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RegistrationNo. 333-169650
Underwriting | ||||||||||||
discounts and | Proceeds | |||||||||||
Price to public | commissions | before expenses | ||||||||||
Per ADS | $ | 10.00 | $ | 0.70 | $ | 9.30 | ||||||
Total | $ | 120,000,000 | $ | 8,400,000 | $ | 111,600,000 |
Credit Suisse | Morgan Stanley |
Piper Jaffray | Oppenheimer & Co. |
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• | largest K-12 after-school tutoring service provider in China; | |
• | brand strength; | |
• | outstanding student performance; | |
• | high teaching quality, strong content development and efficient education management system; | |
• | largest Internet education platform in China; and | |
• | innovative and entrepreneurial management team with a passion for education. |
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• | further penetrate our existing markets; | |
• | extend our geographic network into attractive new markets; | |
• | expand our personalized premium services; and | |
• | further develop our online course offerings. |
• | our ability to continue to attract students to enroll in our courses; | |
• | our ability to continue to recruit, train and retain qualified teachers; | |
• | our ability to improve the content of our existing course offerings and to develop new courses in a timely and cost-effective manner; | |
• | our ability to maintain and enhance our brand; | |
• | our historical financial and operating results, growth rates and profitability may not serve as an adequate basis to judge our future prospects and results of operations; | |
• | our ability to maintain and continue to improve our teaching results in terms of student performance and the level of satisfaction with our services; and | |
• | our ability to compete effectively against our competitors. |
• | risks associated with our control of our variable interest entities, which control is based upon contractual arrangements rather than equity ownership; | |
• | risks associated with our ability to fund our expansion plan due to PRC legal restrictions on foreign currency conversion and restrictions on distribution of school profits, among others; | |
• | uncertainties with respect to PRC regulatory restrictions on after-school tutoring services, including regulations issued by certain provincial governmental authorities prohibiting private schools from offering after-school tutoring classes to primary and secondary school students; and | |
• | risks associated with our ability to obtain various operating licenses and permits and to make registrations and filings for all of our learning centers in China. |
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(1) | Each person is an ultimate beneficial owner and also a director or executive officer of TAL Group. |
• | exercise effective control over Xueersi Education, Xueersi Network and their respective subsidiaries; | |
• | receive substantially all of the economic benefits of Xueersi Education, Xueersi Network and their respective subsidiaries in consideration for the services provided by us; and |
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• | have an exclusive option to purchase all of the equity interests in Xueersi Education and Xueersi Network when and to the extent permitted under PRC law. |
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• | “we,” “us,” “our company,” or “our” refers to TAL Education Group, its subsidiaries and its affiliated entities; | |
• | “common shares” refers to our Class A and Class B common shares, par value US$0.001 per share; | |
• | “preferred shares” or “Series A preferred shares” refers to our Series A convertible redeemable preferred shares, par value US$0.001 per share; | |
• | “ADSs” refers to American depositary shares, each of which representing two Class A common shares; | |
• | “variable interest entities,” or “VIEs,” refers to Beijing Xueersi Network Technology Co., Ltd. and Beijing Xueersi Education Technology Co., Ltd., which are domestic PRC companies in which we do not have equity interests but whose financial results have been consolidated into our consolidated financial statements in accordance with U.S. GAAP due to our having effective control over, and our being the primary beneficiary of, these companies; and “affiliated entities” refers to our VIEs and the VIEs’ direct and indirect subsidiaries and schools; | |
• | “student enrollments” refers to the cumulative total number of courses enrolled in and paid for by our students, including multiple courses enrolled in and paid for by the same student; | |
• | “annual retention rate” refers to the percentage of our students who subsequently enroll in one or more of our courses after enrolling in at least one course in the previous fiscal year; | |
• | “China” or “PRC” refers to the People’s Republic of China, excluding for purposes of this prospectus only, Taiwan, Hong Kong and Macau; | |
• | “K-12” refers to the year before the first grade through the last year of high school; | |
• | “Renminbi” or “RMB” refers to the legal currency of China; and | |
• | ‘‘$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States. |
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Offering price | $10.00 per ADS. | |
ADSs offered by us | 12,000,000 ADSs. | |
ADSs outstanding immediately after this offering | 12,000,000 ADSs. | |
Common shares outstanding immediately after this offering | 149,000,000 shares, par value $0.001 per share, comprised of (i) 24,000,000 Class A common shares, and (ii) 125,000,000 Class B common shares. | |
ADS to Class A common share ratio | 1:2 | |
New York Stock Exchange symbol | XRS. | |
Common shares | Our common shares are divided into Class A common shares and Class B common shares. Holders of Class A common shares and Class B common shares have the same rights except for voting and conversion rights. In respect of matters requiring shareholders’ vote, each Class A common share is entitled to one vote, and each Class B common share is entitled to ten votes. Each Class B common share is convertible into one Class A common share at any time by the holder thereof. Class A common shares are not convertible into Class B common shares under any circumstances. Upon any transfer of Class B common shares by a holder thereof to any person or entity which is not an affiliate of such holder, such Class B common shares shall be automatically and immediately converted into the equal number of Class A common shares. | |
Depositary | JPMorgan Chase Bank, N.A. | |
Over-allotment option | The underwriters have a30-day option to purchase up to 1,800,000 additional ADSs from us at the initial public offering price less underwriting discounts and commissions. | |
Reserved ADSs | At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5% of the total number of ADSs offered in this offering (assuming no exercise of the over-allotment option) to some of our directors, officers, employees, business associates and related persons through a directed share program. | |
Use of proceeds | We plan to use the net proceeds received from this offering to expand our network of learning centers and service centers, build a national training center, pay a declared cash dividend in the amount of $30.0 million to our shareholders of record as of the dividend declaration date conditional upon the completion of this offering, improve our existing facilities, and for other general corporate purposes, including strategic investments in and acquisitions of complementary businesses, although we are not currently negotiating any such investment or acquisition. See “Use of Proceeds” for more information. |
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Lock-up | We, our directors and executive officers and all of our existing shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of any ADSs, common shares or similar securities for a period of 180 days after the date this prospectus. See “Underwriting” for more information. | |
Risk factors | See “Risk Factors” and other information included in this prospectus for a discussion of risks you should carefully consider before investing in the ADSs. |
• | assumes that the underwriters do not exercise their over-allotment option to purchase 1,800,000 additional ADSs; | |
• | reflects the conversion of all outstanding Series A preferred shares into 5,000,000 Class B common shares immediately prior to the completion of this offering; | |
• | excludes 5,419,500 Class A common shares issuable upon the vesting of restricted shares issued under our 2010 share incentive plan that are outstanding as of the date of this prospectus; and | |
• | excludes Class A common shares reserved for future grants under our 2010 share incentive plan. |
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For the Year Ended February 29/28, | For the Six Months Ended August 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||
(in thousands of $, except for shares, | ||||||||||||||||||||
per share and per ADS data) | ||||||||||||||||||||
Summary Consolidated Statements of Operations Data: | ||||||||||||||||||||
Net revenues | $ | 8,882 | $ | 37,476 | $ | 69,594 | $ | 32,983 | $ | 53,022 | ||||||||||
Total cost of revenues | (4,367 | ) | (18,554 | ) | (37,649 | ) | (16,068 | ) | (26,255 | )(1) | ||||||||||
Gross profit | 4,515 | 18,922 | 31,945 | 16,915 | 26,767 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Selling and marketing | (370 | ) | (2,353 | ) | (5,608 | ) | (1,958 | ) | (4,184 | )(2) | ||||||||||
General and administrative | (2,478 | ) | (5,890 | ) | (10,872 | ) | (4,602 | ) | (7,808 | )(3) | ||||||||||
Impairment losses on intangible assets and goodwill | — | (1,615 | ) | — | — | — | ||||||||||||||
Total operating expenses | (2,848 | ) | (9,858 | ) | (16,480 | ) | (6,560 | ) | (11,992 | ) | ||||||||||
Income from operations | 1,667 | 9,064 | 15,465 | 10,355 | 14,775 | |||||||||||||||
Interest income, net | 11 | 77 | 283 | 103 | 162 | |||||||||||||||
Other expenses | — | (210 | ) | (124 | ) | (119 | ) | (27 | ) | |||||||||||
Impairment loss onavailable-for-sale securities | — | (363 | ) | — | — | — | ||||||||||||||
Gain from sales of available-for-sale securities | — | — | — | — | 6 | |||||||||||||||
Gain on extinguishment of liabilities | — | 731 | — | — | — | |||||||||||||||
Income before income tax provision | 1,678 | 9,299 | 15,624 | 10,339 | 14,916 | |||||||||||||||
Provision for income tax | (165 | ) | (2,018 | ) | (1,379 | ) | (912 | ) | (1,670 | ) | ||||||||||
Net income | $ | 1,513 | $ | 7,281 | $ | 14,245 | $ | 9,427 | $ | 13,246 | ||||||||||
Deemed dividends on Series A convertible redeemable preferred shares | — | (4,113 | ) | — | — | — | ||||||||||||||
Net income attributable to common shareholders | $ | 1,513 | $ | 3,168 | $ | 14,245 | $ | 9,427 | $ | 13,246 | ||||||||||
Net income per common share: | ||||||||||||||||||||
Basic | $ | 0.01 | $ | 0.03 | $ | 0.11 | $ | 0.08 | $ | 0.11 | ||||||||||
Diluted | $ | 0.01 | $ | 0.03 | $ | 0.11 | $ | 0.08 | $ | 0.11 |
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For the Year Ended February 29/28, | For the Six Months Ended August 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||
(in thousands of $, except for shares, | ||||||||||||||||||||
per share and per ADS data) | ||||||||||||||||||||
Net income per Series A convertible redeemable preferred share-basic | — | $ | 17.69 | $ | 0.11 | $ | 0.08 | $ | 0.11 | |||||||||||
Net income per ADS(5): | ||||||||||||||||||||
Basic | $ | 0.03 | $ | 0.05 | $ | 0.23 | $ | 0.15 | $ | 0.22 | ||||||||||
Diluted | $ | 0.03 | $ | 0.05 | $ | 0.23 | $ | 0.15 | $ | 0.22 | ||||||||||
Weighted average shares used in calculating net income per common share | ||||||||||||||||||||
