BEIJING, Oct. 17 /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 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: Mr. Rory Macpherson Ogilvy Public
Relations Worldwide Tel: +86-10-8520-6553 Email: In the United
States: Mr. Thomas Smith Ogilvy Public Relations Worldwide Tel:
+1-212-880-5269 Email: DATASOURCE: New Oriental Education &
Technology Group Inc. CONTACT: In China - Ms. Sisi Zhao of New
Oriental Education and Technology Group Inc., +86-10-6260-5566
x8203, or ; or Mr. Rory Macpherson of Ogilvy Public Relations
Worldwide, +86-10-8520-6553, or ; or In the United States - Mr.
Thomas Smith of Ogilvy Public Relations Worldwide, +1-212-880-5269,
or Web Site: http://investor.neworiental.org/
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