EXHIBIT 99.1
ChinaCast Education Corporation Announces First Quarter Results With Net Income Up 41 Percent From Last Year
BEIJING, May 21, 2007 (PRIME NEWSWIRE) -- ChinaCast Education Corporation (OTCBB:CEUC) ("ChinaCast" or "the Company"), one of the leading e-learning services providers to educational institutions, government agencies and corporate enterprises in China, today announced first quarter 2007 financial results.
FIRST QUARTER HIGHLIGHTS
-- Gross margin of 57% and net margin of 33% versus 47% and 22% in Q1
FY2006
-- Q1 Revenues off 6% due to re-structuring of Tongfang Education
joint venture and lower equipment sales which were particularly
high in the first quarter of 2006
-- Establishment of a new wholly-owned subsidiary, ChinaCast Language
Training Education Technology Limited ("CLTET"), to provide English
language training services in China
-- Signing of additional post-secondary education institution distance
learning customer -- Shanghai University of Electric Power
Financial Highlights (a)
In millions
RMB USD
Q1 2007 Q1 2006 Q1 2007 Q1 2006
Total Revenue 39.9 42.4 5.1 5.3
University Distance
Learning 14.7 13.8 1.9 1.7
K-12 Educational
Content 15.7 18.3 2.0 2.3
Vocational/Career
Training 9.5 10.4 1.2 1.3
Gross Profit 22.9 19.7 3.0 2.4
Profit from Operations 16.0 14.1 2.0 1.7
Profit Before Income Tax 18.8 14.8 2.4 1.8
Net Profit 13.0 9.2 1.7 1.1
Share count (Basic) 24,830,744 16,657,872 24,830,744 16,657,872
Per Share Data RMB USD
Q1 2007 Q1 2006 Q1 2007 Q1 2006
Earnings per share
(Basic) 0.52 0.55 0.07 0.07
Earnings per share
(Diluted) 0.49 0.53 0.06 0.07
Weighted avg. shares
for computation 24,830,744 16,657,872 24,830,744 16,657,872
Share count (Diluted) 26,268,007 17,345,807 26,268,007 17,345,807
(a) Dollar values calculated at the exchange rate of US$1 = RMB 7.73 at
31 March 2007, and US$1 = RMB 8.07 at 31 March 2006 and are included
for reader convenience only.
Chairman and Chief Executive, Ron Chan, commented: "We are pleased with the strong growth in net income as our higher margin education service revenues increased by 10% year-on-year. Our overall revenue was off 6% due to a decrease in equipment sales and the restructuring of our Tongfang Education post-secondary education joint venture, which is aimed at allowing us to have a direct stake in the operations of this business and a closer relationship with the Ministry of Personnel.
"During the first quarter, we announced our entry into the private education market in China with the establishment of a new wholly-owned subsidiary, ChinaCast Language Training Education Technology Limited ("CLTET"), to provide English language training services. We hope to expand the number of CLTET training centers nationwide starting in the second half of this year and establish approximately 20 language training centers in the next 18 months. In addition, we have recently signed an additional post-secondary educational e-learning customer, Shanghai University of Electric Power, and plan to roll out up to 50 remote training classrooms over the next 12 months. Going forward, since over 98% of our Singapore shareholders have accepted our stock swap offer, we have applied for de-listing from the Singapore Stock Exchange and hope to be listed on the NASDAQ within the next 90 days."
First quarter revenues were down 6% from the previous year to RMB39.9 million in 2007. Service revenue which is mainly recurring came to RMB33.5 million, up 10% whereas equipment revenue dropped 47% to RMB6.3 million for the first quarter of 2007.
Revenues from the post-secondary education distance learning segment totaled RMB14.7 for the first quarter of 2007, up 7% from Q1 2006. The total number of post-secondary students enrolled in courses using the Group's distance learning platforms including contracts with CCLBJ but excluding Tongfang Education increased by 15,000, or 15% over the same period last year, to reach 116,000 at end March 2007. This increase reflects the continuing growth in demand for higher education in China.
Net revenue attributable to Tongfang Education was RMB2.4 million and RMB1.1 million for the first quarter of 2006 and 2007 respectively. Net revenue from post-secondary education distance learning service (excluding Tongfang's contribution) increased from RMB13.4 million in the first quarter of 2006 to RMB15.1 million in the first quarter of 2007.
