2014

China Bilingual Announces Financial Results for Fiscal Year Ended August 31, 2012 Company reports year-over-year revenue growth of 66.0% to $42.2 million

TAIYUAN CITY, China, Dec. 4, 2012 /PRNewswire-FirstCall/ -- China Bilingual Technology & Education Group Inc. (OTCBB: CBLY) ("China Bilingual" or the "Company"), an education company that owns and operates high-quality, K-12 private boarding schools in China, announced its financial results for its fiscal year ended August 31, 2012.

Fiscal Year 2012 Financial Highlights: (Year-Over-Year, 12-Month Fiscal Year Ended August 31, 2012)

  • Revenues increased to $42.2 million, or 66.0% year-over-year compared to $25.4 million
  • Enrollment increased 4,718 students or 51.3% for the 2011-2012 school year to approximately 13,918 students with the addition of a third campus
  • Gross profit increased to $18.4 million, or 20.4% year-over-year compared to $15.2 million
  • Earnings Before Income Taxes, Depreciation and Amortization ("EBITDA") increased to $19.7 million, or 35.3% year-over-year compared to $14.6 million
  • For the year ended August 31, 2012, the Company paid $10.0 million in interest, depreciation and amortization, primarily attributable to the acquisition and financing of the approximately $108.2 million acquisition of a third campus
  • Net Income decreased to $9.6 million (22.9% net profit margin), or 28.2% year-over-year compared to $14.6 million.  The lower net income was primarily due to the allocation of costs associated with the acquisition and financing of the third campus, which was previously underutilized.  The overall capacity utilization rate decreased from over 90% for the two schools operated during the year ended August 31, 2011 to approximately 66% for the three schools operated during the year ended August 31, 2012. The Company continues to work toward increasing the capacity utilization of all three schools, which lowers the fixed costs per student based on higher enrollment
  • The Company is exempt from paying corporate income taxes because of its classification in China's primary education sector
  • Basic and diluted earnings per share ("EPS") decreased $0.13 to $0.32 per share for the year ended August 31, 2012 from $0.45 per share for the year ended August 31, 2011 due to the decrease in net income
  • Total Assets were $164.9 million based on their historical book value
  • Stockholders' Equity increased to $52.6 million, or 23.4% year-over-year compared to $42.6 million
  • The Company changed its fiscal year end from December 31 to August 31 at August 31, 2011 to better reflect the school year, which typically runs from September 1 through August 31

"We are pleased with our fiscal year 2012 operating performance and integration of our third school campus," stated Dr. Ren Zhiqing, Chairman and CEO of China Bilingual. "For fiscal year 2013, we will continue to focus on increasing enrollment at our schools while seeking suitable opportunities to expand our business model into additional schools and education programs."

"The acquisition of our new Shanxi South Campus has doubled our enrollment capacity to approximately 20,000 students," said Michael Toups, CFO of China Bilingual.   "Our 15 year operating history and our strong academic reputation provide us with a major competitive advantage in the fast-growing private education sector. We remain dedicated to becoming an education leader in China and increasing long-term value for our shareholders."

The Ministry of Education of the PRC (the "MOE") announced on June 18, 2012 its strong support for private education in the PRC.  Under the National Long-Term Education Reform and Development Plan (2010 - 2020), the MOE has been actively working toward developing policies and measures to promote private education and encourage private capital to enter the field of education. The MOE expects the results of the reform to create a more favorable environment for private education as a driver to benefit the education of society as a whole.

Summary of Fiscal 2012 Results of Operations for the Years Ended August 31, 2012 and 2011

Revenues - During the year ended August 31, 2012, we had total revenues of $42.2 million, an increase of $16.8 million or 66.0% as compared to total revenues of $25.4 million during the year ended August 31, 2011. 

The revenue growth was primarily attributable to the acquisition of our third school campus – the Shanxi South School, which led to an increase in enrollment of 4,718 students for the 2011- 2012 school year from approximately 9,200 students to 13,918 students. We also increased our average full-fare tuition by $226 or 7.2% to $3,352 per student for the 2011 - 2012 school year from $3,126 per student for the 2010 - 2011 school year.  

The school year typically runs from September 1 through August 31 and corresponds to the fiscal year end on August 31. The Company changed its fiscal year end at August 31, 2011 to the new fiscal year end from December 31 in prior years.

