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Mar 31, 2008 (PrimeNewswire via COMTEX News Network) --
* Full Year 2007 Net Income of US$8 million exceeds high side guidance of US$7.5 million; increase of 198% from 2006 before adjusting for one-off charges and gains. * Foreign Trade and Business College of Chongqing Normal University acquisition to close imminently and contribute to earnings results starting Q2-2008
BEIJING, March 31, 2008 (PRIME NEWSWIRE) -- ChinaCast Education Corporation ("ChinaCast" or the "Company") (Nasdaq:CAST), one of the leading e-learning and training services providers in China, today announced its US GAAP financial results for the fourth quarter and audited full year ended December 31, 2007.
Financial Highlights for the Full Year Ended December 31, 2007(a)
* Total revenue for 2007 increased 8% to RMB187.7 million
(US$25.7 million) from 2006.
-- Revenue from services for 2007 increased 19% to RMB148.9
million (US$20.4 million) from 2006.
-- Revenue for equipment sales for 2007 decreased 20% to
RMB38.8 million (US$5.3 million) from 2006.
* Net income for 2007 increased 198% to RMB58.7 million
(US$8.0 million) from 2006 before adjusting for one-off charges
and gains due to an impairment loss and a gain on disposal.
* Gross margin increased to 55% in 2007, from 49% in 2006.
* The net margin increased to 31% in 2007, from 11% in 2006.
* Cash and term deposits totalled RMB734 million (US$100.6 million)
on December 31, 2007.
* Basic and diluted earnings per share for 2007 were RMB2.21
(US$0.30) and RMB2.10 (US$0.29) respectively. Weighted average
shares used in the computation of basic and diluted earnings per
share for 2007 were 26.6 million and 28.0 million respectively.
(a) Dollar values are calculated at the exchange rate of US$1.0 =
RMB7.3 for the fourth quarter and full year 2007
2007 Business Highlights
* The Company opened eight new Daily English Language Training Centers in Beijing, since July 2007. * On October 29, 2007, the Company successfully completed its listing on the NASDAQ Global Market. * On December 4, 2007, the Company announced a non-binding Memorandum of Understanding (MOU) to acquire up to 80% of the equity of the Foreign Trade and Business College of Chongqing Normal University.
Financial Highlights for the Fourth Quarter Ended December 31, 2007
* Total revenue for the fourth quarter of 2007 increased 8% to
RMB59.6 million (US$8.2million) from the fourth quarter of 2006.
-- Revenue from services for the fourth quarter of 2007
increased 26% to RMB42.9 million (US$5.9 million) from the
fourth quarter of 2006.
-- Revenue from equipment sales for the fourth quarter of 2007
decreased 21% to RMB16.7 million (US$2.3 million) from the
fourth quarter of 2006.
* Net income for the fourth quarter of 2007 came to RMB14.8 million
(US$2.0 million), before adjusting for one-off charges and gains
due to an impairment loss and a gain on disposal, recovering
from a loss in 2006.
* Gross margin for the fourth quarter of 2007 increased to 50%,
from 42% in the fourth quarter of 2006.
* Net margin for the fourth quarter of 2007 increased to 25%, from
-13% in the fourth quarter of 2006.
* Basic and diluted earnings per share were RMB0.56 (US$0.08) and
RMB0.51 (US$0.07) respectively. Weighted average shares used in
the computation of basic and diluted earnings per share for the
fourth quarter of 2007 were 26.6 million and 28.0 million
respectively.
Ron Chan, Chairman and Chief Executive Officer, commented: "Our strong financial results and effective execution of our business strategy in 2007 reflect excellent performance by our management team and staff.
"2007 was a year of transformation for us as we made our US public listing debut on the NASDAQ Global Market and took bold strides to enter new sectors of the rapidly growing China education market. We embarked on our strategy to expand our core e-learning business to include traditional bricks and mortar schools by opening eight Daily English Language Training Centers and by announcing the proposed acquisition of our first for-profit, private university, the Foreign Trade and Business College ("FTBC") of Chongqing Normal University. This strategy will provide ChinaCast an additional high margin, high growth business segment that has great stability of cash flow and good revenue and earnings visibility.
