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New Oriental Announces Results for the Third Fiscal Quarter Ended February 28, 2007
April 17, 2007 at 4:31 PM EDT

BEIJING, April 17 /Xinhua-PRNewswire/ -- New Oriental Education and Technology Group Inc. (the "Company") (NYSE: EDU), the largest provider of private educational services in China, today announced its unaudited financial results for the fiscal quarter ended February 28, 2007, which is the third quarter for New Oriental's fiscal year 2007(1).

    Highlights for the Fiscal Quarter Ended February 28, 2007
    -- Total net revenues increased by 51.3% year-over-year to RMB255.1
       million (US$33.0 million) from RMB168.6 million in the third quarter
       of fiscal year 2006.
    -- Net income increased by 543.5% year-over-year to RMB65.3 million
       (US$8.4 million) from RMB10.2 million in the third quarter of fiscal
       year 2006, and income attributable to holders of common shares
       excluding share-based compensation expenses (non-GAAP) increased to
       RMB70.9 million (US$9.2 million) from RMB11.1 million in the third
       quarter of fiscal year 2006.
    -- Basic and diluted earnings per ADS were RMB1.79 (US$0.23) and
       RMB1.72 (US$0.22), respectively. Excluding share-based compensation
       expenses (non-GAAP), basic and diluted earnings per ADS were RMB1.94
       (US$0.25) and RMB1.86 (US$0.24), respectively. Each ADS represents
       four common shares of the Company. Common shares used in calculating
       basic and diluted earnings per ADS increased in the third quarter of
       fiscal year 2007 as compared to the third quarter of fiscal year
       2006 due to 34.5 million common shares (equivalent to 8.625 million
       ADS) issued and sold by the Company in its initial public offering
       in September 2006, and approximately 2.4 million common shares
       (equivalent to approximately 600,000 ADS) issued and sold by the
       Company in its follow-on offering in February 2007.
    -- Total student enrollments in language training and test preparation
       courses increased by 8.0% year-over-year to approximately 199,100
       from approximately 184,400 in the third quarter of fiscal year 2006.
    -- The total number of schools remained at 34 and the total number of
       learning centers increased to 128 (including the 34 schools), as of
       February 28, 2007, up from 121 learning centers (including the 34
       schools) as of November 30, 2006.

"Our strong brand recognition in the Chinese private education market and leading course offering contributed to an increase in student enrollments and guidance-beating top line growth," said Mr. Michael Yu, New Oriental's Chairman and Chief Executive Officer. "In the third quarter of fiscal year 2007, we continued to expand our network by establishing new learning centers in Shanghai, Wuhan, Shenyang, Taiyuan, Jinan and Shijiazhuang, and improved our Elite English and online professional development programs through licensing agreements with leading international educational companies."

New Oriental's Chief Financial Officer, Mr. Louis T. Hsieh, added, "We are very pleased with our financial results in the third quarter of fiscal year 2007. Our strong bottom line growth clearly demonstrates the scalability of our hub and spoke business model as we increase our core offerings and presence in China's major cities."

Mr. Hsieh noted that the third quarter of the Company's fiscal year is typically New Oriental's second strongest quarter of its fiscal year as revenue and student enrollments increase due to the one month winter holiday for school age students in China. New Oriental's financial results in this third quarter of fiscal year 2007 were especially strong due to the fact that Chinese New Year was later than usual in 2007 allowing Chinese students to have more time to attend supplemental educational programs during their winter holidays.

Financial Results for the Fiscal Quarter Ended February 28, 2007

For the third quarter of fiscal year 2007, New Oriental reported net revenues of RMB255.1 million (US$33.0 million), representing a 51.3% increase year-over-year.

Net revenues from educational programs and services for the third fiscal quarter were RM240.3 million (US$31.0 million), representing a 49.3% 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 third quarter of fiscal year 2007 increased by 8.0% year-over-year to approximately 199,100 from approximately 184,400 in the third quarter of fiscal year 2006.

Total operating costs and expenses for the quarter were RMB200.9 million (US$26.0 million), a 26.5% increase year-over-year.

