|View printer-friendly version|
New Oriental Announces Results for the Fiscal Quarter Ended August 31, 2006
BEIJING, Oct 17, 2006 /Xinhua-PRNewswire via COMTEX News Network/ -- 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 August 31, 2006, which is the first quarter for New Oriental's fiscal year 2007(1).
Highlights for the Fiscal Quarter Ended August 31, 2006 -- Total net revenues increased by 31.4% year-over-year to RMB429.3 million (US$54.0 million) from RMB326.8 million in the first quarter of fiscal year 2006. -- Net income increased by 100.8% year-over-year to RMB165.1 million (US$20.8 million) from RMB82.2 million in the first quarter of fiscal year 2006, and net income excluding share-based compensation expenses (non-GAAP) increased by 57.5% year-over-year to RMB170.7 million (US$21.5 million). -- Basic and diluted earnings per ADS were RMB6.60 (US$0.83) and RMB5.84 (US$0.73), respectively. Excluding share-based compensation expenses (non-GAAP), basic and diluted earnings per ADS were RMB6.83 (US$0.86) and RMB6.04 (US$0.76), respectively. Each ADS represents four common shares. -- Total student enrollments in language training and test preparation courses increased by 25.9% year-over-year to approximately 337,400 from approximately 268,000 in the first quarter of fiscal year 2006. -- Opened 7 new schools in the fiscal quarter bringing the total number of schools and learning centers to 32 and 115 (including the 32 schools), respectively, as of August 31, 2006, up from 25 schools and 111 learning centers (including the 25 schools) as of May 31, 2006, respectively.
''We are very pleased with the results of the first quarter of our fiscal year 2007,'' said New Oriental's Chairman and Chief Executive Officer, Mr. Michael Yu. ''We saw strong growth in our student enrollment as we continued to leverage our highly recognized brand name, leading market position and unparalleled national network to provide innovative and inspirational instruction to a growing student base of all ages in China.''
New Oriental's Chief Financial Officer, Mr. Louis T. Hsieh, added, ''Our recent successful NYSE IPO demonstrates investors' confidence in the long-term prospects of China's private education market as well as New Oriental's leading market position.'' Mr. Hsieh continued, ''Today, New Oriental operates the largest network of private schools and learning centers in China, with locations in 31 cities. In the quarters ahead, we will continue to expand this geographic network, while increasing student enrollments and educational program and service offerings in our existing locations. We are also exploring strategic relationships to help expand our content distribution channels and educational programs and service offerings.''
Mr. Hsieh further noted that the first quarter of the Company's fiscal year is typically the strongest quarter in terms of revenue and net income as a large number of students take advantage of the summer holiday period to take courses in private schools. For example, in the first fiscal quarter of 2006 (June 1 to August 31, 2005), the Company generated net revenues of RMB326.8 million compared to net revenues of RMB127.2 million in the second fiscal quarter (September 1 to November 30, 2005). In addition, net income for the first fiscal quarter of 2006 was RMB82.2 million compared to a net loss of RMB8.7 million in the second fiscal quarter of 2006.
Financial Results for the Fiscal Quarter Ended August 31, 2006
For the first fiscal quarter of 2007, New Oriental reported net revenues of RMB429.3 million (US$54.0 million), representing a 31.4% increase year-over-year.
Net revenues from educational programs and services for the first fiscal quarter were RMB411.9 million (US$51.8 million), representing a 30.8% 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 first fiscal quarter of 2007 increased by 25.9% year-over-year to approximately 337,400 from approximately 268,000 in the first quarter of fiscal year 2006.
Total operating costs and expenses for the quarter were RMB249.2 million (US$31.3 million), a 7.7% increase year-over-year.
Cost of revenues increased by 21.9% year-over-year to RMB138.6 million (US$17.4 million), primarily due to the increased number of courses offered to a larger student base.
Selling and marketing expenses increased by 61.4% year-over-year to RMB35.7 million (US$4.5 million), primarily due to brand promotion expenses.