Basic | 120,000,000 | 120,000,000 | 120,000,000 | 120,000,000 | 120,000,000 | |||||||||||||||
Diluted | 120,000,000 | 120,000,000 | 125,000,000 | 125,000,000 | 125,193,360 | |||||||||||||||
Pro forma net income per common share(4) | ||||||||||||||||||||
Basic | — | — | $ | 0.11 | — | $ | 0.10 | |||||||||||||
Diluted | — | — | $ | 0.11 | — | $ | 0.10 | |||||||||||||
Pro forma net income per ADS(4)(5) | ||||||||||||||||||||
Basic | — | — | $ | 0.22 | — | $ | 0.21 | |||||||||||||
Diluted | — | — | $ | 0.22 | — | $ | 0.21 | |||||||||||||
Weighted average shares used in calculating pro forma net income per common share(4) | ||||||||||||||||||||
Basic | — | — | 123,151,008 | — | 123,350,832 | |||||||||||||||
Diluted | — | — | 128,151,008 | — | 128,350,832 |
Notes: | ||
(1) | Includes share-based compensation expenses of $110 thousand. | |
(2) | Includes share-based compensation expenses of $163 thousand. | |
(3) | Includes share-based compensation expenses of $647 thousand. | |
(4) | Unaudited pro forma net income per common share is computed by dividing net income attributable to common shareholders by the sum of (i) the weighted average number of common shares outstanding and (ii) the number of common shares whose proceeds, calculated using the initial public offering price of $10.00 per ADS, or $5.00 per common share, would be necessary to pay the amount by which the conditional $30.0 million cash dividend exceeds our earnings for the fiscal year ended February 28, 2010. | |
(5) | Each ADS represents two Class A common shares. |
As of February 29/28, | As of August 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||||||
Actual | Pro Forma(1) | |||||||||||||||||||
(in thousands of $) | ||||||||||||||||||||
Summary Consolidated Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 5,704 | $ | 29,693 | $ | 50,752 | $ | 81,495 | $ | 81,495 | ||||||||||
Total assets | 8,131 | 38,553 | 65,504 | 97,515 | 97,515 | |||||||||||||||
Deferred revenue | 5,714 | 18,023 | 29,408 | 42,101 | 42,101 | |||||||||||||||
Convertible loan | — | — | 500 | 500 | 500 | |||||||||||||||
Total liabilities | 7,012 | 26,198 | 38,578 | 56,234 | 86,234 | |||||||||||||||
Net assets | 1,119 | 12,355 | 26,926 | 41,281 | 11,281 | |||||||||||||||
Series A convertible redeemable preferred shares | — | 9,000 | 9,000 | 9,000 | — | |||||||||||||||
Total equity | 1,119 | 3,355 | 17,926 | 32,281 | 11,281 |
Note: | ||
(1) | Reflects the automatic conversion of all of our Series A preferred shares into 5,000,000 Class B common shares immediately prior to the completion of this offering and the accrual of a $30.0 million cash dividend declared to our shareholders of record as of the dividend declaration date and payable upon the completion of this offering. |
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For the Year Ended February 29/28, | For the Six-Month Period Ended August 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||
(in thousands of $) | ||||||||||||||||||||
Summary Consolidated Cash Flow Data: | ||||||||||||||||||||
Net cash provided by operating activities | $ | 6,324 | $ | 23,468 | $ | 27,175 | 16,198 | 30,955 | ||||||||||||
Net cash provided by/(used in) investing activities | (1,470 | ) | (5,116 | ) | (5,250 | ) | (696 | ) | (214 | ) | ||||||||||
Net cash provided by/(used in) financing activities | 132 | 5,252 | (903 | ) | (1,622 | ) | (163 | ) |
As of and for the | ||||||||||||||||||||
As of and for the Year Ended February 29/28, | Six Months Ended August 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||
Selected Operating Data: | ||||||||||||||||||||
Student enrollments | 67,996 | 215,080 | 382,505 | 175,638 | 236,919 | |||||||||||||||
Learning centers | 30 | 73 | 98 | 83 | 108 |
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• | we may fail to identify new cities with sufficient growth potential into which to expand our network; | |
• | it may be difficult to increase the number of learning centers in more developed cities; | |
• | we may fail to effectively market our services in new markets or promote new courses in existing markets; | |
• | we may not be able to replicate our successful growth model in Beijing and Shanghai to other geographic markets; | |
• | our analysis for selecting suitable new locations may not be accurate and the demand for our services at such new locations may not materialize or increase as rapidly as we expect; | |
• | we may fail to obtain the requisite licenses and permits necessary to open learning centers at our desired locations from local authorities; | |
• | we may not be able to continue to enhance our online course offerings, generate profits from online courses, or adapt online courses to changing student needs and technological advances; and | |
• | we may fail to achieve the benefits we expect from our expansion. |
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• | revoking the business and operating licenses of our PRC subsidiaries and affiliated entities; | |
• | restricting or prohibiting related party transactions between our PRC subsidiaries and affiliated entities; | |
• | imposing fines or other requirements with which we or our PRC subsidiaries and affiliated entities may find difficult or impossible to comply; |
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• | requiring us or our PRC subsidiaries and affiliated entities to restructure the relevant ownership structure or operations; and | |
• | restricting or prohibiting the use of any proceeds from our additional public offering to finance our business and operations in China. |
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• | degree of government involvement; | |
• | level of development; |
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• | rate of economic growth; | |
• | control of foreign exchange rates and currency conversion; | |
• | access to financing; and | |
• | allocation of resources. |
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• | capital contributions to our subsidiaries in China, whether existing ones or newly established ones, must be approved by the PRC Ministry of Commerce or its local bureaus; | |
• | loans by us to our subsidiaries in China, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with the PRC State Administration of Foreign Exchange, or SAFE, or its local bureaus; | |
• | loans by us to our VIEs and their respective subsidiaries, which are domestic PRC entities, must be approved by the National Development and Reform Commission and must also be registered with SAFE or its local bureaus. |
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• | actual or anticipated fluctuations in our operating results, | |
• | changes in financial estimates by securities research analysts, | |
• | changes in the economic performance or market valuation of other education companies, | |
• | announcements by us or our competitors of material acquisitions, | |
• | strategic partnerships, joint ventures or capital commitments, | |
• | addition or departure of our executive officers and key personnel, | |
• | intellectual property litigation, | |
• | release or expiration oflock-up or other transfer restrictions on our outstanding Class B common shares or ADSs, and | |
• | economic, regulatory or political conditions in China. |
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• | our anticipated growth strategies; | |
• | competition in the K-12 after-school tutoring market; | |
• | our future business development, results of operations and financial condition; | |
• | expected changes in our revenues and certain cost and expense items; | |
• | our ability to increase student enrollments and course fees and expand course offerings; | |
• | risks associated with the expansion of our geographic reach; | |
• | the expected increase in spending on private education in China; and | |
• | PRC laws, regulations and policies relating to private education and providers of after-school tutoring services. |
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• | approximately $30.0 million to expand our network of learning centers and service centers; | |
• | approximately $15.0 million to build a national training center; | |
• | $30.0 million to pay a declared dividend conditional upon the completion of this offering (see “Dividend Policy”); | |
• | approximately $10.0 million to improve our existing facilities; and | |
• | the balance for general corporate purposes, including strategic investments in and acquisitions of complementary businesses, although we have not identified any near-term investment or acquisition targets. |
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• | on an actual basis; | |
• | on a pro forma basis to reflect (i) the automatic conversion of all of our Series A preferred shares into 5,000,000 Class B common shares immediately upon the completion of this offering and (ii) the accrual of a $30.0 million cash dividend declared to our existing shareholders as of September 29, 2010 and payable upon the completion of this offering; and | |
• | on a pro forma as adjusted basis to reflect (i) the pro forma adjustments above and (ii) the sale of 24,000,000 Class A common shares in the form of ADSs by us in this offering at $10.00 per ADS, after deducting the underwriting discounts and commissions and the estimated offering expenses payable by us. |
As of August 31, 2010 | ||||||||||||
Pro forma as | ||||||||||||
Actual | Pro forma | adjusted | ||||||||||
Dividend proposed | $ | — | $ | 30,000,000 | $ | — | ||||||
Series A preferred shares ($0.001 par value, 5,000,000 shares authorized, issued and outstanding) | 9,000,000 | — | — | |||||||||
Equity: | ||||||||||||
Class A common shares ($0.001 par value, 500,000,000 shares authorized and nil issued and outstanding, actual; 500,000,000 shares authorized, nil issued and outstanding, pro forma; 500,000,000 shares authorized, 24,000,000 shares issued and outstanding, pro forma as adjusted)(1) | — | — | 24,000 | |||||||||
Class B common shares ($0.001 par value, 495,000,000 shares authorized, 120,000,000 shares issued and outstanding, and 125,000,000 shares issued and outstanding on a pro forma basis)(1) | 120,000 | 125,000 | 125,000 | |||||||||
Additional paid-in capital | 1,699,503 | (19,305,497 | ) | 91,559,364 | ||||||||
Retained earnings(2) | 30,173,018 | 30,173,018 | 30,173,018 | |||||||||
Accumulated other comprehensive income | 288,226 | 288,226 | 288,226 | |||||||||
Total equity | 32,280,747 | 11,280,747 | 122,169,608 | |||||||||
Total | $ | 41,280,747 | $ | 41,280,747 | $ | 122,169,608 | ||||||
Notes: | ||
(1) | Effective September 29, 2010, our share capital was re-designated into Class A and Class B common shares under our third amended and restated memorandum and articles of association. | |
(2) | Includes $4.9 million in statutory reserves that are not available for distribution pursuant to PRC laws. |
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Per Common | ||||||||
Share | Per ADS | |||||||
Initial public offering price | $ | 5.00 | $ | 10.00 | ||||
Net tangible book value per share as of August 31, 2010 | $ | 0.25 | $ | 0.51 | ||||
Pro forma net tangible book value per share after giving effect to the conversion of our Series A preferred shares and accrual of $30.0 million cash dividend | $ | 0.08 | $ | 0.15 | ||||
Pro forma net tangible book value per share after giving effect to the conversion of our Series A preferred shares and accrual of $30.0 million cash dividend and this offering | $ | 0.81 | $ | 1.62 | ||||
Amount of dilution in net tangible book value per share to new investors in the offering | $ | 4.19 | $ | 8.38 |
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Average | ||||||||||||||||||||||||
Price Per | Average | |||||||||||||||||||||||
Common shares | Total | Common | Price Per | |||||||||||||||||||||