Cost of revenues increased by 44.0% year-over-year to RMB107.8 million (US$13.9 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 37.7% year-over-year to RMB28.3 million (US$3.7 million), primarily due to brand promotion expenses.

General and administrative expenses increased by 2.3% year-over-year to RMB64.8 million (US$8.4 million).

Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased to RMB5.6 million (US$0.7 million) in the third quarter of fiscal year 2007 from RMB1.0 million in the third quarter of fiscal year 2006.

Operating margin for the quarter was 21.2%, compared to 5.8% in the corresponding period of the previous year. Excluding share-based compensation expenses (non-GAAP), operating margin for the quarter was 23.4%, compared to 6.4% 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 RMB65.3 million (US$8.4 million), representing a 543.5% increase from the third quarter of fiscal year 2006. Basic and diluted earnings per share amounted to RMB0.45 (US$0.06) and RMB0.43 (US$0.06), respectively, and basic and diluted earnings per ADS were RMB1.79 (US$0.23) and RMB1.72 (US$0.22), respectively.

Income attributable to holders of common shares excluding share-based compensation expenses (non-GAAP) was RMB70.9 million (US$9.2 million). Basic and diluted earnings per ADS excluding share based compensation expenses (non- GAAP) were RMB 1.94 (US$ 0.25) and RMB 1.86 (US$ 0.24), respectively.

Capital expenditures for the quarter were RMB15.0 million (US$1.9 million).

As of February 28, 2007, New Oriental had cash and cash equivalents of RMB3,432.6 million (US$443.4 million), as compared to RMB1,166.5 million as of November 30, 2006. The increase in cash and cash equivalents was primarily due to the net proceeds from the Company's follow-on offering in the third quarter of fiscal year 2007 of approximately RMB2,244 million (US$287.3 million), the substantial majority of such proceeds or approximately RMB2,068 million (US$267.1 million) was distributed to selling shareholders shortly after the Company's third quarter of fiscal year 2007 close. Net operating cash flow for the third quarter of fiscal year 2007 was RMB49.1 million (US$6.3 million).

Financial Results for the Nine Months Ended February 28, 2007

For the nine months ended February 28, 2007 New Oriental reported net revenues of RMB853.4 million (US$110.2 million), representing a 37.1% increase year-over-year.

Total student enrollments in language training and test preparation courses in the nine months ended February 28, 2007 increased by 19.0% year-over-year to approximately 754,300 from approximately 633,600 in the nine months ended February 28, 2006.

Operating margin for the nine months ended February 28, 2007 was 27.5%, compared to 15.3% for the nine months ended February 28, 2006.

Net income for the nine months ended February 28, 2007 was RMB238.6 million (US$30.8 million), representing a 185.2% increase year-over-year. Basic and diluted earnings per ADS for the nine months ended February 28, 2007 amounted to RMB7.38 (US$0.95) and RMB6.93 (US$0.90), respectively. Common shares used in calculating basic and diluted earnings per ADS increased in the nine months ended February 28, 2007 due to 34.5 million common shares (equivalent to 8.625 million ADS) issued and sold by the Company in its initial public offering in September 2006, and approximately 2.4 million new common shares (equivalent to approximately 600,000 ADS) issued and sold by the Company in its follow-on offering in February 2007.

Outlook for Fiscal Fourth Quarter 2007

New Oriental expects its total net revenues in the fourth quarter of fiscal year 2007 (March 1, 2007 to May 31, 2007) to be in the range of RMB177 million (US$22.9 million) to RMB185 million (US$23.9 million), representing year-over-year growth in the range of 19.9% to 25.3%, 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 April 18, 2007 U.S. Eastern Time (8 PM on April 18, 2007 Beijing/Hong Kong time).

    Dial-in details for the earnings conference call are as follows:

    US:         +1-617-597-5361
    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 April 25, 2007:

International: +1-617-801-6888

Passcode: 32480126

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 fourth 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 April 18, 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) The Company's financial statements are stated in RMB. The
        translation of RMB amounts at and for the period ended February 28,
        2007 into United States dollar ("US$") is included solely for the
        convenience of the readers and has been made at the rate of
        RMB7.7410 to US$1, the approximate free rate of exchange at
        February 28, 2007. Such translations should not be construed as
        representations that RMB amounts could be converted into US$ at
        that rate or any other rate.



