2014

ChinaEdu Corporation Reports Second Quarter 2012 Results Net Revenue Increases to $18.1 Million, Exceeding Company Guidance

Income from Operations increases 35.4% Year-Over-Year to $3.6 Million

BEIJING, Sept.18, 2012 /PRNewswire/ -- ChinaEdu Corporation (NASDAQ: CEDU) ("ChinaEdu" or the "Company"), a leading online educational services provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2012.(1)

Second Quarter 2012 Highlights  

  • Total net revenue for the second quarter of 2012 was $18.1 million, a 4.5 percent increase from $17.3 million in the corresponding period in 2011.
  • Net revenue from online degree programs was $14.5 million, an increase of 4.5 percent from $13.9 million in the corresponding period of 2011.
  • Net income attributable to ChinaEdu was $1.5 million.
  • Adjusted net income attributable to ChinaEdu(2) was $1.9 million.
  • Net income attributable to ChinaEdu per diluted ADS(3) was $0.086.
  • Adjusted net income attributable to ChinaEdu per diluted ADS(4) was $0.114.
  • Operating margin in the second quarter of 2012 was 19.7 percent.
  • The number of revenue students(5) in online degree programs during the Spring 2012 semester increased roughly 21.4 percent year-over-year to approximately 193,000 students.

Julia Huang, executive chairman of ChinaEdu commented, "The plans we laid for the second quarter of 2012 were well executed and we encountered very few surprises during the quarter. Net revenue for online degree programs increased steadily over the corresponding period in 2011. This growth was complimented by equally steady growth in our non-degree programs, allowing the Company to meet the high end of our quarterly revenue guidance. We continue to leverage our competency in interactive learning to find scalability and persist in our push to be the market leader across our industry. As always, strict cost control measures allow us to build on our strong track record of ongoing profitability."

Financial Results for the Second Quarter Ended June 30, 2012

Net Revenue

Total net revenue for the second quarter of 2012 was $18.1 million, a 4.5 percent increase from $17.3 million in the corresponding period in 2011.

Net revenue from online degree programs for the second quarter of 2012 was $14.5 million, a 4.5 percent increase over $13.9 million in the corresponding period in 2011. As seen in the previous quarter, the increase in net revenue from online degree programs in the second quarter was primarily due to organic growth in revenue students enrolled in core online degree programs. Growth was also attributed to greater revenue contribution from our learning centers network and increased revenue contribution from our online non-degree training programs. Enrollment for online degree programs in the Spring 2012 semester was approximately 193,000 revenue students, an increase of 21.4 percent from approximately 159,000 revenue students enrolled in the Spring 2011 semester.

As of June 30 2012, ChinaEdu's learning centers network was providing recruiting services for 22 universities with 113 operational learning centers, of which 55 were proprietary centers(6) and 58 were contracted centers(7). This compares to 100 operational learning centers as of June 30, 2011, of which 57 were proprietary and 43 were contracted centers.

Net revenue from non-degree programs, including online tutoring programs, private primary and secondary schools and international and elite curriculum programs, in the second quarter of 2012 was $3.6 million, a 4.5 percent increase from $3.5 million in the second quarter of 2011. The growth was mainly driven by an increase in student enrollments at our private schools in Anqing and Pingdingshan.

Cost of Revenue

Total cost of revenue for the second quarter of 2012 was $7.4 million, representing an increase of 6.4 percent, compared to $6.9 million in the corresponding period of 2011.

Cost of revenue for online degree programs in the second quarter of 2012 was $4.9 million, an increase of 5.2 percent from $4.6 million in the corresponding period of 2011. The increase in cost of revenue was primarily due to an increase in staff costs that resulted from a headcount increase across the Company.

Cost of revenue for non-degree programs in the second quarter of 2012 was $2.5 million, an increase of 8.8 percent from $2.3 million in the second quarter of 2011. The cost of revenue increase in this area of the business was primarily related to employee costs, leasing costs and service fees associated with our 101 online tutoring programs and teaching costs, dormitory, canteen and transportation costs related to our private primary schools in Anqing and Pingdingshan.

Gross Profit and Gross Margin

Gross profit in the second quarter of 2012 was $10.7 million, compared to $10.4 million in the corresponding period of 2011. Gross margin decreased slightly to 59.2 percent, compared to 59.9 percent in the corresponding period in 2011.