Purchased | Consideration | Share | ADS | |||||||||||||||||||||
Number | Percent | Amount | Percent | |||||||||||||||||||||
Existing shareholders | 125,000,000 | 84 | % | $ | 9,899,641 | 7.6 | % | $ | 0.08 | $ | 0.16 | |||||||||||||
New investors | 24,000,000 | 16 | % | $ | 120,000,000 | 92.4 | % | $ | 5.00 | $ | 10.00 | |||||||||||||
Total | 149,000,000 | 100 | % | $ | 129,899,641 | 100 | % | |||||||||||||||||
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Exchange Rate | ||||||||||||||||
Period | Period End | Average(1) | Low | High | ||||||||||||
(RMB per $1.00) | ||||||||||||||||
2005 | 8.0702 | 8.1826 | 8.2765 | 8.0702 | ||||||||||||
2006 | 7.8041 | 7.9579 | 8.0702 | 7.8041 | ||||||||||||
2007 | 7.2946 | 7.5806 | 7.8127 | 7.2946 | ||||||||||||
2008 | 6.8225 | 6.9193 | 7.2946 | 6.7800 | ||||||||||||
2009 | 6.8259 | 6.8295 | 6.8470 | 6.8176 | ||||||||||||
2010 | ||||||||||||||||
April | 6.8247 | 6.8256 | 6.8275 | 6.8229 | ||||||||||||
May | 6.8305 | 6.8275 | 6.8310 | 6.8245 | ||||||||||||
June | 6.7815 | 6.8184 | 6.8323 | 6.7815 | ||||||||||||
July | 6.7735 | 6.7762 | 6.7807 | 6.7709 | ||||||||||||
August | 6.8069 | 6.7873 | 6.8069 | 6.7670 | ||||||||||||
September | 6.6905 | 6.7396 | 6.8102 | 6.6869 | ||||||||||||
October (through October 15, 2010) | 6.6397 | 6.6749 | 6.6912 | 6.6397 |
Source: Federal Reserve Statistical Release | ||
(1) | Annual averages were calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by using the average of the daily rates during the relevant month. |
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• | recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or | |
• | entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
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(1) | Each person is an ultimate beneficial owner and also a director or executive officer of TAL Group. |
• | exercise effective control over Xueersi Education, Xueersi Network and their respective subsidiaries; | |
• | receive substantially all of the economic benefits of Xueersi Education, Xueersi Network and their respective subsidiaries in consideration for the services provided by us; and | |
• | have an exclusive option to purchase all of the equity interests in Xueersi Education and Xueersi Network when and to the extent permitted under PRC law. |
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• | the ownership structures of our affiliated entities and wholly owned subsidiaries in China, both currently and after giving effect to this offering, are in compliance with existing PRC laws and regulations; and | |
• | the contractual arrangements among our wholly owned subsidiaries in China, our affiliated entities, the shareholders of Xueersi Education and the shareholders of Xueersi Network are valid, binding and enforceable under, and will not result in any violation of, PRC laws or regulations currently in effect. |
• | revoking the business and operating licenses of our PRC subsidiaries and affiliated entities; | |
• | restricting or prohibiting related party transactions between our PRC subsidiaries and affiliated entities; | |
• | imposing fines or other requirements with which we or our PRC subsidiaries and affiliated entities may find difficult or impossible to comply; | |
• | requiring us or our PRC subsidiaries and affiliated entities to restructure the relevant ownership structure or operations; and | |
• | restricting or prohibiting the use of any proceeds from our additional public offering to finance our business and operations in China. |
• | capital contributions to our subsidiaries in China, whether existing ones or newly established ones, must be approved by the PRC Ministry of Commerce or its local bureaus; |
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• | loans by us to our subsidiaries in China, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with the PRC State Administration of Foreign Exchange, or SAFE, or its local bureaus; and | |
• | loans by us to our affiliated entities, which are domestic PRC entities, must be approved by the relevant government authorities and must also be registered with SAFE or its local bureaus. |
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For the Year Ended February 29/28, | For the Six Months Ended August 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||
(in thousands of $, except for shares, per share and per ADS data) | ||||||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||
Net revenues | $ | 8,882 | $ | 37,476 | $ | 69,594 | $ | 32,983 | $ | 53,022 | ||||||||||
Total cost of revenues | (4,367 | ) | (18,554 | ) | (37,649 | ) | (16,068 | ) | (26,255 | )(1) | ||||||||||
Gross profit | 4,515 | 18,922 | 31,945 | 16,915 | 26,767 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Selling and marketing | (370 | ) | (2,353 | ) | (5,608 | ) | (1,958 | ) | (4,184 | )(2) | ||||||||||
General and administrative | (2,478 | ) | (5,890 | ) | (10,872 | ) | (4,602 | ) | (7,808 | )(3) | ||||||||||
Impairment losses on intangible assets and goodwill | — | (1,615 | ) | — | — | — | ||||||||||||||
Total operating expenses | (2,848 | ) | (9,858 | ) | (16,480 | ) | (6,560 | ) | (11,992 | ) | ||||||||||
Income from operations | 1,667 | 9,064 | 15,465 | 10,355 | 14,775 | |||||||||||||||
Interest income, net | 11 | 77 | 283 | 103 | 162 | |||||||||||||||
Other expenses | — | (210 | ) | (124 | ) | (119 | ) | (27 | ) | |||||||||||
Impairment loss onavailable-for-sale securities | — | (363 | ) | — | — | — |
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For the Year Ended February 29/28, | For the Six Months Ended August 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||
(in thousands of $, except for shares, per share and per ADS data) | ||||||||||||||||||||
Gain from sales of available-for-sale securities | — | — | — | — | 6 | |||||||||||||||
Gain on extinguishment of liabilities | — | 731 | — | — | — | |||||||||||||||
Income before income tax provision | 1,678 | 9,299 | 15,624 | 10,339 | 14,916 | |||||||||||||||
Provision for income tax | (165 | ) | (2,018 | ) | (1,379 | ) | (912 | ) | (1,670 | ) | ||||||||||
Net income | $ | 1,513 | $ | 7,281 | $ | 14,245 | $ | 9,427 | $ | 13,246 | ||||||||||
Deemed dividends on Series A convertible redeemable preferred shares | — | (4,113 | ) | — | — | — | ||||||||||||||
Net income attributable to common shareholders | $ | 1,513 | $ | 3,168 | $ | 14,245 | $ | 9,427 | $ | 13,246 | ||||||||||
Net income per common share: | ||||||||||||||||||||
Basic | $ | 0.01 | $ | 0.03 | $ | 0.11 | $ | 0.08 | $ | 0.11 | ||||||||||
Diluted | $ | 0.01 | $ | 0.03 | $ | 0.11 | $ | 0.08 | $ | 0.11 | ||||||||||
Net income per Series A convertible redeemable preferred share-basic | — | $ | 17.69 | $ | 0.11 | $ | 0.08 | $ | 0.11 | |||||||||||
Net income per ADS(5): | ||||||||||||||||||||
Basic | $ | 0.03 | $ | 0.05 | $ | 0.23 | $ | 0.15 | $ | 0.22 | ||||||||||
Diluted | $ | 0.03 | $ | 0.05 | $ | 0.23 | $ | 0.15 | $ | 0.22 | ||||||||||
Weighted average shares used in calculating net income per common share | ||||||||||||||||||||
Basic | 120,000,000 | 120,000,000 | 120,000,000 | 120,000,000 | 120,000,000 | |||||||||||||||
Diluted | 120,000,000 | 120,000,000 | 125,000,000 | 125,000,000 | 125,193,360 | |||||||||||||||
Pro forma net income per common share(4) | ||||||||||||||||||||
Basic | — | — | $ | 0.11 | — | $ | 0.10 | |||||||||||||
Diluted | — | — | $ | 0.11 | — | $ | 0.10 | |||||||||||||
Pro forma net income per ADS(4)(5) | ||||||||||||||||||||
Basic | — | — | $ | 0.22 | — | $ | 0.21 | |||||||||||||
Diluted | — | — | $ | 0.22 | — | $ | 0.21 | |||||||||||||
Weighted average shares used in calculating pro forma net income per common share(4) | ||||||||||||||||||||
Basic | — | — | 123,151,008 | — | 123,350,832 | |||||||||||||||
Diluted | — | — | 128,151,008 | — | 128,350,832 |
Notes: | ||
(1) | Includes share-based compensation expenses of $110 thousand. | |
(2) | Includes share-based compensation expenses of $163 thousand. | |
(3) | Includes share-based compensation expenses of $647 thousand. | |
(4) | Unaudited pro forma net income per common share is computed by dividing net income attributable to common shareholders by the sum of (i) the weighted average number of common shares outstanding and (ii) the number of common shares whose proceeds, calculated using the initial public offering price of $10.00 per ADS, or $5.00 per common share, would be necessary to pay the amount by which the conditional $30.0 million cash dividend exceeds our earnings for the fiscal year ended February 28, 2010. | |
(5) | Each ADS represents two Class A common shares. |
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As of February 29/28, | ||||||||||||||||||||
2008 | 2009 | 2010 | As of August 31, 2010 | |||||||||||||||||
Actual | Actual | Actual | Actual | Pro Forma(1) | ||||||||||||||||
(in thousands of $) | ||||||||||||||||||||
Selected Consolidated Balance Sheet Data | ||||||||||||||||||||
Cash and cash equivalents | $ | 5,704 | $ | 29,693 | $ | 50,752 | $ | 81,495 | 81,495 | |||||||||||
Total assets | 8,131 | 38,553 | 65,504 | 97,515 | 97,515 | |||||||||||||||
Deferred revenue | 5,714 | 18,023 | 29,408 | 42,101 | 42,101 | |||||||||||||||
Convertible loan | — | — | 500 | 500 | 500 | |||||||||||||||
Total liabilities | 7,012 | 26,198 | 38,578 | 56,234 | 86,234 | |||||||||||||||
Net assets | 1,119 | 12,355 | 26,926 | 41,281 | 11,281 | |||||||||||||||
Series A convertible redeemable preferred shares | — | 9,000 | 9,000 | 9,000 | — | |||||||||||||||
Total equity | 1,119 | 3,355 | 17,926 | 32,281 | 11,281 |
Note: | ||
(1) | Reflects the automatic conversion of all of our Series A preferred shares into 5,000,000 Class B common shares immediately prior to the completion of this offering and the accrual of a $30.0 million cash dividend declared to our shareholders of record as of the dividend declaration date and payable upon the completion of this offering. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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For the Year Ended February 29/28, | For the Six Months Ended August 31, | |||||||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||
(in thousands of $, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Net revenues | 8,882 | 100.0 | % | 37,476 | 100.0 | % | 69,594 | 100.0 | % | 32,983 | 100.0 | % | 53,022 | 100.0 | % | |||||||||||||||||||||||||
Total cost of revenues | (4,367 | ) | (49.2 | ) | (18,554 | ) | (49.5 | ) | (37,649 | ) | (54.1 | ) | (16,068 | ) | (48.7 | ) | (26,255 | )(1) | (49.5 | ) | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Selling and marketing | (370 | ) | (4.2 | ) | (2,353 | ) | (6.3 | ) | (5,608 | ) | (8.1 | ) | (1,958 | ) | (5.9 | ) | (4,184 | )(2) | (7.9 | ) | ||||||||||||||||||||
General and administrative | (2,478 | ) | (27.9 | ) | (5,890 | ) | (15.7 | ) | (10,872 | ) | (15.6 | ) | (4,602 | ) | (14.0 | ) | (7,808 | )(3) | (14.7 | ) | ||||||||||||||||||||
Impairment losses on intangible assets and goodwill | — | — | (1,615 | ) | (4.3 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total operating expenses | (2,848 | ) | (32.1 | )% | (9,858 | ) | (26.3 | )% | (16,480 | ) | (23.7 | )% | (6,560 | ) | (19.9 | )% | (11,992 | ) | (22.6 | )% | ||||||||||||||||||||
Notes: | ||
(1) | Includes share-based compensation expenses of $110 thousand. | |
(2) | Includes share-based compensation expenses of $163 thousand. | |
(3) | Includes share-based compensation expenses of $647 thousand. |
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• | Net revenues of Wuhan School and Qianjiang School would grow at a CAGR of 10.4% and 9.4%, respectively, from 2009 to 2014 primarily through an increase in the number of students. The long-term growth rate of Wuhan School and Qianjiang School after 2014 was assumed to be 3% per year. | |