                               Financial Tables



                  NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In thousands)
                                                                     As of
                                            As of February 28     November 30
                                                   2007              2006
                                               (Unaudited)        (Unaudited)
                                                  RMB        USD          RMB
    ASSETS:
    Current assets:
    Cash and cash equivalents               3,432,623    443,434    1,166,510
    Restricted cash                             3,069        396        3,064
    Term deposits                               3,000        388           --
    Accounts receivable, net                    3,059        395        2,664
    Inventory                                  39,257      5,071       40,758
    Prepaid expenses and other current
     assets                                    44,615      5,763       43,692

    Total current assets                    3,525,623    455,447    1,256,688

    Property, plant and equipment, net        702,084     90,697      708,269
    Land use right, net                        25,041      3,235       25,180
    Amounts due from related parties              523         68          464
    Deferred tax assets                         4,952        640        8,996
    Trade mark                                  1,637        211        1,637
    Long term investment                           15          2           --

    Total assets                            4,259,875    550,300    2,001,234

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
    Accounts payable-trade                     38,185      4,933       37,360
    Accrued expenses and other current
     liabilities                              122,893     15,875      118,649
    Income tax payable                         14,996      1,937       21,041
    Amount due to related parties           2,067,820    267,126           --
    Deferred revenue                          135,025     17,443      182,651

    Total current liabilities               2,378,919    307,314      359,701

    Total liabilities                       2,378,919    307,314      359,701

    Minority interest                           1,886        244        2,023

    Total shareholders' equity              1,879,070    242,742    1,639,510

    Total liabilities and shareholders'
     equity                                 4,259,875    550,300    2,001,234



                 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 February 28
                                                  2007              2006
                                               (Unaudited)      (Unaudited)
                                                 RMB        USD         RMB
    Net Revenues:
    Educational programs and services        240,250     31,036     160,890
    Books and others                          14,818      1,914       7,662
    Total net revenues                       255,068     32,950     168,552

    Operating costs and expenses (note 1):
    Cost of revenues                         107,780     13,923      74,829
    Selling and marketing                     28,334      3,660      20,584
    General and administrative                64,821      8,374      63,385

    Total operating costs and expenses       200,935     25,957     158,798
    Operating income                          54,133      6,993       9,754

    Other income (expenses), net              11,561      1,493      (2,460)

    Income tax expense                          (705)       (91)      2,860
    Minority interest, net of tax                356         46          --

    Income from continuing operations         65,345      8,441      10,154

    Income on discontinued operations                                    --

    Net Income                                65,345      8,441      10,154
    Dividend in kind                              --         --          --
    Income attributable to holders of
     common shares                            65,345      8,441      10,154

    Net income per share-basic                  0.45       0.06        0.10
    Net income per share-diluted                0.43       0.06        0.09

    Net income per ADS-basic (note 2)           1.79       0.23        0.41
    Net income per ADS-diluted (note 2)         1.72       0.22        0.37


    Notes:

    Note 1: Share based compensation expenses (in thousands) are included in
            the operating costs and expenses as follows:


                                         For the Three Months Ended Febuary 28
                                                   2007               2006
                                                 Unaudited         Unaudited
                                              RMB         USD        RMB
    Cost of revenues                          270          35         --
    Selling and marketing                     102          13         --
    General and administrative              5,185         670        954


    Note 2: Each ADS represents four common shares



                  NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS CONTINUED
             (In thousands except for per share and per ADS amounts)

                                         For the Nine Months Ended February 28
                                                   2007              2006
                                               (Unaudited)        (Unaudited)
                                                 RMB         USD          RMB
    Net Revenues:
    Educational programs and services        804,131     103,879      590,425
    Books and others                          49,299       6,369       32,192
    Total net revenues                       853,430     110,248      622,617