"Our e-learning business, which was still our primary business segment in 2007, continues to show steady, profitable growth in service revenues as our post-secondary, K-12 and vocational training customers expand their distance learning programs. Our service revenues grew 19% year-over-year in 2007 and we are targeting similar annual growth in 2008 as we sign up new clients and roll-out additional e-learning services.
"As stated previously, in December 2007 we signed a non-binding MOU to acquire up to an 80% stake in a for-profit, private university, the FTBC. I am happy to report that in February 2008 we signed the definitive agreement for the acquisition of an 80% controlling interest in FTBC for a cash consideration of RMB480 million (US$65.8 million). FTBC is a private, for-profit university with four-year degree and two-year diploma programs fully accredited by the PRC Ministry of Education, over 132 acres of real estate and 900 teaching and administrative staff. The University has over 10,000 students enrolled in the current academic year and plans to grow 15% in the next academic year starting September 2008.
"We also plan to accelerate this growth by introducing foreign degree/non-degree programs and opening a Daily English Language Training Center on campus. We expect to close this acquisition imminently and anticipate strong earnings for FTBC in 2008, which will further increase our corporate earnings growth starting in the second quarter of 2008.
"Starting from July 2007, we opened eight Daily English Language Training Centers in Beijing and plan to open an additional twelve centers in 2008. In addition, we plan to integrate our Daily English Language Training Centers into our university campuses and to expand to additional second and third tier cities in China over the next several years by franchising this business. We anticipate the earnings from this business segment to begin contributing to our growth in 2008.
"Our goal is to become a leading player in the emerging PRC for-profit education sector. Our strategy to accomplish it is to acquire additional schools and universities, with curriculum focused on career-oriented programs, over the next several years. We remain focused on acquiring targets that meet our criteria for excellence in service, best in class credentials and sound profitability and to develop synergies between these schools and our nationwide e-learning distribution platform. By executing this strategy, we target to have over 75,000 students attending our universities with revenues in excess of US$100 million over the next several years.
"In summary, we have concluded a year of record performance for ChinaCast and we are particularly excited about the outlook for 2008 given the positive growth trends in the education market in China. While our e-learning business continues to grow at a healthy rate, our corporate earnings will be significantly stronger in 2008 as our traditional school education services begin to make a substantial contribution to our financials. We have built a solid platform on which to drive long-term growth and will continue to seek new opportunities in the China education market while providing strong profitability for our shareholders."
Selected Financial Results for the Full Year Ended December 31, 2007
Total revenue for 2007 came to RMB187.7 million (US$25.7 million), an 8% increase from 2006. Service revenue for 2007, which is typically recurring in nature, amounted to RMB148.9 million (US$20.4 million), up 19% from 2006. Equipment revenue for 2007, mainly project based and which typically have lower margins, amounted to RMB38.8 million (US$5.3 million), a decrease of 20% from 2006. ChinaCast Education also reports revenue broken out according to three different education sectors:
* Post-Secondary Distance Learning: Revenue from post secondary education distance learning services for 2007 increased by 24% to RMB69.6 million (US$9.5 million) as compared to 2006. This is due to increase in student enrollments, increase in tuition fees and the addition of another university partner, namely Tongji University. The total number of post-secondary students enrolled in courses using the Company's distance learning services for 2007 increased to 121,000 from 110,000 at the end of 2006. * K-12 Education Content Delivery: Revenue from the K-12 education content delivery business for 2007 decreased by approximately 13% to RMB68.3 million (US$9.4 million) mainly due to a reduction in equipment sales. The number of subscribing schools for K-12 distance learning services for 2007 remained steady at 6,500. * Vocational/Career Training Services: Revenue from vocational/career training services for 2007 increased by 26% to RMB49.8 million (US$6.8 million) as compared to 2006. The increase was mainly due to the expansion of service revenue from customers such as the Ministry of Labor and Taikang Life Insurance and the establishment of the English training service.