Gross margin for online degree programs decreased very slightly to 66.3 percent for the second quarter of 2012, compared to 66.5 percent in the corresponding period of 2011.

Gross margin for private schools decreased to 26.1 percent, compared to 29.3 percent in the corresponding period in 2011. The decrease was primarily due to increased teaching costs as well as dormitory, canteen and transportation costs at the Anqing School and Pingdingshan School.

Gross margin for online tutoring programs decreased to 57.7 percent, from 71.4 percent in second quarter of 2011, largely due to decreased barter transaction revenue as well as increased staff and leasing costs associated with these programs.

Operating Expenses

Total operating expenses were $7.2 million in the second quarter of 2012, representing a 7.6 percent decrease from $7.7 million in the corresponding period in 2011. As a percentage of net revenue, total operating expenses decreased to 39.5 percent, compared to 44.7 percent in the corresponding period in 2011. The decrease in the total operating expense was the result of the following:

  • General and administrative expenses for the second quarter of 2012 were $3.8 million, a decrease of 1.5 percent compared to $3.9 million in the corresponding period in 2011. As a percentage of net revenue, general and administrative expenses decreased to 21.1 percent, compared with 22.4 percent in the same period in 2011, the result of increased net revenue.
  • Selling and marketing expenses were $1.8 million in the second quarter of 2012,a decrease of 19.6 percent compared to $2.2 million in the corresponding period in 2011. The decrease in selling and marketing expenses was primarily attributable to a significant decrease in marketing activities surrounding elite curriculum programs. As a percentage of net revenue, selling and marketing expenses decreased to 9.8 percent, compared with 12.8 percent in the same period in 2011.
  • Research and development expenses for the second quarter of 2012 were $1.6 million, a decrease of 5.8 percent compared to $1.7 million in the corresponding period in 2011, primarily because we deployed some research and development employees into maintaining services in 2012.  As a percentage of net revenue, the research and development expense was 8.6 percent in the second quarter of 2012, decreasing from 9.5 percent in the same period in 2011.

Income from Operations

Income from operations in the second quarter of 2012 was $3.6 million, an increase of 35.4 percent compared to $2.6 million in the corresponding period of 2011. This significant increase was mainly due to a substantial rise in student enrollment in online degree programs in the Spring semester. Operating margin increased to 19.7 percent for the second quarter of 2012, compared to 15.2 percent in the corresponding period of 2011.

Adjusted income from operations, a non-GAAP measure defined as income from operations excluding share-based compensation, amortization of intangible assets and land use rights, was $4.0 million for the second quarter of 2012, an increase of 31.7 percent compared to $3.1 million in the corresponding period of 2011.

Adjusted operating margin, a non-GAAP measure defined as the ratio of adjusted income from operations (non-GAAP) over net revenue, for the second quarter of 2012 increased to 22.3 percent, compared to 17.7 percent in the corresponding period of 2011.

Interest and Investment Income

Interest and investment income for the second quarter of 2012 increased 57.8 percent to $0.7 million, compared to $0.4 million for the corresponding quarter of 2011.

Income Tax Expense

In the second quarter of 2012, the income tax expense was $0.9 million and the effective income tax rate was 21.4 percent. This compares with an income tax expense of $0.6 million and effective income tax rate of 20.1 percent in same period of 2011.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests increased to $1.9 million in the second quarter of 2012, compared to $1.7 million in the corresponding period in 2011.

Net Income Attributable to ChinaEdu

Net income attributable to ChinaEdu, which is net income, excluding net income attributable to non-controlling interests, was $1.5 million in the second quarter of 2012, representing an increase of 84.4 percent from $0.8 million in the corresponding period of 2011.

Net income attributable to ChinaEdu per basic and diluted ADS was $0.092 and $0.086, respectively, for the second quarter of 2012, compared to $0.050 and $0.047, respectively, for the corresponding period in 2011.

Adjusted net income attributable to ChinaEdu (non-GAAP) was $1.9 million in the second quarter of 2012 compared to $1.2 million in the corresponding period of 2011. Adjusted net margin, a non-GAAP measure defined as the ratio of adjusted net income attributable to ChinaEdu (non-GAAP) over net revenue, was 10.7 percent in the second quarter of 2012, compared to 7.0 percent in the corresponding period of 2011.