• | Cost of revenues mainly consists of teacher salary and welfare, rent, and tutoring materials. Cost of revenues as a percentage of revenues of Wuhan School was expected to decrease from 91% in 2009 to 62% of sales in 2014 because staff cost and rental would not grow as fast as revenues. Cost of revenues as a percentage of revenues of Qianjiang School was expected to increase from 53% in 2009 to 60% of sales in 2014. | |
• | Operating expenses as a percentage of revenues were expected to decrease from 2009 to 2014 as we anticipated that corporate overhead and administrative expense would not increase as fast as revenues during the period due to the improvement of operating efficiency. | |
• | There would be no material changes in the existing political, legal, fiscal and economic conditions in China and in our ability to recruit and retain competent management, key personnel and technical staff to support our ongoing operations. | |
• | There was no material deviation in industry trends and market conditions from economic forecasts. |
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• | our financial and operating results; | |
• | the assumptions and basis of our financial projections; | |
• | the nature of our business; | |
• | the stage of development of our operations; | |
• | our business plan; | |
• | our business risks; | |
• | the nature and prospects of the private education industry in China; | |
• | the global economic outlook in general and the specific economic and competitive elements affecting our business, industry and market; and | |
• | the market-derived investment returns of entities engaged in similar business. |
• | that no material change will occur in the applicable future periods in the existing political, legal, fiscal or economic conditions and in the education industry in China; |
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• | that no material change will occur in the current PRC law applicable to us and the applicable tax rates will remain unchanged; | |
• | that exchange rates and interest rates in the applicable future periods will not differ materially from the current rates; | |
• | that our future growth will not be constrained by lack of funding; | |
• | that we have the ability to retain competent management and key personnel to support our ongoing operations; and | |
• | that industry trends and market conditions for the education and related industries will not deviate significantly from current forecasts. |
For the Year Ended February 29/28, | For the Six Months Ended August 31, | |||||||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||
(in thousands of $, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Net revenues | $ | 8,882 | 100.0 | % | $ | 37,476 | 100.0 | % | $ | 69,594 | 100.0 | % | $ | 32,983 | 100.0 | % | $ | 53,022 | 100.0 | % | ||||||||||||||||||||
Cost of revenues | (4,367 | ) | (49.2 | ) | (18,554 | ) | (49.5 | ) | (37,649 | ) | (54.1 | ) | (16,068 | ) | (48.7 | ) | (26,255 | )(1) | (49.5 | ) | ||||||||||||||||||||
Gross profit | 4,515 | 50.8 | 18,922 | 50.5 | 31,945 | 45.9 | 16,915 | 51.3 | 26,767 | 50.5 | ||||||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||||||||||
Selling and marketing | (370 | ) | (4.2 | ) | (2,353 | ) | (6.3 | ) | (5,608 | ) | (8.1 | ) | (1,958 | ) | (5.9 | ) | (4,184 | )(2) | (7.9 | ) | ||||||||||||||||||||
General and administrative | (2,478 | ) | (27.9 | ) | (5,890 | ) | (15.7 | ) | (10,872 | ) | (15.6 | ) | (4,602 | ) | (14.0 | ) | (7,808 | )(3) | (14.7 | ) | ||||||||||||||||||||
Impairment losses on intangible assets and goodwill | — | — | (1,615 | ) | (4.3 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total operating expenses | (2,848 | ) | (32.1 | ) | (9,858 | ) | (26.3 | ) | (16,480 | ) | (23.7 | ) | (6,560 | ) | (19.9 | ) | (11,992 | ) | (22.6 | ) | ||||||||||||||||||||
Income from operations | 1,667 | 18.7 | 9,064 | 24.2 | 15,465 | 22.2 | 10,355 | 31.4 | 14,775 | 27.9 | ||||||||||||||||||||||||||||||
Interest income, net | 11 | 0.1 | 77 | 0.2 | 283 | 0.4 | 103 | 0.3 | 162 | 0.3 | ||||||||||||||||||||||||||||||
Other expenses | — | — | (210 | ) | (0.6 | ) | (124 | ) | (0.2 | ) | (119 | ) | (0.4 | ) | (27 | ) | (0.1 | ) | ||||||||||||||||||||||
Impairment loss onavailable-for-sale securities | — | — | (363 | ) | (1.0 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Gain from sales of available-for-sale securities | — | — | — | — | — | — | — | — | 6 | 0.0 | ||||||||||||||||||||||||||||||
Gain on extinguishment of liabilities | — | — | 731 | 2.0 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
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For the Year Ended February 29/28, | For the Six Months Ended August 31, | |||||||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||
(in thousands of $, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Income before income tax provision | 1,678 | 18.8 | 9,299 | 24.8 | 15,624 | 22.4 | 10,339 | 31.3 | 14,916 | 28.1 | ||||||||||||||||||||||||||||||
Provision for income tax | (165 | ) | (1.8 | ) | (2,018 | ) | (5.4 | ) | (1,379 | ) | (1.9 | ) | (912 | ) | (2.7 | ) | (1,670 | ) | (3.1 | ) | ||||||||||||||||||||
Net income | $ | 1,513 | 17.0 | % | $ | 7,281 | 19.4 | % | $ | 14,245 | 20.5 | % | $ | 9,427 | 28.6 | % | $ | 13,246 | 25.0 | % | ||||||||||||||||||||
Notes: | ||
(1) | Includes share-based compensation expenses of $110 thousand. | |
(2) | Includes share-based compensation expenses of $163 thousand. | |
(3) | Includes share-based compensation expenses of $647 thousand. |
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For the Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
November 30, 2008 | February 28, 2009 | May 31, 2009 | August 31, 2009 | November 30, 2009 | February 28, 2010 | May 31, 2010 | August 31, 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
% of Net | % of Net | % of Net | % of Net | % of Net | % of Net | % of Net | % of Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | Revenues | $ | Revenues | $ | Revenues | $ | Revenues | $ | Revenues | $ | Revenues | $ | Revenues | $ | Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands of $, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net revenues | 10,229 | 100.0 | % | 14,203 | 100.0 | % | 15,439 | 100.0 | % | 17,544 | 100.0 | % | 16,374 | 100.0 | % | 20,237 | 100.0 | % | 20,496 | 100.0 | % | 32,526 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||
Cost of revenues | (5,200 | ) | (50.8 | )% | (7,057 | ) | (49.7 | )% | (7,215 | ) | (46.7 | )% | (8,853 | ) | (50.5 | )% | (9,133 | ) | (55.8 | )% | (12,448 | ) | (61.5 | )% | (12,062 | ) | (58.9 | )% | (14,193 | )(1) | (43.6 | )% | ||||||||||||||||||||||||||||||||
Gross profit | 5,029 | 49.2 | % | 7,146 | 50.3 | % | 8,224 | 53.3 | % | 8,691 | 49.5 | % | 7,241 | 44.2 | % | 7,789 | 38.5 | % | 8,434 | 41.1 | % | 18,333 | 56.4 | % | ||||||||||||||||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selling and marketing expenses | (567 | ) | (5.6 | )% | (855 | ) | (6.0 | )% | (750 | ) | (4.9 | )% | (1,209 | ) | (6.9 | )% | (1,654 | ) | (10.1 | )% | (1,996 | ) | (9.9 | )% | (1,674 | ) | (8.1 | )% | (2,510 | )(2) | (7.7 | )% | ||||||||||||||||||||||||||||||||
General and administrative expenses | (1,803 | ) | (17.6 | )% | (2,022 | ) | (14.2 | )% | (2,223 | ) | (14.4 | )% | (2,379 | ) | (13.5 | )% | (3,075 | ) | (18.8 | )% | (3,196 | ) | (15.8 | )% | (3,752 | ) | (18.3 | )% | (4,056 | )(3) | (12.5 | )% | ||||||||||||||||||||||||||||||||
Impairment loss on intangible assets and goodwill | — | — | (1,615 | ) | (11.4 | )% | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | (2,370 | ) | (23.2 | )% | (4,492 | ) | (31.6 | )% | (2,973 | ) | (19.3 | )% | (3,588 | ) | (20.4 | )% | (4,729 | ) | (28.9 | )% | (5,192 | ) | (25.7 | )% | (5,426 | ) | (26.4 | )% | (6,566 | ) | (20.2 | )% | ||||||||||||||||||||||||||||||||
Income from operations | 2,659 | 26.0 | % | 2,654 | 18.7 | % | 5,251 | 34.0 | % | 5,103 | 29.1 | % | 2,512 | 15.3 | % | 2,597 | 12.8 | % | 3,008 | 14.7 | % | 11,767 | 36.2 | % | ||||||||||||||||||||||||||||||||||||||||
Interest income, net | 25 | 0.2 | % | 39 | 0.3 | % | 65 | 0.4 | % | 38 | 0.2 | % | 127 | 0.8 | % | 54 | 0.3 | % | 107 | 0.5 | % | 55 | 0.2 | % | ||||||||||||||||||||||||||||||||||||||||
Other expenses | — | — | (25 | ) | (0.2 | )% | (80 | ) | (0.5 | )% | (38 | ) | (0.2 | )% | (6 | ) | (0.0 | )% | — | — | (33 | ) | (0.1 | )% | 6 | 0.0 | % | |||||||||||||||||||||||||||||||||||||
Impairment loss onavailable-for-sale securities | — | — | (363 | ) | (2.6 | )% | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Gain from sales ofavailable-for-sale securities | — | — | — | — | — | — | — | — | — | — | — | — | 6 | 0.0 | % | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Income before income tax provision | 2,684 | 26.2 | % | 2,305 | 16.2 | % | 5,236 | 33.9 | % | 5,103 | 29.1 | % | 2,633 | �� | 16.1 | % | 2,651 | 13.1 | % | 3,088 | 15.1 | % | 11,828 | 36.4 | % | |||||||||||||||||||||||||||||||||||||||
Provision for income tax | (583 | ) | (5.7 | )% | (499 | ) | (3.5 | )% | (462 | ) | (3.0 | )% | (450 | ) | (2.6 | )% | (232 | ) | (1.4 | )% | (234 | ) | (1.2 | )% | (346 | ) | (1.7 | )% | (1,324 | ) | (4.1 | )% | ||||||||||||||||||||||||||||||||
Net income | $ | 2,101 | 20.5 | % | $ | 1,806 | 12.7 | % | $ | 4,774 | 30.9 | % | $ | 4,653 | 26.5 | % | $ | 2,401 | 14.7 | % | $ | 2,417 | 11.9 | % | $ | 2,742 | 13.4 | % | $ | 10,504 | 32.3 | % | ||||||||||||||||||||||||||||||||
(1) | Includes share-based compensation expenses of $110 thousand. | |
(2) | Includes share-based compensation expenses of $163 thousand. | |
(3) | Includes share-based compensation expenses of $647 thousand. |
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For the Year Ended February 29/28, | For the Six Months Ended August 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||
(in thousands of $) | ||||||||||||||||||||
Net cash provided by operating activities | $ | 6,324 | $ | 23,468 | $ | 27,175 | $ | 16,198 | $ | 30,955 | ||||||||||
Net cash provided by (used in) investing activities | (1,470 | ) | (5,116 | ) | (5,250 | ) | (696 | ) | (214 | ) | ||||||||||
Net cash provided by (used in) financing activities | 132 | 5,252 | (903 | ) | (1,622 | ) | (163 | ) | ||||||||||||
Effect of foreign exchange rate changes | 315 | 385 | 37 | 26 | 165 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | 5,301 | 23,989 | 21,059 | 13,906 | 30,743 | |||||||||||||||
Cash and cash equivalents at the beginning of the period | 403 | 5,704 | 29,693 | 29,693 | 50,752 | |||||||||||||||
Cash and cash equivalents at end of the period | 5,704 | 29,693 | 50,752 | 43,599 | 81,495 |
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Payment due by period | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
(in thousand $) | ||||||||||||||||||||
Operating lease obligations(1) | $ | 42,674 | 13,155 | 20,159 | 9,347 | 13 | ||||||||||||||
Acquisition payables(2) | 513 | 513 | — | — | — | |||||||||||||||
Convertible loan(3) | 500 | — | 500 | — | — |
Notes: | ||
(1) | Represents our non-cancelable leases for our offices, learning centers and service centers. | |
(2) | Represents outstanding consideration payable in connection with our acquisitions of Tianjin Education, Jianli School, Qianjiang School and Wuhan School as of February 28, 2010. $240,198 in acquisition cash consideration payable for the acquisition of Tianjin Education and Wuhan School was outstanding as of August 31, 2010. | |
(3) | Represents the principal amount due to a third party pursuant to a convertible loan. The convertible loan has a principal amount of $500,000, bears an annual interest rate of 15% and will mature on January 30, 2012. |