Total cost of sales for 2007 decreased by 4% to RMB85.5 million (US$11.7 million) in 2007, primarily due to the decrease in lower equipment sales which have lower margins. Gross profit margin increased from 49% in 2006 to 55% in 2007.
Selling and marketing expenses for 2007 increased by 187% to RMB6.6 million (US$0.9 million) primarily due to additional expenses after the establishment of the English training service. The English training business line is a consumer service business and involves more direct sales and marketing activities when compared with the other business segments.
General and administrative expenses were up by 26% to RMB55.1 million (US$7.6 million) in 2007 due to the increase in professional fees and other expenses associated with listing the Company's shares on the NASDAQ Global Market. There were also additional expenses associated with the establishment of the Daily English Language Training Center business starting in July 2007.
Income before tax for 2007 was RMB84.7 million (US$11.6 million), representing a 96% increase as compared to 2006 primarily due to an increase in gross profit, a one-off impairment loss reversal and an increase in interest income. Provision for income tax for fiscal year 2007 was RMB21.3 million (US$2.9 million), an increase of 73% as compared to 2006.
Net income for 2007 increased 198% to RMB58.7 million (US$8.0 million) from 2006 before adjusting for one-off charges due to impairment losses and discontinued operations. There was a one-off impairment loss of RMB13.3 million in 2006 and one-off gain on disposal of RMB10.3 million in 2007.
Basic and diluted earnings per share for 2007 were RMB2.21 (US$0.30) and RMB2.10 (US$0.29) respectively. Weighted average shares used in the computation of basic and diluted earnings per share for 2007 were 26.6 million and 28.0 million respectively.
Cash and bank balances together with term deposits increased to RMB735.4 (US$100.7) million as of December 31, 2007. Net operating cash flow for fiscal year 2007 was approximately RMB38.7 million (US$5.3 million).
Business Outlook for Fiscal Year 2008
ChinaCast estimates total revenue for the 2008 fiscal year ending December 31, 2008, to be in the range of RMB234 million to RMB256 million (US$32.0 million to US$35.0 million).
ChinaCast estimates net income for the 2008 fiscal year ending December 31, 2008, to be in the range of RMB80 million to RMB95 million (US$11.0 million to US$13.0 million). This forecast reflects ChinaCast's current and preliminary view, which is subject to change.
Conference Call Information
A conference call to discuss the results for the fiscal year and fourth quarter ended December 31, 2007, will be held on Monday, March 31, 2008, at 10:00 am US Eastern Time (10:00 pm Beijing Time). The discussion will feature remarks by Ron Chan, Chairman and CEO, and Tony Sena, CFO.
Conference Call Information Replay Details
Date: Monday, March 31, 2008 The replay will be available from
Time: 10:00 am ET** 12:30 pm ET** Monday March 31, 2008
until midnight ET** Monday,
April 14, 2008
Conference Replay Dial In
Conference Dial In Numbers: Numbers:
--------------------------- -------------------------
US/Canada Toll Free: US/Canada Toll Free:
1 877 419-6603 1 888-203-1112
International: +1 719 325-4932 International: +1 719 457-0820
Pass Code: 4734122
Live Webcast: Web Replay:
www.chinacasteducation.com www.chinacasteducation.com
**ET=US Eastern Time
Please access the website approximately 10 minutes prior to the start time in order to download a copy of the company's 2007 fiscal year and fourth quarter results presentation and to install any necessary software.