    Operating costs and expenses (note 1):
    Cost of revenues                         332,320      42,930      249,744
    Selling and marketing                     89,475      11,559       56,039
    General and administrative               197,067      25,458      221,783

    Total operating costs and expenses       618,862      79,947      527,566
    Operating income                         234,568      30,301       95,051

    Other income (expenses), net              17,729       2,290       (7,781)

    Income tax expense                       (14,388)     (1,859)     (13,179)
    Minority interest, net of tax                712          92          (12)

    Income from continuing operations        238,621      30,824       74,079

    Income on discontinued operations             --          --        9,595

    Net Income                               238,621      30,824       83,674
    Dividend in kind                              --          --      (25,526)
    Income attributable to holders of
     common shares                           238,621      30,824       58,148

    Net income per share-basic                  1.84        0.24         0.58
    Net income per share-diluted                1.73        0.22         0.52

    Net income per ADS-basic (note 2)           7.38        0.95         2.33
    Net income per ADS-diluted (note 2)         6.93        0.90         2.09


    Notes:

    Note 1: Share based compensation expenses (in thousands) are included in
            the operating costs and expenses as follows:


                                      For the Nine Months Ended February 28
                                                  2007              2006
                                                Unaudited        Unaudited
                                             RMB        USD         RMB
    Cost of revenues                         622         80          65
    Selling and marketing                    319         41         793
    General and administrative            18,330      2,368      26,321


    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 February 28
                                                  2007               2006
                                              (Unaudited)         (Unaudited)
                                                RMB          USD          RMB

    GAAP net income                          65,345        8,441       10,154
    Dividend in kind                             --           --           --
    GAAP Income attributable to holders
     of common shares                        65,345        8,441       10,154
    Share-based compensation expense          5,557          718          954
    Non-GAAP income attributable to
     holders of common shares                70,902        9,159       11,108

    GAAP net income per ADS - basic
     (note 1)                                  1.79         0.23         0.41
    GAAP net income per ADS - diluted
     (note 1)                                  1.72         0.22         0.37

    Non-GAAP net income per ADS - basic
     (note 1)                                  1.94         0.25         0.44
    Non-GAAP net income per ADS -
     diluted (note 1)                          1.86         0.24         0.40

    Shares used in calculated basic net
     income per ADS (note 1)            146,143,021  146,143,021  100,000,000
    Shares used in calculated diluted
     net income per ADS (note 1)        152,238,305  152,238,305  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
                                    CONTINUED
                 (In thousands except share and per ADS amounts)


                                        For the Nine Months Ended February 28
                                                  2007               2006
                                              (Unaudited)         (Unaudited)
                                            RMB          USD          RMB

    GAAP net income                         238,621       30,824       83,674
    Dividend in kind                             --           --      (25,526)
    GAAP Income attributable to holders
     of common shares                       238,621       30,824       58,148
    Share-based compensation expense         19,271        2,489       27,179
    Non-GAAP income attributable to
     holders of common shares               257,892       33,313       85,327

    GAAP net income per ADS - basic
     (note 1)                                  7.38         0.95         2.33
    GAAP net income per ADS - diluted
     (note 1)                                  6.93         0.90         2.09

    Non-GAAP net income per ADS - basic
     (note 1)                                  7.97         1.03         3.41
    Non-GAAP net income per ADS -
     diluted (note 1)                          7.49         0.97         3.07

    Shares used in calculated basic net
     income per ADS (note 1)            129,413,247  129,413,247  100,000,000
    Shares used in calculated diluted
     net income per ADS (note 1)        137,720,319  137,720,319  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: 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
    -0-                       04/17/2007
    /CONTACT:  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, +86-10-8520-6553, or rory.macpherson@ogilvy.com, or Mr. Thomas
Smith, +1-212-880-5269, or thomas.smith@ogilvypr.com, both of Ogilvy Public
Relations Worldwide for New Oriental Education and Technology Group/
    /Web site:  http://english.neworiental.org /
    (EDU)

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





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-- CNTU024 --
8105 04/17/2007 16:30 EDT http://www.prnewswire.com