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New Oriental Announces Results for the Second Fiscal Quarter Ended November 30, 2006
January 15, 2007 at 7:01 PM EST

BEIJING, Jan. 15 /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.
    -0-               01/15/2007
    /CONTACT:  In China -- Ms. Sisi Zhao of New Oriental Education and
Technology Group Inc., +86-10-6260-5566 x8203, or
zhaosisi@staff.neworiental.org, or Mr. Rory Macpherson of Ogilvy Public
Relations Worldwide, +86-10-8520-6553, or rory.macpherson@ogilvy.com; or in
the United States -- Mr. Thomas Smith of Ogilvy Public Relations Worldwide,
+1-212-880-5269, or thomas.smith@ogilvypr.com, for EDU /
    /Web Site: http://english.neworiental.org
               http://investor.neworiental.org /
    (EDU)

CO:  New Oriental Education and Technology Group Inc.
ST:  China
IN:  CPR MLM EDU HED
SU:  ERN CCA


KY
-- CNM014 --
6840 01/15/2007 19:00 EST http://www.prnewswire.com