About ChinaCast Education Corporation
Established in 1999 with offices in Beijing and Shanghai, ChinaCast is one of the PRC's leading publicly listed e-learning and private education service providers. The Company provides its education services in three main education segments: post-secondary, K-12 and vocational/career. These services include interactive distance learning applications, multimedia education content, English language training and vocational/career training courses. The company is listed on the NASDAQ Global Market with the ticker symbol CAST.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995
This press release may contain statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of management's plans and objectives, future contracts, and forecasts of trends and other matters. These projections, expectations and trends are dependent on certain risks and uncertainties including such factors, among others, as growth in demand for education services, smooth and timely implementation of new training centers and other risk factors listed in the company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007. Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as "anticipate", "estimate", "expect", "believe," "will likely result," "outlook," "project" and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.
CHINACAST EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share-related data)
For the years ended December 31,
----------------------------------------------
2005 2006 2007 2007
---------- ---------- ---------- ----------
RMB RMB RMB US$
Revenues:
Service 116,221 125,556 148,903 20,397
Equipment 29,797 48,563 38,827 5,319
---------- ---------- ---------- ----------
146,018 174,119 187,730 25,716
---------- ---------- ---------- ----------
Cost of revenues:
Service (40,300) (41,251) (45,823) (6,227)
Equipment (29,054) (48,139) (39,678) (5,435)
---------- ---------- ---------- ----------
(69,354) (89,390) (85,501) (11,712)
---------- ---------- ---------- ----------
Gross profit 76,664 84,729 102,229 14,004
---------- ---------- ---------- ----------
Operating (expenses)
income:
Selling and marketing
expenses (including
share-based
compensation of
RMB148, RMBnil and
RMB170 for 2005,
2006 and 2007,
respectively) (3,268) (2,312) (6,640) (910)
General and
administrative
expenses (including
share-based
compensation of
RMB1,770, RMB1,181
and RMB360 for 2005,
2006 and 2007,
respectively) (35,238) (43,626) (55,145) (7,554)
Foreign exchange loss (2,361) (2,118) (4,179) (573)
Management service fee 14,286 11,623 18,035 2,471
---------- ---------- ---------- ----------
Total operating
expenses, net (26,581) (36,433) (47,929) (6,566)
---------- ---------- ---------- ----------
Income from operations 50,083 48,296 54,300 7,438
Impairment loss on
cost method
investment -- (13,270) -- --
Gain on disposal of
cost method
investment -- -- 10,270 1,407
Interest income 4,594 8,302 20,156 2,761
Interest expense (19) (18) (38) (5)
Other income 581 -- -- --
---------- ---------- ---------- ----------
Income before
provision for income
taxes, earnings in
equity investments,
and minority interest 55,239 43,310 84,668 11,601
Provision for income
taxes (10,540) (12,299) (21,263) (2,913)
Net income before
earnings in equity
investments and
minority interest 44,699 31,011 63,425 8,688
Earnings in equity
investments (402) (914) (1,155) (158)
Minority interest (8,574) (5,833) (3,242) (455)
---------- ---------- ---------- ----------
Income from continuing
operations 35,723 24,264 59,028 8,035
---------- ---------- ---------- ----------
Discontinued
operations
Income (loss) from
discontinued
operations, net of
taxes of RMBnil
for both 2006 and
2007 834 (2,250) (139) (19)
Minority interest
in discontinued
operations, net of
taxes of RMBnil
for both 2006 and
2007 (1,669) (2,310) (230) (31)
---------- ---------- ---------- ----------
Loss on discontinued
operations (835) (4,560) (369) (50)
Net income 34,888 19,704 58,659 8,035