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• | Large classes: in-class teaching with typically more than 30 students per class. This is the traditional format of after-school tutoring. However, it is experiencing a declining trend due to its lower effectiveness compared to the other formats of after-school tutoring. In 2009, this segment represented an estimated market size of RMB26.5 billion ($3.9 billion), according to iResearch. iResearch expects the market share of large classes to continue to decline over time. | |
• | Small classes: in-class teaching with typically10-30 students per class. The smaller class size allows teachers to pay closer attention to individual students and better tailor the classes to their study needs. This class setting therefore has become the most popular format of after-school tutoring given its attractive balance between affordability and the amount of individual attention students are able to receive from their teachers. In 2009, this segment represented an estimated market size of RMB104.6 billion ($15.4 billion), according to iResearch. iResearch expects this segment to grow at a CAGR of 19.3% over the next five years. | |
• | One-on-one personalized tutoring. This class format offers the most customized tutoring services based on a student’s specific situations and study needs and has grown in popularity in recent years driven by the increasing demand for highly tailored tutoring services as well as an increase in the number of high-income households in China. In 2009, theone-on-one personalized tutoring segment represented an estimated market size of RMB56.2 billion ($8.3 billion), according to iResearch. iResearch expects this segment to grow at a CAGR of 20.0% over the next five years. | |
• | Online courses: pre-recorded or live class videos coupled with interactive teaching and testing materials offered through educational websites. Online courses are able to reach a broader base of students as they are unconstrained by geographic location barriers and accessible on-demand by potential students whose schedules or location do not allow them to attend courses in person. In 2009, the online course segment represented an estimated market size of RMB2.4 billion ($352.6 million), according to iResearch. iResearch expects this segment to grow at a CAGR of 40.2% over the next five years. |
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2009 (estimated) | 2014 (estimated) | |
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• | educate our students to become well-rounded people with integrity and high moral standards; | |
• | motivate our students to set and achieve high long-term goals; | |
• | nurture our students’ passion for learning; and | |
• | foster a loving and caring character in our students. |
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Primary School | Middle School | High School | ||||||||||||||||||||||||||||||||||||||||||||||||||
K | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | ||||||||||||||||||||||||||||||||||||||||
Mathematics | • | • | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||||||||||||||||||||||||
English | • | • | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||||||||||||||||||||||||
Chinese | • | • | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||||||||||||||||||||||||
Physics | – | – | – | – | – | – | – | – | • | • | • | • | • | |||||||||||||||||||||||||||||||||||||||
Chemistry | – | – | – | – | – | – | – | – | – | • | • | • | • | |||||||||||||||||||||||||||||||||||||||
Biology | – | – | – | – | – | – | – | – | – | – | • | • | • |
• | : Currently offered. | |
– | : Not offered at the corresponding grade level in public schools in China. |
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Number of | Number of | |||||||
City | Learning Centers | Service Centers | ||||||
Beijing | 80 | 61 | ||||||
Shanghai | 14 | 12 | ||||||
Shenzhen | 2 | 2 | ||||||
Guangzhou | 3 | 3 | ||||||
Tianjin | 4 | 3 | ||||||
Wuhan | 6 | 6 |
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• | brand; | |
• | student achievements; | |
• | price/value; | |
• | type and quality of tutoring services offered; and | |
• | ability to effectively tailor service offerings to specific needs of students, parents and educators. |
• | 3 trademark registrations for our brand and logo in China and Hong Kong; | |
• | registrations of 13 domain names; | |
• | copyrights to substantially all of the course content we developed in house, including all of our online courses; and | |
• | copyright registration certificates for 20 software programs developed by us relating to different aspects of our operations. |
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Website Domain Name | Main Purpose | |
www.eduu.com | Our main webpage which is linked to the websites listed below | |
www.eduu.cn | Online courses | |
www.gaokao.com | College entrance examinations | |
www.zhongkao.com | High school entrance examinations | |
www.jiajiaoban.com | Personalized premium services | |
www.aoshu.com | Mathematics for primary and middle schools; specialized training for competition mathematics | |
www.yingyu.com | English language | |
www.zuowen.com | Chinese composition | |
www.youjiao.com | Preschool and kindergarten education |
Number of | ||||||||
Functional Area | Employees | % of Total | ||||||
Teaching | 1,067 | 37.7 | % | |||||
Customer service | 912 | 32.3 | % | |||||
Sales and marketing | 149 | 5.3 | % | |||||
Curriculum and course material development | 217 | 7.7 | % | |||||
General and administrative | 325 | 11.5 | % | |||||
Technology | 157 | 5.6 | % | |||||
Total | 2,827 | 100.0 | % |
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• | capital contributions to our subsidiaries in China, whether existing ones or newly established ones, must be approved by the PRC Ministry of Commerce or its local bureaus; | |
• | loans by us to our subsidiaries in China, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with the PRC State Administration of Foreign Exchange, or SAFE, or its local bureaus; and | |
• | loans by us to our affiliated entities, which are domestic PRC entities, must be approved by the National Development and Reform Commission and must also be registered with SAFE or its local bureaus. |
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Directors and Executive Officers | Age | Position/Title | ||||
Bangxin Zhang | 30 | Chairman of the Board of Directors and Chief Executive Officer | ||||
Yundong Cao | 30 | Director and President | ||||
Jane Jie Sun | 42 | Independent Director | ||||
Wai Chau Lin | 45 | Independent Director | ||||
Yachao Liu | 28 | Vice President | ||||
Yunfeng Bai | 29 | Vice President | ||||
Joseph Kauffman | 33 | Chief Financial Officer |
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• | appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; | |
• | reviewing with the independent auditors any audit problems or difficulties and management’s response; | |
• | discussing the annual audited financial statements with management and the independent auditors; | |
• | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; | |
• | reviewing and approving all proposed related party transactions; |
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• | meeting separately and periodically with management and the independent auditors; and | |
• | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
• | reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; | |
• | reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; and | |
• | reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements. |
• | selecting and recommending to the board nominees for election by the shareholders or appointment by the board; | |
• | reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; | |
• | making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and | |
• | advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. |
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Number of | ||||||||
Class A | Vesting | |||||||
Restricted | Date of | Commencement | Vesting | |||||
Name | Shares | Grant | Date | Schedule | ||||
Yachao Liu | * | July 26, 2010 | July 26, 2010 | 4 years | ||||
Yunfeng Bai | * | July 26, 2010 | July 26, 2010 | 4 years | ||||
Joseph Kauffman | * | July 26, 2010 | July 26, 2010 | 4 years | ||||
Directors and officers as a group | 2,125,000 | — | July 26, 2010 | 4 years | ||||
Other individuals as a group | 3,294,500 | — | July 26, 2010 | 1 to 4 years | ||||
Total | 5,419,500 | — | July 26, 2010 | — |
* | Less than 1% of the outstanding common shares. |
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• | each of our directors and executive officers; and | |
• | each person known to us to own beneficially more than 5% of our common shares. |
Shares Beneficially | ||||||||||||||||||||
Shares Beneficially | Owned after This Offering | |||||||||||||||||||
Owned Prior to This Offering | % of Voting | |||||||||||||||||||
Number | %(1) | Number | %(2) | Power(3) | ||||||||||||||||
Directors and Executive Officers: | ||||||||||||||||||||
Bangxin Zhang(4) | 59,550,000 | 47.6 | % | 59,550,000 | 40.0 | % | 46.7 | % | ||||||||||||
Yundong Cao(5) | 20,300,000 | 16.2 | % | 20,300,000 | 13.6 | % | 15.9 | % | ||||||||||||
Jane Jie Sun | — | — | — | — | — | |||||||||||||||
Wai Chau Lin | — | — | — | — | — | |||||||||||||||
Yachao Liu(6) | 8,812,500 | 7.1 | % | 8,812,500 | 5.9 | % | 6.9 | % | ||||||||||||
Yunfeng Bai(7) | 6,337,500 | 5.1 | % | 6,337,500 | 4.3 | % | 5.0 | % | ||||||||||||
Joseph Kauffman | — | — | — | — | — | |||||||||||||||
All directors and executive officers as a group | 95,000,000 | 76.0 | % | 95,000,000 | 63.8 | % | 74.6 | % | ||||||||||||
Principal Shareholders: | ||||||||||||||||||||
Bright Unison Limited(8) | 59,550,000 | 47.6 | % | 59,550,000 | 40.0 | % | 46.7 | % | ||||||||||||
Tiger Global Five China Holdings(9) | 21,875,000 | 17.5 | % | 23,475,000 | 15.8 | % | 17.3 | % | ||||||||||||
Central Glory Investments Limited(10) | 14,550,000 | 11.6 | % | 14,550,000 | 9.8 | % | 11.4 | % | ||||||||||||
KTB China Optimum Fund and affiliate fund(11) | 8,125,000 | 6.5 | % | 8,285,000 | 5.6 | % | 6.4 | % | ||||||||||||
Perfect Wisdom International Limited(12) | 8,812,500 | 7.1 | % | 8,812,500 | 5.9 | % | 6.9 | % | ||||||||||||
Excellent New Limited(13) | 6,337,500 | 5.1 | % | 6,337,500 | 4.3 | % | 5.0 | % |
(1) | For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by 125,000,000, being the sum of the total number of common shares outstanding as of the date of the prospectus and the number of common shares issuable upon conversion of all outstanding series A preferred shares at the conversion rate of one preferred share to one Class B common share. | |
(2) | For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by 149,000,000, being the total number of common shares outstanding immediately after the closing of this offering, assuming that the underwriters do not exercise their over-allotment option. | |
(3) | Percentage of total voting power represents voting power with respect to all of our Class A and Class B common shares, as a single class. Each holder of our Class B common shares is entitled to ten votes per Class B common share and each holder of Class A common shares is entitled to one vote per Class A common share held by our shareholders on all matters submitted to them for a vote. Our Class A common shares and Class B common shares vote together as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. Our Class B common shares are convertible at any time by the holder into Class A common shares on a 1:1 basis. | |
(4) | Consists of 59,550,000 Class B common shares held by Bright Unison Limited, a British Virgin Islands company. Bangxin Zhang is the sole shareholder and the sole director of Bright Unison Limited. Bangxin Zhang’s business address isc/o 18/F, Hesheng Building, 32 Zhongguancun Avenue, Haidian District, Beijing 100080, People’s Republic of China. | |
