable, net 2,664
340 1,542
Inventory 40,758
5,203 43,174
Prepaid expenses and other current
assets 43,692
5,577 42,974
Total current assets 1,256,688
160,277 386,638
Property, plant and equipment, net 708,269
90,410 712,312
Land use right, net 25,180
3,214 25,318
Deposit for acquiring property and
equipment --
-- --
Amounts due from related parties 464
64 2,691
Deferred tax assets 8,996
1,148 3,870
Long term prepaid rent --
-- 1,038
Trade mark 1,637
209 1,637
Total assets 2,001,234
255,322 1,133,504
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade 37,360
4,769 51,140
Accrued expenses and other current
liabilities 118,649
15,145 128,223
Income tax payable 21,041
2,686 18,413
Current portion of long-term debt --
-- 42,998
Amount due to related parties --
-- 162
Deferred revenue 182,651
23,315 135,728
Total current liabilities 359,701
45,915 376,664
Long-term debt, less current portion --
-- 64,445
Total long-term liabilities --
-- 64,445
Minority interest 2,023
258 200
Total liabilities 361,724
46,173 441,309
SHAREHOLDERS' EQUITY
Series A convertible preferred shares
(US$ 0.01 par value; 11,111,111
shares authorized as of August 31,
2006; 11,111,111 and nil shares
issued and outstanding as of August
31, 2006)(liquidation value
US$22,500) --
-- 920
Common Shares (US$ 0.01 par value;
150,000,000 shares authorized as of
August 31, 2006; 100,000,000 shares
issued and outstanding as of August
31, 2006; 300,000,000 shares
authorized and 145,611,111 shares
issued and outstanding as of
November 30, 2006) 11,940
1,456 8,277
Additional paid-in capital 1,264,475
158,440 315,208
Retained earnings 376,147
47,999 367,930
Accumulated other comprehensive loss
(gain) (13,052)
1,254 (140)
Total shareholders' equity 1,639,510
209,149 692,195
Total liabilities and shareholders'
equity 2,001,234
255,322 1,133,504
NEW ORIENTAL EDUCATION & TECHNOLOGY
GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands except for per share and per ADS
amounts)
For the
Three Months
Ended
November 30
2006
2005
(Unaudited)
(Unaudited)
RMB
USD RMB
Net Revenues:
Educational Programs and services 151,967
19,398 114,714
Books and others 17,062
2,178 12,509
Total net revenues 169,029
21,576 127,223
Operating costs and expenses (note
1):
Cost of revenues 85,903
10,965 61,142
Selling and marketing 25,409
3,243 13,314
General and administrative 57,456
7,332 62,909
Total operating costs and expenses 168,768
21,540 137,365
Operating income (loss) 261
36 (10,142)
Other income (expenses), net 8,085
1,023 (2,185)
Income tax expense (485)
(62) 1,862
Minority interest, net of tax 356
45 --
Income from continuing operations 8,217
1,042 (10,465)
Income on discontinued operations --
-- 1,784
Net Income 8,217
1,042 (8,681)
Dividend in kind --
-- (25,526)
Income attributable to holders of
common shares 8,217
1,042 (34,207)
Net income per share-basic 0.06
0.01 (0.34)
Net income per share-diluted 0.06
0.01 (0.31)
Net income per ADS-basic (note 2) 0.23
0.03 (1.36)
Net income per ADS-diluted (note 2) 0.22
0.03 (1.24)
Notes:
Note 1: Share-based compensation expenses are included
in the operating
costs and expenses as follows:
For the
Three Months
Ended
November 30
2006
2005
Unaudited
Unaudited
RMB
USD RMB
Cost of revenues 209
27 --
Selling and marketing 118
15 --
General and administrative 7,698
983 --
Note 2: Each ADS represents four common shares
NEW ORIENTAL EDUCATION & TECHNOLOGY
GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands except for per share and per ADS
amounts)
For the
Six Months
Ended
November 30
2006
2005
(Unaudited)
(Unaudited)
RMB
USD RMB
Net Revenues:
Educational Programs and services 563,881
71,979 429,535
Books and others 34,481
4,401 24,530
Total net revenues 598,362
76,380 454,065
Operating costs and expenses (note
1):
Cost of revenues 224,540
28,662 174,915
Selling and marketing 61,141
7,805 35,455
General and administrative 132,246
16,877 158,398
Total operating costs and expenses 417,927
53,344 368,768
Operating income (loss) 180,435
23,036 85,297
Other income (expenses), net 6,168
779 (5,321)
Income tax expense (13,683)
(1,747) (16,039)
Minority interest, net of tax 356
45 (12)
Income from continuing operations 173,276
22,113 63,925
Income on discontinued operations --
-- 9,595
Net Income 173,276
22,113 73,520
Dividend in kind --
-- (25,526)
Income attributable to holders of
common shares 173,276
22,113 47,994
Net income per share-basic 1.43
0.18 0.48
Net income per share-diluted 1.33
0.17 0.43
Net income per ADS-basic (note 2) 5.72
0.73 1.92
Net income per ADS-diluted (note 2) 5.31
0.68 1.73
Notes:
Note 1: Share-based compensation expenses are included
in the operating
costs and expenses as follows:
For the
Six Months
Ended
November 30
2006
2005
Unaudited
Unaudited
RMB
USD RMB
Cost of revenues 352
45 65
Selling and marketing 217
28 793
General and administrative 13,145
1,678 25,367
Note 2: Each ADS represents four common shares
NEW ORIENTAL EDUCATION & TECHNOLOGY
GROUP INC.