========== ========== ========== ==========
Net income per share
Basic 2.09 1.17 2.21 0.30
========== ========== ========== ==========
Diluted 2.02 1.00 2.10 0.29
========== ========== ========== ==========
Weighted average
shares used in
computation:
Basic 16,657,872 16,872,309 26,567,240 26,567,240
========== ========== ========== ==========
Diluted 17,292,280 19,731,999 27,975,731 27,975,731
========== ========== ========== ==========
FULL YEAR 2007 (US GAAP AUDITED)
CHINACAST EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share-related data)
As of December 31,
----------------------------------
2006 2007 2007
---------- ---------- ----------
RMB RMB US$
Assets
Current assets:
Cash and cash equivalents 278,067 138,610 18,988
Term deposits 442,921 596,768 81,749
Accounts receivable, net of
allowance of RMB148 for both
2006 and 2007 41,692 35,316 4,838
Inventory 3,067 2,015 276
Prepaid expenses and other
current assets 5,199 7,127 976
Amounts due from related parties 2,583 3,248 445
---------- ---------- ----------
Total current assets 773,529 783,084 107,272
Non-current deposits -- 1,948 267
Property and equipment, net 14,332 11,107 1,522
Acquired intangible assets, net 14,028 21,781 2,984
Long-term investments 5,114 11,165 1,529
Deferred tax assets 172 -- --
Non-current advances to a related
party 129,866 119,914 16,426
Goodwill 3,538 1,715 235
---------- ---------- ----------
Total assets 940,579 950,714 130,235
========== ========== ==========
Liabilities, minority interest,
and shareholders' equity
Current liabilities:
Accounts payable 16,403 13,027 1,785
Accrued expenses and other
current liabilities 96,204 53,376 7,311
Amounts due to related parties 4,469 -- --
Income taxes payable 42,769 31,237 4,279
Current portion of capital
lease obligation 146 34 5
---------- ---------- ----------
Total current liabilities 159,991 97,674 13,380
---------- ---------- ----------
Capital lease obligation, net
of current portion 37 -- --
Unrecognized tax benefits -- 27,892 3,821
---------- ---------- ----------
Total non-current liabilities 37 27,892 3,821
Total liabilities 160,028 125,566 17,201
---------- ---------- ----------
Minority interest 145,501 20,512 2,810
---------- ---------- ----------
CHINACAST EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEETS - continued
(In thousands, except share-related data)
As of December 31,
----------------------------------
2006 2007 2007
---------- ---------- ----------
RMB RMB US$
Commitments and contingencies
Shareholders' equity:
Ordinary shares (US$0.0001 par
value;100,000,000 shares
authorized; 23,140,702 and
27,292,641 shares issued and
outstanding in 2006 and 2007,
respectively) 18 21 3
Additional paid-in capital 653,000 768,844 105,321
Statutory reserve 9,721 16,087 2,204
Accumulated other comprehensive
loss (2,762) (5,205) (713)
(Accumulated deficit) retained
earnings (24,927) 24,889 3,409
---------- ---------- ----------
Total shareholders' equity 635,050 804,636 110,224
---------- ---------- ----------
Total liabilities, minority
interest, and shareholders'
equity 940,579 950,714 130,235
========== ========== ==========
CHINACAST EDUCATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the years ended December 31,
----------------------------------------------
2005 2006 2007 2007
---------- ---------- ---------- ----------
RMB RMB RMB US$
Cash flows from
operating
activities:
Net income 34,888 19,704 58,659 8,035
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Minority interest
in continuing
operations 8,574 5,833 3,242 445
Minority interest
in discontinued
operations 1,669 2,310 230 31
Depreciation and
amortization 8,745 12,336 5,253 720
Share-based
compensation 1,918 1,181 530 73
Provision for bad
debts 37 111 -- --
Loss on disposal of
property and
equipment 3 7 -- --
Earnings in equity
investments 402 914 1,155 158
Write-down of
inventory -- -- 492 67
Impairment loss on
cost method
investment -- 13,270 -- --
Gain on disposal of
cost method