Adjusted net income attributable to ChinaEdu per basic and diluted ADS (non-GAAP) was $0.121 and $0.114, respectively, for the second quarter of 2012, compared to $0.077 and $0.072, respectively, in the corresponding period of 2011.

Deferred Revenue

As of June 30, 2012, deferred revenue was $21.7 million, consisting of current deferred revenue in the amount of $20.1 million and non-current deferred revenue in the amount of $1.6 million. Spring semester tuition is generally received during the second quarter but is recognized both in the second quarter and the third quarter of the calendar year.

Private school revenue is generally received in September, but is amortized over 6 or 12 months. Online tutoring program revenue can be received at program enrollment and is mostly amortized within 12 months.

Cash and Cash Equivalents and Term Deposits

As of June 30, 2012, the Company reported cash and cash equivalents and term deposits of $59.1 million, which primarily consisted of cash, demand deposits with original maturity terms of three months or less, and term deposits with original maturity terms of greater than three months but less than one year.

Amounts Due from Related Parties

Amounts due from related parties, which represents cash owed to the Company by collaborative alliance partners, were $47.1 million as of June 30, 2012 compared to $37.5 million as of December 31, 2011.

2012 Year-to-Date Financial Results

Net Revenue

For the six months ended June 30, 2012, total net revenue was $36.0 million, representing an increase of 13.7 percent over $31.7 million in the corresponding period in 2011. Net revenue from online degree programs for the first half of 2012 was $29.0 million, representing a 15.2 percent increase from $25.1 million in the corresponding period in 2011. Net revenue from non-online degree programs for the first half of 2012 was $7.1 million, compared to $6.6 million in 2011, an 8.0 percent increase. The growth in total net revenue was attributable to strong enrollment in online degree programs in the Fall semester of 2011 and in the Spring semester of 2012, particularly at learning centers. Growth in net revenue at the Anqing School increased, while the Company saw a decrease in revenue contributed by 101 online tutoring programs and international and elite curriculum programs.

Cost of Revenue

For the six months ended June 30, 2012, total cost of revenue was $14.6 million, an increase from $13.2 million in the corresponding period in 2011. Cost of revenue for online degree programs in the first half of 2012 was $9.7 million, an increase of 9.1 percent compared to $8.8 million in the corresponding period of 2011. The increase was primarily due to cost increases in headcount and the expansion of the Company's learning centers network.  

Cost of revenue for non-online degree programs in the first half of 2012 was $4.9 million, an increase of 12.4 percent compared to $4.4 million in the corresponding period of 2011. The cost of revenue increase was primarily related to employee costs, leasing costs associated with our 101 online tutoring programs and teaching costs, dormitory, canteen and transportation costs related to our private primary schools in Anqing and Pingdingshan. Cost of revenue for international and elite curriculum programs decreased as those programs have grown smaller.

Gross Profit

Gross profit for the six months ended June 30, 2012 was $21.5 million, an increase of 16.2 percent compared with $18.5 million for the corresponding period in 2011. The increase was primarily due to an increase in gross margin across online degree programs.

Income from Operations

Income from operations was $7.1 million for the six months ended June 30, 2012, representing an increase of 63.1 percent from $4.3 million for the corresponding period in 2011. Operating margin was 19.6 percent for the six months ended June 30, 2012 compared to 13.7 percent for the corresponding period in 2011.

Adjusted income from operations (non-GAAP) was $8.1 million for the first half of 2012, representing an increase of 55.3 percent, compared to $5.2 million in the corresponding period of 2011. Adjusted operating margin (non-GAAP) for the six months ended June 30, 2012 was 22.5 percent, compared to 16.4 percent for the corresponding period in 2011.

Interest Income and Investment Income

Interest income and investment income increased 71.7 percent to $1.3 million in the first half of 2012, compared to $0.7 million in the corresponding period of last year.

Income Tax Expense

Income tax expense for the first half of 2012 was $1.8 million, as compared with $1.0 million for the corresponding period of last year.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests was $3.6 million in first half of 2012, an increase of 27.8 percent compared to $2.8 million in the first half of 2011. The increase was primarily attributable to a non-controlling interest impact related to the increase in net income from online degree programs in the first half of 2012.

Net Income attributable to ChinaEdu

Net income attributable to ChinaEdu was $3.1 million for the six months ended June 30, 2012, representing an increase of 129.9 percent from $1.3 million for the corresponding period in 2011. Net margin was 8.6 percent for the six months ended June 30, 2012, compared to 4.2 percent for the corresponding period in 2011.