General and administrative expenses decreased by 21.7% year-over-year to RMB74.8 million (US$9.4 million), primarily due to lower share-based compensation expenses in the first fiscal quarter of 2007 as compared to the corresponding period last year. Excluding share-based compensation expenses, general and administrative expenses were comparable to the same period of last fiscal year.
Total share-based compensation expenses, which were allocated to related operating costs and expenses, decreased to RMB5.7 million (US$0.7 million) in the first fiscal quarter of 2007 from RMB26.2 million in the first fiscal quarter of 2006.
Operating margin for the quarter was 42.0%, compared to 29.2% in the corresponding period last year. Excluding share-based compensation expenses (non-GAAP), operating margin for the quarter would have been 43.3%, compared to 37.2% 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.
Net income for the quarter was RMB165.1 million (US$20.8 million), representing a 100.8% increase from the first fiscal quarter of 2006. Basic and diluted earnings per share amounted to RMB1.65 (US$0.21) and RMB1.46 (US$0.18), respectively, and basic and diluted earnings per ADS were RMB6.60 (US$0.83) and RMB5.84 (US$0.73), respectively.
Net income excluding share-based compensation expenses (non-GAAP) was RMB170.7 million (US$21.5 million). Basic and diluted earnings per share excluding share-based compensation expenses (non-GAAP) were RMB1.71 (US$0.21) and RMB1.51 (US$0.19), respectively, and basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) were RMB6.83 (US$0.86) and RMB6.04 (US$0.76), respectively.
Capital expenditures for the quarter were RMB32.3 million (US$4.1 million).
As of August 31, 2006, New Oriental had cash and cash equivalents of RMB294.9 million (US$37.1 million). Net operating cash flow for the first quarter of fiscal year 2007 was RMB139.3 million (US$17.5 million).
Outlook for Fiscal Second Quarter 2007
New Oriental expects its total net revenues in the second quarter of fiscal year 2007 (September 1 to November 30, 2006) to be in the range of RMB148 million (US$18.6 million) to RMB158 million (US$19.9 million), representing year-over-year growth in the range of 16.5% to 24.4%, respectively. This forecast reflects New Oriental's current and preliminary view, which is subject to change.
The Company notes that due to seasonality of the Chinese education market, the second quarter is normally the slowest period of the fiscal year, with revenues typically significantly below those of the first quarter.
Conference Call Information
New Oriental's management will host an earnings conference call at 8 AM on October 17, 2006 U.S. Eastern Daylight Time (8 PM on October 17, 2006 Beijing/Hong Kong time).
Dial-in details for the earnings conference call are as follows: US: 1 617 213 8066 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''.
Additionally, a live and archived webcast of this 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.''
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 second 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 October 17, 2006, 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: operating margin excluding share-based compensation expenses, 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 are made at a rate of RMB7.9538 to US$1.00, the effective noon buying rate as of August 31, 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 August 31 As of May 31 2006 2006 (Unaudited) (Audited) RMB USD RMB ASSETS: Current assets: Cash and cash equivalents 294,948 37,083 261,854 Restricted cash 3,000 377 3,000 Term deposits 1,000 126 -- Accounts receivable, net 1,542 194 3,035 Inventory 43,174 5,428 36,418 Prepaid expenses and other current assets 42,974 5,403 35,655 Total current assets 386,638 48,611 339,962 Property, plant and equipment, net 712,312 89,556 706,565 Land use right, net 25,318 3,183 25,456 Deposit for acquiring property and equipment -- -- 1,175 Amounts due from related parties 2,691 338 8,527 Deferred tax assets 3,870 487 5,163 Long term prepaid rent 1,038 131 1,077 Trade mark 1,637 206 1,637 Total assets 1,133,504 142,512 