investment -- -- (10,270) (1,407)
Changes in assets and
liabilities:
Accounts receivable (22,713) (3,212) 3,117 427
Inventory (508) 352 396 54
Prepaid expenses and
other current assets (5,345) 9,524 (3,486) (478)
Non-current deposits -- -- (1,968) (270)
Amounts due from
related parties (1,694) 821 (665) (91)
Accounts payable 7,418 5,776 (2,021) (277)
Accrued expenses and
other current
liabilities 16,941 13,961 (30,647) (4,198)
Amount due to related
parties 87 243 (134) (18)
Income taxes payable 7,335 11,639 10,089 1,382
Deferred tax assets 172 173 172 24
Unrecognized tax
benefits -- -- 4,555 624
---------- ---------- ---------- ----------
Net cash provided by
operating activities 57,929 94,943 38,699 5,301
---------- ---------- ---------- ----------
Cash flows from
investing activities:
Purchase of equity
investment (4,300) -- -- --
Purchase of cost
investment (15,000) -- -- --
Repayment from amount
due from a related
party -- 5,000 -- --
Advances to related
parties (15,182) -- (1,443) (198)
Repayment from
advance to related
parties -- 18,611 11,395 1,561
Refundable deposit
for purchase of
equipment (3,800) -- -- --
Return of deposit for
purchase of
equipment 9,004 3,800 -- --
Deposits for business
acquisition -- (10,000) -- --
Return of deposit for
business acquisition -- 10,000 -- --
Purchase of property
and equipment (297) (1,301) (2,690) (368)
Purchase of
subsidiaries, net of
cash acquired (12,195) -- -- --
Term deposits 50,103 (169,123) (153,847) (21,075)
Disposal of cost
method investment -- -- 12,000 1,644
Acquisition of brand
name usage right -- -- (22,532) (3,087)
Cash disposed of from
disposal of
subsidiary -- -- (9,133) (1,248)
---------- ---------- ---------- ----------
Net cash provided by
(used in) investing
activities 8,333 (143,013) (166,230) (22,771)
---------- ---------- ---------- ----------
Cash flows from
financing activities:
Capital distribution -- -- (5,793) (794)
Net cash proceeds
from the Share
Exchange Transaction -- 196,247 -- --
Repayment of capital
lease obligation (151) (160) (147) (20)
Repayment of bank loan (140) -- -- --
Repayment of advances
from related parties -- -- (4,251) (582)
Exercise of share
options -- 9,699 -- --
---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities (291) 205,786 (10,191) (1,396)
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(In thousands)
Effect of foreign
exchange rate changes (28) (17) (1,735) (237)
Net increase
(decrease) in cash
and cash equivalents 65,943 157,699 (139,457) (19,103)
Cash and cash
equivalents at
beginning of the year 54,425 120,368 278,067 38,091
---------- ---------- ---------- ----------
Cash and cash
equivalents at end
of the year 120,368 278,067 138,610 18,988
========== ========== ========== ==========
Non-cash investing
and financing
activities:
Acquisition of
property and
equipment in
exchange for
payable 392 144 -- --
========== ========== ========== ==========
Disposal of
subsidiaries:
Consideration:
Offset against
payable -- -- 6,300 863
Addition to cost
method -- -- 8,936 1,224
-- -- 15,236 2,087
========== ========== ========== ==========
Supplemental cash
flow information:
Interest paid 19 18 38 5
========== ========== ========== ==========
Income taxes paid 3,270 1,314 7,865 1,077
========== ========== ========== ==========
Acquisition of
subsidiaries:
Cash consideration 21,000 -- -- --
========== ========== ========== ==========
This news release was distributed by PrimeNewswire, www.primenewswire.com
SOURCE: ChinaCast Education Corporation
ChinaCast Education Corporation
Michael J. Santos, Chief Marketing Officer &
Investor Relations Officer
(86-10) 6566-7788
Fax: (86-10) 8528-8366
mjsantos@chinacasteducation.com
www.chinacasteducation.com
15/F Reignwood Center, No. 8 Yong An-Dongli,
Jianguomenwai Avenue
Beijing 100022, PRC
Advanced Investor Relations, L.L.C.
U.S. Investor Relations Contact:
Miranda Weeks
(703) 485-6067
miranda@advancedinvestorrelations.com
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