Adjusted net margin was 11.3 percent for the six months ended June 30, 2012, compared to 6.9 percent for the corresponding period of 2011.The increase was primarily due to increased net profit in the first half of 2012.

Third  Quarter 2012 Guidance

ChinaEdu management expects total net revenue in the third quarter of 2012 to range from RMB119 million to RMB122 million or $18.7 million to $19.2 million, representing a five percent to seven percent increase compared to the corresponding period in 2011. This forecast reflects ChinaEdu's current and preliminary view, which is subject to change.

Conference Call

ChinaEdu's management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on September 19, 2012 (8:00 p.m. Beijing/Hong Kong Time on September 19, 2012).

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

International:      

+6567239381

Hong Kong:         

+85224750994

United States:     

       +1 (718) 354-1231

Toll-free China, Mobile:   

4006208038

Toll-free China:   

8008190121

Toll-free United States:   

   +1 (866) 519-4004

Passcode:         

22035522

A live and archived webcast of the conference call will be available on the investor relations page of ChinaEdu's website at http://ir.chinaedu.net and a replay of the conference call may be accessed by phone until September 26, 2012.

Dial-in numbers for the replay are as follows:

Toll Free United States     

+1 866 214 5335

International              

+1 718 354 1232

Conference ID:          

22035522

Non-GAAP Financial Measures

To supplement the unaudited condensed consolidated financial information presented in accordance with Generally Accepted Accounting Principles in the United States of America ("GAAP"), the Company uses non-GAAP measures of income from operations and net income attributable to ChinaEdu, which are adjusted from results based on GAAP to exclude certain non-cash items of share-based compensation and amortization of intangible assets and land use rights. Adjusted operating margin defined as the ratio of adjusted operating income from operation over net revenue. Adjusted net income attributable to ChinaEdu per basic and diluted ADS are a non-GAAP measure which are computed using adjusted net income attributable to ChinaEdu over the number of ADSs used in net income attributable to ChinaEdu per basic and diluted ADS calculation.

These non-GAAP financial measures are provided to enhance the investors' overall understanding of the Company's current and past financial performance in on-going core operations as well as prospects for the future. These measures should be considered in addition to results prepared and presented in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Management considers the non-GAAP information as important measures internally and therefore deems it important to provide all of this information to investors.

About ChinaEdu

ChinaEdu Corporation is an educational services provider in China, incorporated as an exempted limited liability company in the Cayman Islands. Established in 1999, the Company's primary business is to provide comprehensive services to the online degree programs of leading Chinese universities. These services include academic program development, technology services, enrollment marketing, student support services and finance operations. The Company's other lines of businesses include the operation of private primary and secondary schools, online interactive tutoring services and providing marketing, support for international and elite curriculum programs and online learning community for adult students.

The Company believes it is the largest service provider to online degree programs in China in terms of the number of higher education institutions that are served and the number of student enrollments supported. The Company currently has entered into collaborative alliances with 12 universities, ranging from 10 to 50 years in length. The Company has also entered into technology agreements with 6 universities. Besides, ChinaEdu performs recruiting services for 22 universities through nationwide learning center network.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and contingencies, many of which are beyond our control which may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's Annual Report on Form 20-F for the year ended December 31, 2011, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Unless required by law, the Company undertakes no obligation to (and expressly disclaim any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For investor and media inquiries, please contact:

Helen Plummer
Senior Investor Relations Coordinator
ChinaEdu Corporation
Phone: +1 908-442-9395
E-mail: helen@chinaedu.net

Jin Yu
Investor Relations Manager
ChinaEdu Corporation
Phone: +86 15711096022
E-mail: jinyu@chinaedu.net

(1) The reporting currency of the Company is RMB, but for the convenience of the reader, the amounts for the three and six months ended on June 30, 2012 are presented in U.S. dollars. Unless otherwise stated, all translations from RMB to U.S. dollars were made at the rate of RMB6.353 to $1.00, the noon buying rate in effect on June 30, 2012 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or U.S. dollar amounts referred could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release. An explanation of the Company's non-GAAP financial measures is included in the section entitled "Non-GAAP Financial Measures" below, and the related reconciliations to GAAP financial measures are presented in the accompanying financial statements.

(2) "Adjusted net income attributable to ChinaEdu" is a non-GAAP measure defined as net income attributable to ChinaEdu excluding share-based compensation net of non-controlling interests' portion, and amortization of intangible assets and land use rights.