RECONCILIATION OF NON-GAAP MEASURES TO THE MOST
COMPARABLE GAAP MEASURES
(In thousands except share and per ADS
amounts)
For
the Three Months
Ended November 30
2006
2005
(Unaudited) (Unaudited)
RMB
USD RMB
GAAP net income 8,217
1,042 (8,681)
Dividend in kind --
-- (25,526)
GAAP income attributable to holders
of common shares 8,217
1,042 (34,207)
Share-based compensation expenses 8,025
1,025 --
Non-GAAP income attributable to
holders of common shares 16,242
2,067 (34,207)
GAAP net income per ADS - basic
(note 1) 0.23
0.03 (1.36)
GAAP net income per ADS - diluted
(note 1) 0.22
0.03 (1.24)
Non-GAAP net income per ADS - basic
(note 1) 0.46
0.06 (1.36)
Non-GAAP net income per ADS -
diluted (note 1) 0.44
0.06 (1.24)
Shares used in calculated basic net
income per ADS (note 1) 142,603,785
142,603,785 100,000,000
Shares used in calculated diluted
net income per ADS (note 1) 148,176,297
148,176,297 111,111,111
Note 1: Each ADS represents four common shares
NEW ORIENTAL EDUCATION & TECHNOLOGY
GROUP INC.
RECONCILIATION OF NON-GAAP MEASURES TO THE MOST
COMPARABLE GAAP MEASURES
(In thousands except share and per ADS
amounts)
For
the Six Months
Ended
November 30
2006
2005
(Unaudited)
(Unaudited)
RMB
USD RMB
GAAP net income 173,276
22,113 73,520
Dividend in kind --
-- (25,526)
GAAP income attributable to holders
of common shares 173,276
22,113 47,994
Share-based compensation expenses 13,714
1,751 26,225
Non-GAAP income attributable to
holders of common shares 16,242
23,864 74,219
GAAP net income per ADS - basic
(note 1) 5.72
0.73 1.92
GAAP net income per ADS - diluted
(note 1) 5.31
0.68 1.73
Non-GAAP net income per ADS - basic
(note 1) 6.17
0.79 2.97
Non-GAAP net income per ADS -
diluted (note 1) 5.73
0.73 2.67
Shares used in calculated basic net
income per ADS (note 1) 121,185,489
121,185,489 100,000,000
Shares used in calculated diluted
net income per ADS (note 1) 130,565,761
130,565,761 111,111,111
Note 1: Each ADS represents four common shares
For investor and media inquiries, please contact:
In China:
Ms. Sisi Zhao
New Oriental Education and Technology Group Inc.
Tel: +86-10-6260-5566 x8203
Email: zhaosisi@staff.neworiental.org
Mr. Rory Macpherson
Ogilvy Public Relations Worldwide
Tel: +86-10-8520-6553
Email: rory.macpherson@ogilvy.com
In the United States:
Mr. Thomas Smith
Ogilvy Public Relations Worldwide
Tel: +1-212-880-5269
Email: thomas.smith@ogilvypr.com
SOURCE New Oriental Education and Technology Group Inc.
PR
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