Cost of Revenue - During the year ended August 31, 2012, our cost of revenue was $23.8 million (56.5% of revenues), an increase of $13.7 million or 134.4% as compared to cost of revenue of $10.2 million (40.0% of revenues) during the year ended August 31, 2011.

The increase in cost of revenue was primarily the result of an increase in costs in connection with the acquisition of a third campus and the increase in enrollment of approximately 4,681 students. The third campus acquired on August 31, 2011 was previously underutilized and our overall capacity utilization rate decreased from over 90% for our two schools during the year ended August 31, 2011 to approximately 66% for the three schools during the year ended August 31, 2012.

The Company continues to work toward increasing the capacity utilization of all three schools, which lowers the fixed costs per student based on higher enrollment.  The increased costs for the year ended August 31, 2012 was from increased teacher and staff salaries to support the increased enrollment, as well as $3.6 million in depreciation and amortization expense allocated to cost of revenue primarily associated with the approximately $108.2 million acquisition of the third campus.

General and Administrative Expenses - During the year ended August 31, 2012, general and administrative expenses was $3.1 million, an increase of $1.4 million or 79.9% as compared to $1.7 million for the year ended August 31, 2011.

General and administrative expenses increased due to the increase in administrative overhead expenses, costs of operating as a public company and $1.0 million in depreciation and amortization expense allocated to general and administrative expenses, all primarily associated with the newly acquired third campus.

Interest Expense - Interest expense was $5.6 million for the year ended August 31, 2012, an increase of $5.5 million or 5,792.4% as compared to $95,571 for the year ended August 31, 2011.  

The increase in interest expense was a result of the financing for the acquisition of our third school, comprising $2.2 million in interest on a bank loan of RMB 100,000,000 (approximately $15.9 million) obtained by the Company in August 2011 and $3.4 million on the accretion of the implied interest in the long-term and short-term portion of the payable - acquisition resulting from the fair value discount recorded as interest expense based on the payment plan to the seller.

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") - EBITDA was $19.7 million for the year ended August 31, 2012, an increase of $5.1 million or 35.3% compared to $14.6 million for the year ended August 31, 2011.  The increase was primarily attributable to the increase in revenues as a result of the increase in total enrollment of 4,681 students for the year ended August 31, 2012.

Net Income - As a result of the factors described above, net income attributable to shareholders was $9.6 million for the year ended August 31, 2012, a decrease of $3.8 million or 28.2% as compared to $13.4 million for the year ended August 31, 2011.

The decrease between the periods resulted primarily from the increase in interest expense, depreciation and amortization associated with the acquisition of our third school. Total interest, depreciation and amortization, primarily associated with the acquisition of the third school, was $10.0 million.

Basic and diluted earnings per share ("EPS") decreased $0.13 to $0.32 per share for the year ended August 31, 2012 from $0.45 per share for the year ended August 31, 2011 due to the decrease in net income.  

Liquidity and Capital Resources - As of August 31, 2012, cash and cash equivalents were $30.4 million.  The Company's principle source of liquidity comes from deferred school fees from students who attend the three schools. The Company collects tuition in advance of the school year and therefore has no accounts receivable.  The Company has collected substantially all of its prepaid tuition for the 2012 – 2013 school year and recorded it as a liability under deferred school fees of $45.9 million as of August 31, 2012.  Based on the Company's current operating plan, strong profit margin and existing resources, including cash flow generated from operations as well as available bank loans, management estimates it has sufficient resources to meet its working capital requirements.

Plan of Operations - The Company completed the Equity Transfer Agreement dated August 31, 2011 for the acquisition of the Shanxi South Campus, formerly known as the Shanxi Rising School.  The Company expects to continue to expand its enrollment base utilizing the excess capacity at its existing schools in addition to marketing and expanding enrollment at the Shanxi South Campus.  The Company's strategy is to leverage its strong academic reputation to develop additional business.  Management is also actively seeking opportunities to expand the business that can be accretive to earnings.  The Company intends to grow the business model through the acquisition of existing schools and educations programs to increase total enrollment.

About China Bilingual Technology & Education Group Inc.

China Bilingual Technology and Education Group, Inc. is an education company that owns and operates high-quality, K-12 private boarding schools in China. Founded in 1998, the Company currently operates three schools encompassing the kindergarten, elementary, middle and high school levels with approximately 14,583 students and 1,876 faculty and staff for the 2012-2013 school year.