(3) "ADS" is American Depositary Share. Each ADS represents three ordinary shares.

(4) "Adjusted net income attributable to ChinaEdu per diluted ADS" is a non-GAAP measure which is computed using adjusted net income attributable to ChinaEdu over the number of ADSs used in net income attributable to ChinaEdu per diluted ADS calculation.

(5) "Revenue students" refers to students of university online degree programs who have paid tuitions. The numbers for the three months ended June 30, 2012 and 2011 are revenue students in Spring 2012 and Spring 2011, respectively.

(6) Proprietary centers refer to self-owned learning centers operated either under the Company's own brand name or the brand name of a university pursuant to a licensing arrangement with that university.

(7) Contracted centers refer to agreement with third party learning centers pursuant to which the Company only provides assistance in applying for approval from provincial level education authorities as well as securing additional university online degree programs. In return, the Company receives a percentage of the tuition earned by these third party learning centers.

 

ChinaEdu Corporation

Unaudited Condensed Consolidated Balance Sheets






(in thousands, unaudited)

December 31, 

2011

June 30,

2012

June 30, 

2012



RMB

RMB

US$






Current assets:





Cash and cash equivalents

273,746

179,271

28,218


Term deposits 

98,163

196,028

30,856


Short-term investments

34,648

23,072

3,632


Accounts receivable, net 

31,478

47,231

7,434


Prepaid expenses and other current assets 

22,725

26,222

4,127


Amounts due from related parties 

238,016

299,101

47,080


Deferred tax assets-current

5,697

1,180

186


Assets held for sale

-

4,201

661

Total current assets 

704,473

776,306

122,194


Deferred tax assets-non-current

8,217

9,420

1,483


Rental deposits

2,213

1,776

280


Land use rights

26,657

26,353

4,148


Property and equipment, net 

239,210

228,632

35,988


Deposits paid for acquisition of property and equipment

17,902

17,902

2,818


Acquired intangible assets, net 

63,638

62,598

9,853


Goodwill 

43,255

43,255

6,809

Total assets 

1,105,565

1,166,242

183,573






Liabilities and equity




Current liabilities:





Accounts payable (including accounts payable of the consolidated VIE without recourse to the Group of 1,975 and 7,026 as of December 31, 2011 and June 30, 2012, respectively)

2,239

7,064

1,112


Deferred revenues-current (including deferred revenues of the consolidated VIE without recourse to the Group of 20,525 and 21,092 as of December 31, 2011 and June 30, 2012, respectively)

125,332

127,546

20,076


Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIE without recourse to the Group of 18,644 and 23,849as of December 31, 2011 and June 30, 2012, respectively)

91,980

101,161

15,923


Amounts due to related parties (including amounts due to related parties of the consolidated VIE without recourse to the Group of 1,953 and 1,501 as of December 31, 2011 and June 30, 2012, respectively)

13,146

34,159

5,377


Income taxes payable (including income taxes payable of the consolidated VIE without recourse to the Group of 8,893 and 10,717 as of December 31, 2011 and June 30, 2012, respectively)

51,448

44,860

7,061


Other taxes payable (including other taxes payable of the consolidated VIE without recourse to the Group of 3,047 and 3,408 as of December 31, 2011 and June 30, 2012, respectively)

21,970

18,568

2,923

Total current liabilities 

306,115

333,358

52,472


Deferred revenues-non-current (including deferred revenues of the consolidated VIE without recourse to the Group of 33 and 29 as of December 31, 2011 and June 30, 2012, respectively)

12,059

10,210

1,608


Deferred tax liabilities-non-current (including deferred tax liabilities of the consolidated VIE without recourse to the Group of 1,017 and 997 as of December 31, 2011 and June 30, 2012, respectively)

9,243

8,894

1,400


Unrecognized tax benefit (including unrecognized tax benefit of the consolidated VIE without recourse to the Group of 2,364 and 2,927 as of December 31, 2011 and June 30, 2012, respectively)

6,089

7,314

1,151

Total liabilities 

333,506

359,776

56,631






    ChinaEdu shareholders' equity

604,806

632,030

99,485


Noncontrolling interests

167,253

174,436

27,457

Total  equity 

772,059

806,466

126,942

Total liabilities and equity 

1,105,565

1,166,242

183,573

 