(5) | Consists of (i) 14,550,000 Class B common shares held by Central Glory Investments Limited, a British Virgin Islands company, to which Yundong Cao is the sole shareholder and the sole director and (ii) 5,750,000 Class B common shares held by Passion Prance Limited, a British Virgin Islands company, to which Yundong Cao’s spouse is the sole shareholder and the sole director. Mr. Cao |
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disclaims beneficiary ownership of the shares held by Passion Prance Limited. Yundong Cao’s business address isc/o 18/F, Hesheng Building, 32 Zhongguancun Avenue, Haidian District, Beijing 100080, People’s Republic of China. | ||
(6) | Consists of 8,812,500 Class B common shares held by Perfect Wisdom International Limited, a British Virgin Islands company. Yachao Liu is the sole shareholder and the sole director of Perfect Wisdom International Limited. Yachao Liu’s business address isc/o 18/F, Hesheng Building, 32 Zhongguancun Avenue, Haidian District, Beijing 100080, People’s Republic of China. | |
(7) | Consists of 6,337,500 Class B common shares held by Excellent New Limited, a British Virgin Islands company. Yunfeng Bai is the sole shareholder and the sole director of Excellent New Limited. Yunfeng Bai’s business address isc/o 18/F, Hesheng Building, 32 Zhongguancun Avenue, Haidian District, Beijing 100080, People’s Republic of China. | |
(8) | Bright Unison Limited is a company incorporated in the British Virgin Islands. Bangxin Zhang is the sole shareholder and the sole director of Bright Unison Limited. Its registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. | |
(9) | Prior to this offering, shares held by Tiger Global Five China Holdings, a company organized under the laws of Mauritius, consist of 21,875,000 Class B common shares. In this offering, Tiger Global Management, LLC, an affiliate of Tiger Global Five China Holdings, will purchase 800,000 ADSs, representing 1,600,000 Class A common shares. Tiger Global Five China Holdings is a company organized under the laws of Mauritius and controlled by Tiger Global Five Parent Holdings, which is in turn controlled by Tiger Global Private Investment Partners V, L.P., or PIP V. PIP V is controlled by its general partner Tiger Global PIP Performance V, L.P., which is controlled by its general partner Tiger Global PIP Management V, Ltd., which is in turn controlled by Charles P. Coleman III. The registered office of Tiger Global Five China Holdings is Twenty Seven, Cybercity, Ebene, Mauritius. | |
(10) | Central Glory Investments Limited is a company incorporated in the British Virgin Islands. Yundong Cao is the sole shareholder and the sole director of Central Glory Investments Limited. Its registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. | |
(11) | Prior to this offering, shares held by KTB China Optimum Fund consist of (i) 3,125,000 Class B common shares and (ii) 5,000,000 Class B common shares issuable upon the conversion of the Series A preferred shares held by KTB China Optimum Fund. In this offering, KTB China Optimum Fund will purchase 80,000 ADSs, representing 160,000 Class A common shares. KTB China Optimum Fund was formed in Korea, and its general partner is KTB Capital Co., Ltd. KTB Capital Co., Ltd., which is a wholly owned subsidiary of KTB Securities Co., Ltd., a listed company on Korea Stock Exchange, has the discretionary authority to vote and dispose of the shares held by KTB China Optimum Fund. KTB China Optimum Fund’s registered office is at KTB network building826-14 Yeoksam-dong Gangnam-gu, Seoul, Korea. | |
(12) | Perfect Wisdom International Limited is a company incorporated in the British Virgin Islands. Yachao Liu is the sole shareholder and the sole director of Perfect Wisdom International Limited. Its registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. | |
(13) | Excellent New Limited is a company incorporated in the British Virgin Islands. Yunfeng Bai is the sole shareholder and the sole director of Excellent New Limited. Its registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. |
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• | authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders; and | |
• | limit the ability of shareholders to requisition and convene general meetings of shareholders. |
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• | the statutory provisions as to majority vote have been met; | |
• | the shareholders have been fairly represented at the meeting in question; | |
• | the arrangement is such that a businessman would reasonably approve; and | |
• | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law. |
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• | a company is acting or proposing to act illegally or ultra vires; | |
• | the act complained of, although not ultra vires, could be effected duly if authorized by more than a simple majority vote which has not been obtained; and | |
• | those who control the company are perpetrating a “fraud on the minority.” |
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• | Cash. The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof (to the |
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extent applicable), on an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain registered ADR holders, and (iii) deduction of the depositary’s expenses in (1) converting any foreign currency to U.S. dollars to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some or all of the value of the distribution. |
• | Shares. In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such shares. Only whole ADSs will be issued. Any shares which would result in fractional ADSs will be sold and the net proceeds will be distributed in the same manner as cash to the ADR holders entitled thereto. | |
• | Rights to receive additional shares. In the case of a distribution of rights to subscribe for additional shares or other rights, if we provide evidence satisfactory to the depositary that it may lawfully distribute such rights, the depositary will distribute warrants or other instruments in the discretion of the depositary representing such rights. However, if we do not furnish such evidence, the depositary may: |
• | sell such rights if practicable and distribute the net proceeds in the same manner as cash to the ADR holders entitled thereto; or | |
• | if it is not practicable to sell such rights, do nothing and allow such rights to lapse, in which case ADR holders will receive nothing. |
• | Other Distributions. In the case of a distribution of securities or property other than those described above, the depositary may either (i) distribute such securities or property in any manner it deems equitable and practicable or (ii) to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell such securities or property and distribute any net proceeds in the same way it distributes cash. |
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• | temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends; | |
• | the payment of fees, taxes and similar charges; or | |
• | compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities. |
• | to receive any distribution on or in respect of shares, | |
• | to give instructions for the exercise of voting rights at a meeting of holders of shares, |
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• | to pay the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR, or | |
• | to receive any notice or to act in respect of other matters, |
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• | a fee of $1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs; | |
• | a fee of up to $0.05 per ADS for any cash distribution made pursuant to the deposit agreement; | |
• | a fee of up to $0.05 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision); | |
• | reimbursement of such fees, charges and expenses as are incurred by the depositaryand/or any of the depositary’s agents (including, without limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the shares, the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which charge shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions); | |
• | a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto; | |
• | stock transfer or other taxes and other governmental charges; | |
• | cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of shares; | |
• | transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and | |
• | expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars. |
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• | payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in effect for the registration of transfers of shares upon any applicable register and (iii) any applicable fees and expenses described in the deposit agreement; | |
• | the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other information, including without limitation, information as to citizenship, |
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residence, exchange control approval, beneficial ownership of any securities, compliance with applicable law, regulations, provisions of or governing deposited securities and terms of the deposit agreement and the ADRs, as it may deem necessary or proper; and |
• | compliance with such regulations as the depositary may establish consistent with the deposit agreement. |
• | any present or future law, rule, regulation, fiat, order or decree of the United States, the Cayman Islands, the People’s Republic of China (for this section only, including the Hong Kong Special Administrative Region) or any other country, or of any governmental or regulatory authority or securities exchange or market or automated quotation system, the provisions of or governing any deposited securities, any present or future provision of our charter, any act of God, war, terrorism or other circumstance beyond our, the depositary’s or our respective agents’ control shall prevent, delay or subject to any civil or criminal penalty, any act which the deposit agreement or the ADRs provide shall be done or performed by us, the depositary or our respective agents (including, without limitation, voting); | |
• | it exercises or fails to exercise discretion under the deposit agreement or the ADR; | |
• | it performs its obligations under the deposit agreement and ADRs without gross negligence or bad faith; | |
• | it takes any action or refrains from taking any action in reliance upon the advice of or information from legal counsel, accountants, any person presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information; or | |
• | it relies upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. |
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• | be a party to and bound by the terms of the deposit agreement and the applicable ADR or ADRs, and | |
• | appoint the depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the deposit agreement and the applicable ADR or ADRs, to adopt any and all procedures necessary to comply with applicable laws and to take such action as the depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the deposit agreement and the applicable ADR and ADRs, the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof. |
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• | 1% of the number of our common shares then outstanding, in the form of ADSs or otherwise, which will equal approximately 1.49 million shares immediately after this offering, assuming the underwriters do not exercise their over-allotment option; and | |
• | the average weekly trading volume of our ADSs on the New York Stock Exchange during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. |