1,089,562 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings -- -- 35,000 Accounts payable-trade 51,140 6,430 36,183 Accrued expenses and other current liabilities 128,223 16,121 91,596 Dividend payable -- -- 772 Income tax payable 18,413 2,315 9,151 Current portion of long-term debt 42,998 5,406 47,603 Amount due to related parties 162 20 389 Deferred revenue 135,728 17,065 244,524 Total current liabilities 376,664 47,357 465,218 Long-term debt, less current portion 64,445 8,102 102,638 Total long-term liabilities 64,445 8,102 102,638 Minority interest 200 25 200 Total liabilities 441,309 55,484 568,056 SHAREHOLDERS' EQUITY Series A convertible preferred shares (US$0.01 par value; 11,111,111 shares authorized as of August 31, 2006 and May 31, 2006; 11,111,111 and nil shares issued and outstanding as of August 31, 2006 and May 31, 2006) (liquidation value US$22,500) 920 116 920 Common Shares (US$ 0.01 par value; 150,000,000 shares authorized as of August 31, 2006 and May 31, 2006; 100,000,000 shares issued and outstanding as of August 31, 2006 and May 31, 2006) 8,277 1,041 8,277 Additional paid-in capital 315,208 39,630 309,519 Retained earnings 367,930 46,259 202,871 Accumulated other comprehensive loss (140) (18) (81) Total shareholders' equity 692,195 87,028 521,506 Total liabilities and shareholders' equity 1,133,504 142,512 1,089,562 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 August 31 2006 2005 (Unaudited) (Unaudited) RMB USD RMB Net Revenues: Educational programs and services 411,914 51,788 314,821 Books and others 17,419 2,190 12,021 Total net revenues 429,333 53,978 326,842 Operating costs and expenses (note 1): Cost of revenues 138,637 17,430 113,773 Selling and marketing 35,732 4,492 22,141 General and administrative 74,790 9,403 95,489 Total operating costs and expenses 249,159 31,325 231,403 Operating income 180,174 22,653 95,439 Other income (expenses),net (1,917) (241) (3,136) Income tax expense (13,198) (1,659) (17,901) Minority interest, net of tax -- -- (12) Income from continuing operations 165,059 20,753 74,390 Income on discontinued operations -- -- 7,811 Net Income 165,059 20,753 82,201 Net income per share-basic 1.65 0.21 0.82 Net income per share-diluted 1.46 0.18 0.74 Net income per ADS-basic (note 2) 6.60 0.83 3.28 Net income per ADS-diluted (note 2) 5.84 0.73 2.96 Notes: Note 1: Share-based compensation expenses are included in the operating costs and expenses as follows: For the Three Months Ended August 31 2006 2005 (Unaudited) (Unaudited) RMB USD RMB Cost of revenues 143 18 65 Selling and marketing 99 12 793 General and administrative 5,447 685 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 August 31 2006 2005 (Unaudited) (Unaudited) RMB USD RMB GAAP net income 165,059 20,752 82,201 Share-based compensation expense 5,689 715 26,225 Non-GAAP net income 170,748 21,467 108,426 GAAP net income per ADS - basic (note 1) 6.60 0.83 3.28 GAAP net income per ADS - diluted (note 1) 5.84 0.73 2.96 Non-GAAP net income per ADS - basic (note 1) 6.83 0.86 4.34 Non-GAAP net income per ADS - diluted (note 1) 6.04 0.76 3.90 Shares used in calculated basic net income per ADS (note 1) 100,000,000 100,000,000 100,000,000 Shares used in calculated diluted net income per ADS (note 1) 113,131,319 113,131,319 111,111,111 Note 1: Each ADS represents four common shares. For more information, please contact: In China: Ms. Sisi Zhao New Oriental Education and Technology Group Inc. Tel: +86-10-6260-5566 x8203 Email: firstname.lastname@example.org Mr. Rory Macpherson Ogilvy Public Relations Worldwide Tel: +86-10-8520-6553 Email: email@example.com In the United States: Mr. Thomas Smith Ogilvy Public Relations Worldwide Tel: +1-212-880-5269 Email: firstname.lastname@example.org
SOURCE New Oriental Education & Technology Group Inc.
In China - Ms. Sisi Zhao of New Oriental Education and Technology Group Inc., +86-10-6260-5566 x8203, or email@example.com; or Mr. Rory Macpherson of Ogilvy Public Relations Worldwide, +86-10-8520-6553, or firstname.lastname@example.org; or In the United States - Mr. Thomas Smith of Ogilvy Public Relations Worldwide, +1-212-880-5269, or email@example.com