 

ChinaEdu Corporation

Unaudited Condensed Consolidated Statements of Operations 



Three Months Ended 


Six Months Ended 

(in thousands,except for percentage, share, and per share information)


June 30, 2011


June 30, 2012


June 30, 2012


June 30, 2011


June 30, 2012


June  30, 2012



RMB


RMB


US$


RMB


RMB


US$














Gross Revenue *


115,327


119,519


18,813


211,189


239,151


37,643














Business Tax


5,296


4,486


706


9,808


10,191


1,603














Net Revenue:













Online degree programs


88,085


92,089


14,495


159,750


184,016


28,965

Online tutoring programs


7,250


6,389


1,006


12,906


12,398


1,952

Private primary and secondary schools


11,880


13,815


2,175


23,120


27,351


4,305

International and elite curriculum programs


2,816


2,740


431


5,605


5,195


818

Total net revenue


110,031


115,033


18,107


201,381


228,960


36,040














Cost of revenue:













Online degree programs


29,500


31,035


4,885


56,212


61,354


9,657

Online tutoring programs


2,077


2,700


425


4,090


5,421


853

Private primary and secondary schools


8,395


10,205


1,606


16,756


20,011


3,150

International and elite curriculum programs


4,168


3,020


475


6,833


5,683


895

Total cost of revenue


44,140


46,960


7,391


83,891


92,469


14,555














Gross profit:













Online degree programs


58,585


61,054


9,610


103,538


122,662


19,308

Online tutoring programs


5,173


3,689


581


8,816


6,977


1,099

Private primary and secondary schools


3,485


3,610


569


6,364


7,340


1,155

International and elite curriculum programs


(1,352)


(280)


(44)


(1,228)


(488)


(77)

Total gross profit


65,891


68,073


10,716


117,490


136,491


21,485














Online degree programs


66.5%


66.3%


66.3%


64.8%


66.7%


66.7%

Online tutoring programs


71.4%


57.7%


57.7%


68.3%


56.3%


56.3%

Private primary and secondary schools


29.3%


26.1%


26.1%


27.5%


26.8%


26.8%

International and elite curriculum programs


(48.0%)


(10.2%)


(10.2%)


(21.9%)


(9.4%)


(9.4%)

Gross margin


59.9%


59.2%


59.2%


58.3%


59.6%


59.6%














Operating expenses:













General and administrative


24,612


24,251


3,817


46,509


50,061


7,880

Selling and marketing


14,083


11,316


1,781


23,151


21,779


3,428

Research and development


10,501


9,894


1,557


20,259


19,671


3,096

Total operating expenses


49,196


45,461


7,155


89,919


91,511


14,404

Income from operations


16,695


22,612


3,561


27,571


44,980


7,081

Operating margin


15.2%


19.7%


19.7%


13.7%


19.6%


19.6%














Other income


299


266


42


422


513


81

Interest income 


2,139


3,583


564


4,049


6,571


1,034

Investment income


629


786


124


629


1,460


230

Income before income tax


19,762


27,247


4,291


32,671


53,524


8,426

Income tax expense


(3,981)


(5,831)


(919)


(6,456)


(11,314)


(1,782)

Net income


15,781


21,416


3,372


26,215


42,210


6,644

Net income attributable to the noncontrolling interests


(10,741)


(12,124)


(1,908)


(17,681)


(22,593)


(3,556)

Net income attributable to ChinaEdu


5,040


9,292


1,464


8,534


19,617


3,088

Net margin


4.6%


8.1%


8.1%


4.2%


8.6%


8.6%














Net income attributable to ChinaEdu per ADS:













      Basic 


0.32


0.59


0.092


0.54


1.24


0.195

      Diluted 


0.30


0.55


0.086


0.50


1.16


0.184














Weighted average aggregate number of ADSs outstanding:













      Basic 


15,853,838


15,852,495


15,852,495


15,881,875


15,799,250


15,799,250

      Diluted 


17,000,614


16,927,279


16,927,279


17,114,971


16,844,208


16,844,208



























* Gross revenue are detailed as follows













Online degree programs


93,028


96,268


15,153


168,837


193,586


30,471

Online tutoring programs


7,414


6,511


1,025


13,264


12,668


1,994

Private primary and secondary schools


11,905


13,837


2,178


23,157


27,395


4,312

International and elite curriculum programs


2,980


2,903


457


5,931


5,502


866

 