The Company's schools are located in Shanxi and Sichuan Provinces and provide students with an innovative and high-quality education with a focus on fluency and cultural skills in both Chinese and English. The schools regularly rank among the top schools in their respective regions for college entrance rates and national college entrance exam scores. The Company's schools have earned excellent teaching reputations and are recognized for the success of their students and strong faculty.

As China experiences rapid industrialization and economic growth, the government is focused on education as a means to increase worker productivity and raise the standard of living. Parents in China's new middle and upper classes are sending their children to receive private school education to give them an advantage in China's increasingly competitive workforce. The Company's sector in education is not subject to corporate income tax, and the Company anticipates its growth will come from both organic growth through increased enrollment and expansion of its business model and teaching methods into new schools to be acquired by the Company. For more information, visit http://www.ChinaBilingualEdu.com.

Forward-Looking Statements

Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. For additional information, readers should carefully review reports or documents the Company files periodically with the Securities and Exchange Commission.

Contact:      

At the Company:
Michael Toups, Chief Financial Officer
U.S. Office +1 727-641-1357
Email: mtoups@ChinaBilingualEdu.com
http://www.ChinaBilingualEdu.com

China Bilingual Technology & Education Group Inc. and Subsidiaries

Consolidated Balance Sheets




August 31,

2012


August 31,

2011

ASSETS





CURRENT ASSETS:







Cash and cash equivalents


$

30,410,983


$

15,090,521

Inventory



-



3,489

Other current assets



4,078,038



9,606,682

      Total Current Assets



34,489,021



24,700,692








LONG-TERM ASSETS:







Property, plant and equipment, net



82,250,434



84,120,568

Land use rights, net



48,118,088



48,950,660

Deposit paid for long-term assets



-



18,778

    Total Long-Term Assets



130,368,522



133,090,006








TOTAL ASSETS


$

164,857,543


$

157,790,698








LIABILITIES AND STOCKHOLDERS' EQUITY







CURRENT LIABILITIES:







Accounts payable


$

165,743


$

48,824

Short-term payable-acquisition



32,721,915



22,560,426

Due to related parties



4,550,762



7,842,522

Other Payables



951,468



333,202

Refundable deposits



134,661



795,848

Deferred school fees



45,902,425



39,498,972

Home purchase down payment



919,458



878,668

Short-term bank loan



-



15,685,044

Accrued expenses and other current liabilities



1,026,225



908,268

Total Current Liabilities



86,372,657



88,551,774








LONG-TERM LIABILITIES:







Long-term bank loan



11,045,539



-

Long-term payable-acquisition



14,808,754



26,602,306








TOTAL LIABILITIES



112,226,950



115,154,080








STOCKHOLDERS' EQUITY:







Common Stock, $0.001 par value; 75,000,000 shares authorized; 30,069,629, 30,014,528 issued and outstanding as of August 31, 2012 and 2011



30,070



30,015

Additional paid in capital



163,389



67,421

Retained earnings



49,746,368



40,100,740

Accumulated other comprehensive income



2,690,766



2,438,442








TOTAL STOCKHOLDERS' EQUITY



52,630,593



42,636,618








TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

164,857,543


$

157,790,698


The notes to these consolidated financial statements are an integral part of these balance sheets.

 

China Bilingual Technology & Education Group Inc. and Subsidiaries

Consolidated Statements of Operations




For the Years Ended

 August 31,



2012


2011





(Unaudited)




REVENUES



42,200,354



25,419,516

COST OF REVENUES



23,839,738



10,172,606

GROSS PROFIT



18,360,616



15,246,910

OPERATING EXPENSES







   General and Administrative Expenses



3,140,188



1,745,189

TOTAL OPERATING EXPENSES



3,140,188



1,745,189

INCOME FROM OPERATIONS



15,220,428



13,501,721

 OTHER INCOME (EXPENSE)







   Interest Income



56,605



26,604

   Interest Expense



(5,631,405)



(95,571)

NET INCOME BEFORE INCOME TAXES


$

9,645,628


$

13,432,754

INCOME TAX EXPENSE



-



-

NET INCOME


$

9,645,628


$

13,432,754








Earnings per Common Share:







  Basic


$

0.32


$

0.45

  Diluted


$

0.32


$

0.45








Weighted Average Common Shares Outstanding:







  Basic



30,094,205



30,010,932

  Diluted



30,094,205



30,010,932


The notes to consolidated financial statements are an integral part of these statements.