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• | excess distributionand/or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or common shares; | |
• | amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC, or pre-PFIC year, will be taxable as ordinary income; | |
• | amount allocated to each prior taxable year, other than the current taxable year or a pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable to the U.S. Holder for that year; and | |
• | interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than the current taxable year or a pre-PFIC year. |
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Underwriters | Number of ADSs | |||
Credit Suisse Securities (USA) LLC | 5,100,000 | |||
Morgan Stanley & Co. International plc | 5,100,000 | |||
Piper Jaffray & Co. | 900,000 | |||
Oppenheimer & Co. Inc. | 900,000 | |||
Total | 12,000,000 |
Per ADS | Total | |||||||||||||||
No | Full | No | Full | |||||||||||||
Underwriting Discounts and Commissions To Be Paid by | Exercise | Exercise | Exercise | Exercise | ||||||||||||
TAL Education Group | $ | 0.70 | $ | 0.70 | $ | 8,400,000 | $ | 9,660,000 |
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• | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any common shares or ADSs or any securities convertible into or exercisable or exchangeable for such common shares or ADSs or enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common shares or ADSs, whether any such transaction described above is to be settled by delivery of common shares or ADSs or such other securities, in cash or otherwise; | |
• | file any registration statement with the SEC relating to the offering of any common shares or ADSs or any securities convertible into or exercisable or exchangeable for such common shares or ADSs; or | |
• | publicly disclose the intention to make any such offer, pledge, sale or disposition, or enter into any such transaction, swap, hedge or other arrangement, or file any such registration statement. |
• | the sale of common shares or ADSs to the underwriters; | |
• | the issuance of common shares or the grant of options to purchase common shares under our share incentive plan; and | |
• | the issuance by us of common shares upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing or which is otherwise described in this prospectus. |
• | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any common shares or ADSs or any securities convertible into or exercisable or exchangeable for such common shares or ADSs or enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common shares or ADSs, whether any such transaction described above is to be settled by delivery of common shares or ADSs or such other securities, in cash or otherwise; or | |
• | publicly disclose the intention to make any such offer, pledge, sale or disposition, or enter into any such transaction, swap, hedge or other arrangement. |
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• | during the last 17 days of the180-day restricted period we issue an earnings release or material news or a material event relating to our company occurs; or | |
• | prior to the expiration of the180-day restricted period, we announce that we will release earnings results during the16-day period beginning on the last day of the180-day period. |
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Securities and Exchange Commission registration fee | $ | 9,839 | ||
New York Stock Exchange listing fee | 125,000 | |||
Financial Industry Regulatory Authority, Inc. filing fee | 14,300 | |||
Printing and engraving expenses | 250,000 | |||
Accounting fees and expenses | 400,000 | |||
Legal fees and expenses | 1,200,000 | |||
Miscellaneous | 180,000 | |||
Total | $ | 2,179,139 | ||
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F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6–F-7 | ||||
F-8–F-36 | ||||
F-37–F-40 | ||||
F-41 | ||||
F-42 | ||||
F-43 | ||||
F-44 | ||||
F-45-F-58 |
F-1
Table of Contents
F-2
Table of Contents
As of | As of | |||||||||||
February 28, | February 28, | |||||||||||
2009 | 2010 | |||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 29,692,901 | $ | 50,752,481 | ||||||||
Available-for-sale securities | 340,418 | 1,918,156 | ||||||||||
Amounts due from related parties | 92,112 | — | ||||||||||
Inventory | 1,063 | 121,819 | ||||||||||
Deferred tax assets-current | 481,129 | 831,297 | ||||||||||
Prepaid expenses and other current assets | 1,414,923 | 2,280,941 | ||||||||||
Total current assets | 32,022,546 | 55,904,694 | ||||||||||
Property and equipment, net | 2,471,337 | 4,991,490 | ||||||||||
Deferred tax assets-non-current | 131,289 | 283,968 | ||||||||||
Rental deposit | 939,207 | 2,170,548 | ||||||||||
Intangible assets, net | 2,226,343 | 1,389,160 | ||||||||||
Goodwill | 762,272 | 763,802 | ||||||||||
Total assets | $ | 38,552,994 | $ | 65,503,662 | ||||||||
Liabilities, Convertible Redeemable Preferred Shares and Equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable (including accounts payable of the consolidated VIEs without recourse to TAL Education Group of nil and 915,408 as of February 28, 2009, and February 28, 2010, respectively) | $ | — | $ | 987,742 | ||||||||
Deferred revenue (including deferred revenue of the consolidated VIEs without recourse to TAL Education Group of 18,022,550 and 24,631,648 as of February 28, 2009, and February 28, 2010, respectively) | 18,022,550 | 29,407,994 | ||||||||||
Amounts due to related parties (including amounts due to related parties of the consolidated VIEs without recourse to TAL Education Group of 101,043 and 108,204 as of February 28, 2009 and February 28, 2010, respectively) | 101,043 | 108,204 | ||||||||||
Distribution payable to shareholders (including distribution payable to shareholders of the consolidated VIEs without recourse to TAL Education Group of 1,462,095 and nil as of February 28, 2009 and February 28, 2010, respectively) | 1,462,095 | — | ||||||||||
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities without recourse to TAL Education Group of 3,601,117 and 6,588,552 as of February 28, 2009 and February 28, 2010, respectively) | 3,609,797 | 6,817,816 | ||||||||||
Income tax payable (including income tax payable of the consolidated VIEs without recourse to TAL Education Group of 2,636,095 and 2,653,324 as of February 28, 2009, and February 28, 2010, respectively) | 2,636,095 | 580,225 | ||||||||||
Total current liabilities | 25,831,580 | 37,901,981 | ||||||||||
Convertible loan | — | 500,000 | ||||||||||
Deferred tax liabilities-non-current | 203,776 | 175,610 | ||||||||||
Acquisition payable-non-current (including acquisition payable -non-current of the consolidated VIEs without recourse to TAL Education Group of 162,293 and nil as of February 28, 2009 and February 28, 2010, respectively) | 162,293 | — | ||||||||||
Total liabilities | 26,197,649 | 38,577,591 | ||||||||||
Commitments and contingencies (Note 16) | ||||||||||||
Series A convertible redeemable preferred shares ($0.001 par value, 5,000,000 shares and 5,000,000 shares authorized, issued and outstanding as of February 28, 2009 and February 28, 2010, respectively, liquidation value $5,000,000) | 9,000,000 | 9,000,000 | ||||||||||
Equity | ||||||||||||
TAL Education Group Shareholders’ Equity | ||||||||||||
Class A common shares ($0.001 par value, 500,000,000 shares authorized, nil issued and outstanding as of February 28, 2009 and February 28, 2010) | — | — | ||||||||||
Class B common shares ($0.001 par value, 495,000,000 shares authorized as of February 28, 2009 and February 28, 2010; 120,000,000 shares and 120,000,000 shares issued and outstanding as of February 28, 2009 and February 28, 2010, respectively) | 120,000 | 120,000 | ||||||||||
Class B common shares subscription receivable | (120,000 | ) | (120,000 | ) | ||||||||
Additional paid-in capital | 559,898 | 779,641 | ||||||||||
Statutory reserve | 2,660,818 | 4,857,443 | ||||||||||
Retained earnings | 21,400 | 12,069,734 | ||||||||||
Accumulated other comprehensive income | 113,229 | 219,253 | ||||||||||
Total TAL Education Group’s Equity | 3,355,345 | 17,926,071 | ||||||||||
Total liabilities, convertible redeemable preferred shares and equity | $ | 38,552,994 | $ | 65,503,662 | ||||||||
F-3
Table of Contents
For the year | For the year | For the year | ||||||||||
ended | ended | ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenues | $ | 8,882,191 | $ | 37,475,583 | $ | 69,593,523 | ||||||
Cost of revenues | (4,367,086 | ) | (18,554,255 | ) | (37,648,875 | ) | ||||||
Gross profit | 4,515,105 | 18,921,328 | 31,944,648 | |||||||||
Operating expenses | ||||||||||||
Selling and marketing | (370,185 | ) | (2,353,011 | ) | (5,608,116 | ) | ||||||
General and administrative | (2,478,092 | ) | (5,889,370 | ) | (10,871,866 | ) | ||||||
Impairment loss on intangible assets and goodwill | — | (1,615,455 | ) | — | ||||||||
Total operating expenses | (2,848,277 | ) | (9,857,836 | ) | (16,479,982 | ) | ||||||
Income from operations | 1,666,828 | 9,063,492 | 15,464,666 | |||||||||
Interest income | 10,485 | 119,922 | 323,861 | |||||||||
Interest expense | — | (42,967 | ) | (40,643 | ) | |||||||
Other expenses | — | (209,949 | ) | (124,400 | ) | |||||||
Impairment loss onavailable-for-sale securities | — | (362,668 | ) | — | ||||||||
Gain on extinguishment of liabilities | — | 731,092 | — | |||||||||
Income before income tax provision | 1,677,313 | 9,298,922 | 15,623,484 | |||||||||
Provision for income tax | (164,741 | ) | (2,018,253 | ) | (1,378,525 | ) | ||||||
Net income | 1,512,572 | 7,280,669 | 14,244,959 | |||||||||
Net income attributable to TAL Education Group | 1,512,572 | 7,280,669 | 14,244,959 | |||||||||
Deemed dividends on Series A convertible redeemable preferred shares—accretion of redemption premium | — | (4,113,035 | ) | — | ||||||||
Net income attributable to common shareholders of TAL Education Group | 1,512,572 | 3,167,634 | 14,244,959 | |||||||||
Net income per common share | ||||||||||||
Basic | $ | 0.01 | $ | 0.03 | $ | 0.11 | ||||||
Diluted | $ | 0.01 | $ | 0.03 | $ | 0.11 | ||||||
Net income per Series A convertible redeemable preferred share-Basic | $ | — | $ | 17.69 | $ | 0.11 | ||||||
Weighted average shares used in calculating net income per common share | ||||||||||||
Basic | 120,000,000 | 120,000,000 | 120,000,000 | |||||||||
Diluted | 120,000,000 | 120,000,000 | 125,000,000 | |||||||||
Weighted average shares used in calculating net income per Series A convertible redeemable preferred share-basic | — | 232,877 | 5,000,000 | |||||||||
Pro forma net income per common share (unaudited) (Note 23) | ||||||||||||
Basic | — | — | $ | 0.11 | ||||||||
Diluted | — | — | $ | 0.11 | ||||||||
Weighted average shares used in calculating pro forma net income per common share (unaudited) (Note 23) | ||||||||||||
Basic | — | — | 123,151,008 | |||||||||
Diluted | — | — | 128,151,008 |
F-4
Table of Contents
Consolidated Statements of Changes in Equity and Comprehensive Income
(In U.S. dollars, except share and share related data)
Total TAL | ||||||||||||||||||||||||||||||||||||
Class B common | Accumulated | Education | ||||||||||||||||||||||||||||||||||
shares | Additional | other | Group | |||||||||||||||||||||||||||||||||
Class B common shares | subscription | paid-in | Statutory | (Accumulated deficit)/ | comprehensive | shareholders’ | Comprehensive | |||||||||||||||||||||||||||||
Shares | Amount | receivable | capital | reserve | retained earnings | income (loss) | equity | income | ||||||||||||||||||||||||||||
Balance as of March 1, 2007 | 1,000 | $ | 1 | $ | (1 | ) | $ | 62,580 | $ | — | $ | (555,968 | ) | $ | — | $ | (493,388 | ) | $ | — | ||||||||||||||||
Capital contribution | — | — | — | 131,810 | — | — | — | 131,810 | — | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,512,572 | — | 1,512,572 | 1,512,572 | |||||||||||||||||||||||||||