First quarter revenues in the K-12 and content delivery business decreased from RMB18.3 million in 2006 to RMB15.7 million in 2007. This 14% drop is attributed to a fall in equipment sales in this business line. The number of subscribing schools for K-12 distance learning services remains steady at 6,500.
Revenues from vocational and career training services and government/enterprise training and networking services decreased from RMB10.4 in the first quarter of 2006 to RMB9.5 million for the first quarter of 2007 mainly due to lower equipment sales for projects.
Costs of sales of the company were down 30% from RMB22.7 million during the first quarter of 2006 as compared with RMB17 million for the first quarter of 2007. Lower equipment sales in the first quarter of 2007 (down 47%) which are characterized by lower margins explain this decrease.
The Company's gross profit margin was 57% for the first quarter of 2007, up by over 10 percentage points from the same period last year. This increase was a result of lower equipment sales which carry lower margins than services plus, margins on service revenue were higher after the Tongfang Education disposal since that entity generated lower margins than the service revenue of the Group.
Total net operating expenses were RMB6.9 million for the first quarter, up 10% from last year. Selling and marketing expenses remained unchanged at RMB0.7 million in the first quarter of 2006 and 2007. General and administrative expenses were up 22% to RMB10.1 million on an increase in professional fees associated with the business combination of the Company and CCH and the increase in payroll. Professional fees increased from RMB0.9 million in the first quarter of 2006 to RMB2 million in 2007 owing to additional compliance costs in the U.S. Payroll increased from RMB3.2 million to RMB4.5 million in the first quarter of 2007 following business expansion.
Foreign exchange losses came to RMB0.8 million for the first quarter of 2007 compared with RMB0.5 million last year owing to the continuous appreciation of the Renminbi against the U.S. dollar. The company has significant U.S. dollar holdings that it cannot convert to RMB because of exchange control regulations in China.
Interest income was up sharply from RMB0.7 million to RMB2.9 million in the first quarter of 2007 due to the increase in the Group's cash and term deposits.
Minority interest of RMB1.8 million arose mainly as a result of the 6.27% of CCH shareholders who had not participated in the offer of exchange for CEC shares by the end of the first quarter of 2007. By April 2007, the Group had acquired 98.0% of CCH and is in the process of acquiring the remaining shares.
In February 2007, the Group streamlined its beneficial holding in Tongfang Chuangxin. It did so by disposing of a 50% stake it owned in a holding company, Beijing Tongfang Digital Education Technology Limited, which held a 51% stake in a joint venture -- Beijing Tongfang Chuangxin Technology Limited ("Tongfang Chuangxin") -- in exchange for a direct 17.85% stake in Tongfang Chuangxin and RMB6.3 million. Other holders of the Tongfang joint venture are the Ministry of Personnel which holds approximately 50% and Tongfang Co. Limited which holds roughly 32%. As a result, the Group no longer consolidates the results of Tongfang Education and Tongfang Chuangxin. The consolidated result of Tongfang Education was shown as income from discontinued operations for the 3 months ended March 31, 2006, and 2007 respectively. Net loss on discontinued operations amounted to RMB277,000 and RMB346,000 for the 3 months ended March 31, 2006 and 2007 respectively.
Cash and bank balances together with term deposits decreased from RMB721.0 million at the end of 2006 to RMB682.2 million as at March 31, 2007, down 5.4% due to the settlement of the accrued professional fees associated with the acquisition of CCH.
Net cash used in operating activities totaled RMB25.0 million for the first quarter of 2007 compared with cash generated from operations of RMB16.4 million for the same period in 2006. This difference was chiefly due to the settlement of the accrued professional fees owing to the successful acquisition of CCH.
Net cash used in investment activities during the first quarter of 2007 came to RMB41.1 million mainly reflecting transfer to fixed deposit of RMB42.6 million. For the quarter ended March 31, 2007, transfer to fixed deposits amounted to RMB41.0 million and a deposit of RMB10 million was paid as a deposit on the business acquisition.
About ChinaCast Education Corporation ("ChinaCast") (OTCBB:CEUC)
Established in 1999 with offices in Beijing, Shanghai and Hong Kong, ChinaCast provides e-learning services and to educational institutions, government agencies and Fortune 500 enterprises. These services include interactive distance learning applications, multimedia education content, educational portals, vocational/career training and broadband networking services.
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 Form 10KSB for the fiscal year ended December 31, 2006. 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 r elate 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.