ChinaEdu Corporation

Unaudited Condensed Consolidated Statements of Comprehensive Income 


Three Months Ended


Six Months Ended 

(in thousands, unaudited)


June 30,

2011


June 30, 2012


June 30, 2012


June 30, 2011


June 30, 2012


June 30, 2012



RMB


RMB


US$


RMB


RMB


US$

Net income


15,781


21,416


3,372


26,215


42,210


6,644

Other comprehensive income, net of tax













  Foreign currency translation adjustments


(246)


120


19


86


127


20

  Change in fair value of available for sale investments


(14)


205


32


(177)


442


70

Comprehensive income


15,521


21,741


3,423


26,124


42,779


6,734

Less: comprehensive income attributable to the noncontrollng interest


12,665


11,106


1,748


20,653


21,552


3,392

Comprehensive income attributable to Chinaedu 


2,856


10,635


1,675


5,471


21,227


3,342

 

ChinaEdu Corporation

Unaudited Condensed Consolidated Statements of Cash Flow



Three Months Ended 


Six Months Ended 

(in thousands, unaudited)


June 30, 2011


June 30, 2012


June 30, 2012


June 30, 2011


June 30, 2012


June  30, 2012



 RMB 


RMB


US$


RMB


RMB


US$














Operating activities:













       Net income 


15,781


21,416


3,372


26,215


42,210


6,644

       Adjustments to reconcile net income to net cash provided by operating activities: 













           Share-based compensation 


1,649


1,892


298


3,204


4,111


647

           Depreciation and amortization of property and equipment 


5,748


6,304


992


11,535


12,608


1,985

           Amortization of land use rights 


152


152


24


304


304


48

           Amortization of acquired intangible assets 


1,017


1,036


163


2,034


2,021


318

           Gain on sale of investment 


(687)


(158)


(25)


(687)


(227)


(36)

           Loss on sale of bonds 


58


-


-


58


-


-

           Loss on discontinued operations 


-


-


-


16


-


-

           Loss from disposal of property and equipment  


17


16


3


82


828


130

      Changes in assets and liabilities 













           Accounts receivable 


(22,492)


(24,932)


(3,924)


(2,696)


(16,093)


(2,533)

           Inventory


360


-


-


358


-


-

           Provision for Accounts Receivable


-


-


-


-


340


54

           Prepaid expenses and other current assets 


(1,576)


(377)


(60)


(2,065)


(2,590)


(409)

           Amounts due from related parties 


(96,759)


(65,981)


(10,386)


(23,964)


(64,143)


(10,097)

           Rental deposits 


(275)


(34)


(5)


(1,592)


437


69

           Accounts payable 


3,261


2,324


366


4,582


4,838


762

           Deferred revenues 


74,726


79,370


12,493


13,454


379


60

           Accrued expenses and other current liabilities 


17,173


3,167


499


10,221


9,141


1,439

           Amounts due to related parties 


8,368


(6,596)


(1,038)


(1,637)


3,356


528

           Income tax payable  


3,535


4,021


633


(7,724)


(6,581)


(1,036)

           Other taxes payable


3,401


1,558


245


(3,573)


(3,402)


(535)

           Deferred income taxes 


(1,079)


608


96


(32)


2,964


467

           Unrecognized tax benefit 


662


586


92


1,258


1,226


193

Net cash provided by (used in) operating activities


13,040


24,372


3,838


29,351


(8,273)


(1,302)














Investing activities:













           Purchase of property and equipment 


(6,355)


(2,071)


(326)


(14,276)


(2,874)


(452)

           Proceeds from discontinued operations 


-


-


-


233


-


-

           Deposits paid for acquisition of property and equipment 


(14,546)


-


-


(14,546)


-


-

           Purchase of/ maturity of term deposits 


37,401


(122,000)


(19,204)


(5,599)


(97,865)


(15,405)

           Purchase of investments 


(11,000)


(12,571)


(1,979)


(17,000)


(12,571)


(1,979)

           Proceeds from the sale of investment 


8,687


14,634


2,303


8,687


24,952


3,928

           Proceeds from the sale of bonds 


2,859


-


-


2,859


-


-

           Proceeds of exclusive contractual right 


-


(980)


(154)


-


(980)


(154)

           Proceeds from disposal of property and equipment 


1


1


-


1


1


-

Net cash  provided  by (used in) investing activities


17,047


(122,987)