 

China Bilingual Technology & Education Group Inc. and Subsidiaries

Consolidated Statement of Changes in Stockholders' Equity










Accumulated











Additional


Other




Total



Common Stock


Paid-In


Comprehensive


Retained


Stockholders'



Shares


Amount


Capital


Income


Earnings


Equity (Deficit)

Balance, December 31, 2009



26,100,076


$

26,100


$

23,900


$

204,236


$

18,690,599


$

18,944,835

Recapitalization



3,899,929



3,900



(3,900)



-



-



-




















Foreign currency translation adjustment



-



-



-



801,583



-



801,583




















Net Income



-



-



-



-



11,966,081



11,966,081




















Balance, December 31, 2010



30,000,005


$

30,000


$

20,000


$

1,005,819


$

30,656,680


$

31,712,499

Stock Based Compensation



14,523



15



47,421



-



-



47,436

Foreign currency translation adjustment



-



-



-



1,432,623



-



1,432,623

Net Income



-



-



-



-



9,444,060



9,444,060

Balance, August 31, 2011



30,014,528


$

30,015


$

67,421


$

2,438,442


$

40,100,740


$

42,636,618

Stock Based Compensation



55,101



55



95,968



-



-



96,023

Foreign currency translation adjustment



-



-



-



 

252,324



-



252,324

Net Income



-



-



-



-



9,645,628



9,645,628

Balance, August 31, 2012



30,069,629


$

30,070


$

163,389


$

2,690,766


$

49,746,368


$

52,630,593


The notes to these consolidated financial statements are an integral part of these balance sheets.

 

China Bilingual Technology & Education Group Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In US Dollars)




For The Years

Ended August 31,



2012


2011





Unaudited

Cash flows from operating activities:





Net income


$

9,645,628


$

13,432,754

  Depreciation of property and equipment



3,359,844



906,701

  Amortization of land use rights



1,127,377



152,319

  Stock based compensation



105,361



105,449








Changes in operating assets and liabilities:







Adjustments in net cash (used in) provided by operating activities







  Other current assets



5,588,956



(216,787)

  Inventories



3,511



129,951

  Accounts payable



116,679



(91,023)

  Other payables



616,545



(1,302,400)

  Accrued expenses



103,663



418,063

  Refundable deposits



(666,277)



(743,761)

  Deferred school fees



6,168,811



2,726,856

  Home purchase



35,524



129,942








Net cash provided by (used in) operating activities



26,205,622



15,648,064








Cash flows from investing activities:







  Deposits - long term assets



-



(18,230)

  Fixed asset additions



(963,997)



(223,111)

  Business combination



-



(16,021,106)

  Advances to related parties receivables



-



(3,212,987)








Net cash used in investing activities



(963,997)



(19,475,434)








Cash flows from financing activities:







  Payments on acquisition payables



(1,928,508)



-

 (Repayments) of related party loans payables



(3,340,423)



-

  Proceeds debt



11,050,596



8,420,939

 (Repayments) short term debt



(15,786,566)



-








Net cash provided by (used in) financing activities



(10,004,901)



8,420,939








Effect of exchange rate changes on cash



83,738



(394,535)








Net increase (decrease) in cash and cash equivalents



15,320,462



4,199,034








Cash and cash equivalents, beginning of year



15,090,521



10,891,487








Cash and cash equivalents, end of year


$

30,410,983


$

15,090,521








Supplemental disclosures of cash flow information:







  Cash paid for interest


$

2,211,530


$

95,571

  Cash paid for taxes


$

-


$

-

Non cash investing and financing activities:







  Long-term bank loan


$

-


$

-

  Related party loan


$

-


$

7,842,522

  Short-term bank loan


$

-


$

15,685,044

  Short-term payable – acquisition


$

-


$

22,560,426

  Long-term payable – acquisition


$

-


$

26,602,306

  Deposit-long-term asset transfer to fixed asset


$

18,230


$

-


The notes to consolidated financial statements are an integral part of these statements.

SOURCE China Bilingual Technology & Education Group Inc.



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