Conference Call Information Replay Details
Date: Tuesday, May 22, 2007 The replay will be available
Time: 8 am EDT* from 11:00 pm EDT* Tuesday May
22, 2007 until midnight EDT*
June 5, 2007
Conference Dial In Numbers: Conference Replay Dial In Numbers:
U.S./Canada Toll Free: U.S./Canada Toll Free:
1 800 475 3716 1 888 203 1112
International: +1 719 457 2728 International: +1 719 457 0820
Pass Code: 9122674
Live Webcast:
http://ir.chinacast.com.cn/events.cfm
Web Replay:
http://ir.chinacast.com.cn/events.cfm
*EDT=U.S. Eastern Daylight Savings Time
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Un-audited)
(In thousands, except share-related data)
As of As of
March 31, December 31,
2007 2006
----------------- ------------
US$ RMB RMB
Assets
Current assets:
Cash and cash equivalents 25,546 196,705 278,067
Term deposits 63,057 485,543 442,921
Accounts receivable, net of allowance
of RMB148 for both 2007 and 2006,
respectively 5,198 40,023 41,692
Inventory - satellite communication
related equipment and equipment
accessories 397 3,057 3,067
Prepaid expenses and other current
assets 1,310 10,088 5,199
Amounts due from related parties 388 2,989 2,583
------- ------- -------
Total current assets 95,896 738,405 773,529
Property and equipment, net 1,490 11,470 14,332
Acquired intangible assets, net -- -- 14,028
Long-term investments 1,794 13,811 5,114
Deferred tax assets 17 129 172
Non-current advances to a related
party 16,631 128,055 129,866
Goodwill 252 1,943 3,538
------- ------- -------
Total assets 116,080 893,813 940,579
======= ======= =======
Liabilities, minority interest, and
shareholders' equity
Current liabilities:
Accounts payable 2,493 19,197 16,403
Accrued expenses and other current
liabilities 5,199 40,031 96,204
Amounts due to related parties 6 44 4,469
Income taxes payable 3,389 26,100 42,769
Current portion of capital lease
obligation 19 145 146
------- ------- -------
Total current liabilities 11,106 85,517 159,991
------- ------- -------
Non-current liabilities:
Capital lease obligation, net of
current portion -- -- 37
Unrecognized tax benefits 3,143 24,197 --
------- ------- -------
Total non-current liabilities 3,143 24,197 37
------- ------- -------
Total liabilities 14,249 109,714 160,028
------- ------- -------
Minority interest 7,556 58,181 145,501
------- ------- -------
CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Un-audited) -- continued
(In thousands, except share-related data)
As of As of
March 31, December 31,
2007 2006
------------------ ------------
US$ RMB RMB
Contingencies
Shareholders' equity:
Ordinary shares (US$0.0001 par
value; 100,000,000 shares
authorized in 2007 and 2006;
26,098,275 and 23,140,702 shares
issued and outstanding in 2007
and 2006, respectively) 3 20 18
Additional paid-in capital 95,451 734,973 653,000
Statutory reserve 1,126 8,670 9,721
Accumulated other comprehensive
loss (566) (4,360) (2,762)
Accumulated deficit (1,739) (13,385) (24,927)
-------- -------- --------
Total shareholders' equity 94,275 725,918 635,050
-------- -------- --------
Total liabilities, minority interest,
and shareholders' equity 116,080 893,813 940,579
======== ======== ========
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Un-audited)
(In thousands, except share-related data)
For the three months ended March 31,
--------------------------------------
2007 2007 2006
---- ---- ----
US$ RMB RMB
Revenues:
Service 4,355 33,535 30,597
Equipment 821 6,320 11,844
----------- ----------- -----------
5,176 39,855 42,441
----------- ----------- -----------
Cost of revenues:
Service (1,397) (10,756) (11,008)
Equipment (811) (6,243) (11,701)
----------- ----------- -----------
(2,208) (16,999) (22,709)
----------- ----------- -----------
Gross profit 2,968 22,856 19,732
----------- ----------- -----------
Operating (expenses) income:
Selling and marketing expenses (88) (679) (674)
General and administrative
expenses (including share-
based
compensation of RMBnil and
RMB443 for 2007 and 2006,
respectively) (1,307) (10,068) (7,608)
Foreign exchange loss (110) (844) (453)
Management service fee 611 4,701 3,110
----------- ----------- -----------