(19,360)


(39,641)


(89,337)


(14,062)














Financing activities:













           Cash dividends paid to noncontrolling shareholders 


-


(4,642)


(731)


(13,461)


(4,642)


(731)

           Capital contributions by noncontrolling shareholders 


-


-


-


1,000


-


-

           Capital contributions by shareholders 


-


980


154


-


980


154

           Proceeds from exercise of share options 


94


2,777


437


374


3,722


586

           Prepayment for shares repurchase 


(130)


(886)


(139)


(130)


(886)


(139)

           Repurchase and cancellation of ordinary shares 


(5,723)


(385)


(61)


(5,723)


(385)


(61)

           Repayment of loan from related party 


(25,000)


-


-


(25,000)


-


-

           Loan from related party 


-


5,500


866


35,500


5,500


866

Net cash (used in) provided  by financing activities


(30,759)


3,344


526


(7,440)


4,289


675














Effect of foreign exchange rate changes


(39)


(6)


(1)


112


(11)


(2)














CASH AND CASH EQUIVALENTS, beginning of period


173,586


275,691


43,395


190,493


273,746


43,089














CASH AND CASH EQUIVALENTS, end of period


172,875


180,414


28,398


172,875


180,414


28,398














Net  decrease in cash and cash equivalents


(711)


(95,277)


(14,997)


(17,618)


(93,332)


(14,691)














Breakdown of cash and cash equivalents













            Included in cash and cash equivalents  


172,875


179,271


28,218


172,875


179,271


28,218

            Included in assets held for sale 


-


1,143


180


-


1,143


180

 

ChinaEdu Corporation

Unaudited reconciliations from income from operations to adjusted income from operations (non-GAAP) and adjusted operating margin (non-GAAP)
















Three Months Ended 


Six Months Ended 

(in thousands, unaudited)


June 30, 2011


June 30, 2012


June 30, 2012


June 30, 2011


June 30,
2012


June 30, 2012



 RMB 


RMB


US$


RMB


RMB


US$














Net revenue


110,031


115,033


18,107


201,381


228,960


36,040

Income from operations 


16,695


22,612


3,561


27,571


44,980


7,081

Adjustment:













  Share-based compensation


1,649


1,892


298


3,204


4,111


647

  Amortization of intangible assets and land use rights


1,169


1,188


187


2,338


2,325


366

Adjusted income from operations (non-GAAP)


19,513


25,692


4,046


33,113


51,416


8,094

Adjusted operating margin (non-GAAP)


17.7%


22.3%


22.3%


16.4%


22.5%


22.5%














ChinaEdu Corporation

Unaudited reconciliations from net income attributable to ChinaEdu to adjusted net income attributable to ChinaEdu (non-GAAP), adjusted net margin (non-GAAP) and adjusted net income per ADS (non-GAAP)
















Three Months Ended 


Six Months Ended 

(in thousands, unaudited)


June 30, 2011


June 30, 2012


June 30, 2012


June 30, 2011


June 30, 2012


June 30, 2012



 RMB 


RMB


US$


RMB


RMB


US$














Net revenue


110,031


115,033


18,107


201,381


228,960


36,040

Net income attributable to ChinaEdu


5,040


9,292


1,464


8,534


19,617


3,088

Adjustment:













  Share-based compensation


1,649


1,892


298


3,204


4,111


647

  Share-based compensation attributable to the noncontrolling interest


(122)


(110)


(17)


(256)


(287)


(45)

  Amortization of intangible assets and land use rights


1,169


1,188


187


2,338


2,325


366

Adjusted net income attributable to ChinaEdu (non-GAAP)


7,736


12,262


1,932


13,820


25,766


4,056

Adjusted net margin (non-GAAP)


7.0%


10.7%


10.7%


6.9%


11.3%


11.3%














Adjusted net income attributable to ChinaEdu per ADS (non-GAAP):













      Basic 


0.49


0.77


0.121


0.87


1.63


0.26

      Diluted 


0.46


0.72


0.114


0.81


1.53


0.24














Weighted average aggregate number of ADSs outstanding:













      Basic 


15,853,838


15,852,495


15,852,495


15,881,875


15,799,250


15,799,250

      Diluted 


17,000,614


16,927,279


16,927,279


17,114,971


16,844,208


16,844,208

 

SOURCE ChinaEdu Corporation



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