Total operating expenses, net (894) (6,890) (5,625)
----------- ----------- -----------
Income from operations 2,074 15,966 14,107
Interest income 377 2,905 648
Interest expense (4) (28) (6)
Other income -- -- 40
----------- ----------- -----------
Income before provision for
income taxes, earnings in
equity investments, and
minority interest 2,447 18,843 14,789
Provision for income taxes (541) (3,492) (2,821)
----------- ----------- -----------
Net income before earnings in
equity investments and
minority interest 1,993 15,351 11,968
Earnings in equity investments (31) (239) (162)
Minority interest (230) (1,775) (2,329)
----------- ----------- -----------
Income from continuing
operations 1,732 13,337 9,477
----------- ----------- -----------
Discontinued operations:
Loss from discontinued
operations, net of tax RMBnil
for both 2007 and 2006 (18) (139) (1,368)
Minority interest in
discontinued operations, net
of tax RMBnil for both 2007
and 2006 (30) (230) 1,091
----------- ----------- -----------
Loss on discontinued
operations (48) (369) (277)
----------- ----------- -----------
Net income 1,684 12,968 9,200
=========== =========== ===========
Net income per share
Basic 0.07 0.52 0.55
=========== =========== ===========
Diluted 0.06 0.49 0.53
=========== =========== ===========
Weighted average shares used
in computation:
Basic 24,830,744 24,830,744 16,657,872
=========== =========== ===========
Diluted 26,268,007 26,268,007 17,345,807
=========== =========== ===========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Un-audited)
(In thousands)
For the three months ended March 31,
2007 2007 2006
---- ---- ----
US$ RMB RMB
Cash flows from operating activities:
Net income 1,684 12,968 9,200
Adjustments to reconcile net income
to net cash provided by Operating
activities:
Minority interest in continuing
operations 230 1,775 2,329
Minority interest in discontinued
operations 30 230 (1,091)
Depreciation and amortization 275 2,119 3,067
Amortization of deferred share-based
compensation -- -- 448
Earnings in equity investments 31 239 162
Changes in assets and liabilities:
Accounts receivable (158) (1,214) (2,254)
Inventory 1 10 (1,840)
Prepaid expenses and other current
assets (534) (4,109) (1,550)
Amounts due from related parties (51) (389) 1,423
Accounts payable 539 4,149 (2,458)
Accrued expenses and other current
liabilities (5,568) (42,879) 6,167
Amounts due to related parties (33) (253) (86)
Income taxes payable 296 2,279 2,841
Deferred tax assets 6 43 43
Unrecognized tax benefits 5 36 --
-------- -------- --------
Net cash (used in) provided by used
in operating activities (3,247) (24,996) 16,401
-------- -------- --------
Cash flows from investing activities:
Repayment from advanced to related
parties 235 1,811 10,531
Return of deposit for the purchase
of equipment -- -- 3,800
Deposits for business acquisition -- -- (10,000)
Purchase of property and equipment (91) (703) (134)
Term deposits (5,535) (42,622) (41,000)
Proceeds from disposal of
discontinued operations, net of
cash disposed of (1,184) (9,113) --
-------- -------- --------
Net cash used in investing
activities (6,575) (50,627) (36,803)
-------- -------- --------
Cash flows from financing activities:
Repayment of capital lease
obligation (5) (38) (38)
Repayment of advance from related
parities (552) (4,251) --
-------- -------- --------
Cash used in financing activities (557) (4,289) (38)
-------- -------- --------
Effect of foreign exchange rate
changes (188) (1,450) (7)
Net decrease in cash and cash
equivalents (10,567) (81,362) (20,447)
Cash and cash equivalents at
beginning of the period 36,113 278,067 120,368
-------- -------- --------
Cash and cash equivalents at end of
the period 25,546 196,705 99,921
======== ======== ========
CONTACT: ChinaCast Education Corporation
Michael J. Santos, Chief Marketing Officer & Investor
Relations Officer
(86-10) 6566-7788
mjsantos@chinacast.com.cn
http://ir.chinacast.com.cn
15/F Ruoy Chai Building
No. 8 Yong An-Dongli, Jian Guo Men Wai Avenue
Beijing 100022, PRC
U.S. Investor Relations Contact:
Advanced Investor Relations, L.L.C.
Miranda Weeks
(703) 485-6067
miranda@advancedinvestorrelations.com