Provision for statutory reserve | — | — | — | — | 494,040 | (494,040 | ) | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | 42,102 | 42,102 | 42,102 | |||||||||||||||||||||||||||
Net unrealized (losses) onavailable-for-sale securities, net of tax effect of $24,296 | — | — | — | — | — | — | (49,327 | ) | (49,327 | ) | (49,327 | ) | ||||||||||||||||||||||||
Balance as of February 29, 2008 | 1,000 | 1 | (1 | ) | 194,390 | 494,040 | 462,564 | (7,225 | ) | 1,143,769 | $ | 1,505,347 | ||||||||||||||||||||||||
Capital contribution | — | — | — | 365,508 | — | — | — | 365,508 | — | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | 7,280,669 | — | 7,280,669 | 7,280,669 | |||||||||||||||||||||||||||
Issuance of Class B common shares | 119,999,000 | 119,999 | (119,999 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
Provision for statutory reserve | — | — | — | — | 2,166,778 | (2,166,778 | ) | — | — | — | ||||||||||||||||||||||||||
Distribution to shareholders | — | — | — | — | — | (1,442,020 | ) | — | (1,442,020 | ) | — | |||||||||||||||||||||||||
Accretion for Series A convertible redeemable preferred shares redemption premium | — | — | — | — | — | (4,113,035 | ) | — | (4,113,035 | ) | — | |||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | 71,127 | 71,127 | 71,127 | |||||||||||||||||||||||||||
Net unrealized (losses) onavailable-for-sale securities, net of tax effect of $72,261 | — | — | — | — | — | — | (216,784 | ) | (216,784 | ) | (216,784 | ) | ||||||||||||||||||||||||
Transfer to the statements of operations ofother-than-temporary impairment, net of tax effect of ($96,557) | — | — | — | — | — | — | 266,111 | 266,111 | 266,111 | |||||||||||||||||||||||||||
Balance as of February 28, 2009 | 120,000,000 | 120,000 | (120,000 | ) | 559,898 | 2,660,818 | 21,400 | 113,229 | 3,355,345 | $ | 7,401,123 | |||||||||||||||||||||||||
Capital contribution | — | — | — | 219,743 | — | — | — | 219,743 | — | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | 14,244,959 | — | 14,244,959 | 14,244,959 | |||||||||||||||||||||||||||
Provision for statutory reserve | — | — | — | — | 2,196,625 | (2,196,625 | ) | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | 21,493 | 21,493 | 21,493 | |||||||||||||||||||||||||||
Net unrealized gains onavailable-for-sale securities, net of tax effect of ($28,177) | — | — | — | — | — | — | 84,531 | 84,531 | 84,531 | |||||||||||||||||||||||||||
Balance as of February 28, 2010 | 120,000,000 | $ | 120,000 | $ | (120,000 | ) | $ | 779,641 | $ | 4,857,443 | $ | 12,069,734 | $ | 219,253 | $ | 17,926,071 | $ | 14,350,983 | ||||||||||||||||||
F-5
Table of Contents
For the year | For the year | For the year | ||||||||||
ended | ended | ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 1,512,572 | $ | 7,280,669 | $ | 14,244,959 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation of property and equipment | 46,416 | 452,009 | 1,272,074 | |||||||||
Amortization of intangible assets | 114,536 | 565,300 | 841,193 | |||||||||
Impairment loss on intangible assets and goodwill | — | 1,615,455 | — | |||||||||
Impairment loss onavailable-for-sale securities | — | 362,668 | — | |||||||||
Gain on extinguishment of liabilities | — | (731,092 | ) | — | ||||||||
Changes in operating assets and liabilities | ||||||||||||
Amounts due from related parties | (41,914 | ) | (91,458 | ) | 92,247 | |||||||
Inventory | (4,270 | ) | 3,603 | (120,688 | ) | |||||||
Prepaid expenses and other current assets | 425,014 | (802,788 | ) | (862,708 | ) | |||||||
Deferred income taxes | (139,879 | ) | (602,485 | ) | (557,895 | ) | ||||||
Rental deposit | (235,756 | ) | (635,096 | ) | (1,228,785 | ) | ||||||
Accounts payable | — | — | 987,204 | |||||||||
Deferred revenue | 3,701,239 | 11,995,607 | 11,343,086 | |||||||||
Amounts due to related parties | — | (36,135 | ) | 6,954 | ||||||||
Accrued expenses and other current liabilities | 644,389 | 1,805,910 | 3,217,670 | |||||||||
Income tax payable | 302,689 | 2,285,218 | (2,060,038 | ) | ||||||||
Net cash provided by operating activities | 6,325,036 | 23,467,385 | 27,175,273 | |||||||||
Cash flows from investing activities | ||||||||||||
Purchase of property and equipment | (532,814 | ) | (2,142,362 | ) | (3,785,897 | ) | ||||||
Purchase of intangible assets | (277,022 | ) | (1,422,679 | ) | — | |||||||
Purchase ofavailable-for-sale securities | (660,519 | ) | — | (1,464,231 | ) | |||||||
Acquisitions of subsidiaries, net of cash acquired of $186,336 | — | (1,551,362 | ) | — | ||||||||
Net cash used in investing activities | (1,470,355 | ) | (5,116,403 | ) | (5,250,128 | ) | ||||||
F-6
Table of Contents
For the year | For the year | For the year | ||||||||||
ended | ended | ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Cash flows from financing activities | ||||||||||||
Proceeds from issuance of Series A convertible redeemable preferred shares, net of issuance cost of $113,035 | — | 4,886,965 | — | |||||||||
Capital contributed from shareholders | 131,810 | 365,508 | 219,743 | |||||||||
Payment of deferred consideration | — | — | (180,345 | ) | ||||||||
Distribution to shareholders | — | — | (1,442,020 | ) | ||||||||
Convertible loan | — | — | 500,000 | |||||||||
Net cash provided by (used in) financing activities | 131,810 | 5,252,473 | (902,622 | ) | ||||||||
Effect of exchange rate changes | 315,097 | 384,961 | 37,057 | |||||||||
Net increase in cash and cash equivalents | 5,301,588 | 23,988,416 | 21,059,580 | |||||||||
Cash and cash equivalents at the beginning of year | 402,897 | 5,704,485 | 29,692,901 | |||||||||
Cash and cash equivalents at the end of year | 5,704,485 | 29,692,901 | 50,752,481 | |||||||||
Supplement disclosure of cash flow information: | ||||||||||||
Income tax paid | $ | 1,931 | $ | 335,439 | $ | 3,997,584 | ||||||
F-7
Table of Contents
1. | Organization and Principal Activities |
Place of | ||||||||||
Later of date of | incorporation | Percentage of | ||||||||
incorporation | (or establishment) | economic | ||||||||
Name | or acquisition | /operation | ownership | Principal activities | ||||||
Subsidiaries: | ||||||||||
Xueersi International Education Group Limited (“Xueersi Hong Kong”) | March 11, 2008 | Hong Kong | 100 | % | Holding company | |||||
TAL Education Technology (Beijing) Co., Ltd. (“TAL Beijing”) | May 8, 2008 | Beijing | 100 | % | Software sales, and consulting service | |||||
Beijing Huanqiu Zhikang Shidai Education Consulting Co., Ltd. (“Huanqiu Zhikang”) | September 17, 2009 | Beijing | 100 | % | Education and management consulting service | |||||
Beijing Yidu Huida Education Technology Co., Ltd. (“Yidu Huida”) | November 11, 2009 | Beijing | 100 | % | Software sales and consulting service | |||||
Variable interest entities: | ||||||||||
Beijing Xueersi Education Technology Co., Ltd. (“Xueersi Education”) | December 31, 2005 | Beijing | 100 | % | Sales of educational materials and products | |||||
Beijing Xueersi Network Technology Co., Ltd. (“Xueersi Network”) | August 23, 2007 | Beijing | 100 | % | On-line education | |||||
VIEs’ subsidiaries: | ||||||||||
Beijing Haidian District Xueersi Training School (“Haidian Xueersi”) | July 3, 2006 | Beijing | 100 | % | After-school tutoring for primary and secondary school students | |||||
Beijing Dongcheng District Xueersi Training School (“Dongcheng Xueersi”) | March 21, 2008 | Beijing | 100 | % | After-school tutoring for primary and secondary school students | |||||
Beijing Zhikang Culture Distribution Co., Ltd. (“Zhikang”) | June 30, 2008 | Beijing | 100 | % | After- school tutoring for primary and secondary school students | |||||
Hubei Jianli Hafu English Training School (“Jianli School”) | July 1, 2008 | Hubei | 100 | % | Language education | |||||
Hubei Qianjiang Xiaohafu English Training School (“Qianjiang School”) | July 1, 2008 | Hubei | 100 | % | Language education | |||||
Wuhan Jianghanqu Xiaoxinxing English Training School (“Wuhan School”) | July 1, 2008 | Hubei | 100 | % | Language education | |||||
Shanghai Lehai Science and Technology Information Co., Ltd. (“Shanghai Lehai”) | August 1, 2008 | Shanghai | 100 | % | Technology development and consulting service | |||||
Shanghai Changning District Xueersi-Lejiale School (“Changning School”) | August 1, 2008 | Shanghai | 100 | % | After-school tutoring for primary and secondary school students | |||||
Shanghai Minhang District Lejiale School (“Minhang School”) | August 1, 2008 | Shanghai | 100 | % | Language education | |||||
Beijing Xicheng District Xueersi Training School (“Xicheng Xueersi”) | April 2, 2009 | Beijing | 100 | % | After-school tutoring for primary and secondary school students |
F-8
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Place of | ||||||||||
Later of date of | incorporation | Percentage of | ||||||||
incorporation | (or establishment) | economic | ||||||||
Name | or acquisition | /operation | ownership | Principal activities | ||||||
Shanghai Xueersi Education Information Consulting Co., Ltd. (“Shanghai Education”) | July 2, 2009 | Shanghai | 100 | % | Educational information consulting and educational software development | |||||
Tianjin Xueersi Education Information Consulting Co., Ltd. (“Tianjin Education”) | August 14, 2009 | Tianjin | 100 | % | Educational information consulting service | |||||
Guangzhou Xueersi Education Technology Co., Ltd. (“Guangzhou Education”) | August 16, 2009 | Guangzhou | 100 | % | Educational technology research and development | |||||
Shenzhen Xueersi Education Technology Co., Ltd. (“Shenzhen Education”) | December 22, 2009 | Shenzhen | 100 | % | Teaching software research and development |
• | Agreements that transfer economic benefits to TAL Beijing |
F-9
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
• | Agreements that provide TAL Beijing effective control over the VIEs |
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Total current assets | $ | 27,027,498 | $ | 45,171,584 | ||||
Total non-current assets | 6,452,080 | 8,792,445 | ||||||
Total assets | 33,479,578 | 53,964,029 | ||||||
Total current liabilities | 25,822,900 | 34,897,136 | ||||||
Total non-current liabilities | 366,069 | 175,610 | ||||||
Total liabilities | $ | 26,188,969 | $ | 35,072,746 | ||||
F-10
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenues | $ | 8,882,191 | $ | 37,475,583 | $ | 68,884,665 | ||||||
Net income | $ | 1,512,572 | $ | 7,312,960 | $ | 14,260,357 |
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Net cash provided by operating activities | $ | 6,325,036 | $ | 24,956,771 | $ | 21,611,823 | ||||||
Net cash used in investing activities | $ | (1,470,355 | ) | $ | (5,066,464 | ) | $ | (5,250,128 | ) | |||
Net cash provided by/ (used in) financing activities | $ | 131,810 | $ | 365,508 | $ | (1,402,622 | ) |
2. | Significant Accounting Policies |
F-11
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Computer, network equipment and software | 3 years | |
Vehicles | 4-5 years | |
Office equipment and furniture | 3-5 years | |
Leasehold improvement | Shorter of the lease term or estimated useful lives |
Trade name | 10.0 years | |
Student base | 3.5 years | |
Partnership agreement | 2.6-3.5 years | |
Domain names | 3.0 years | |
Non-compete agreement | 2.0-3.0 years | |
Educational license | 0.9-2.0 years |
F-12
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-13
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-14
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-15
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-16
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-17
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
3. | Acquisitions |
F-18
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Amortization | ||||||||||||
period | ||||||||||||
Cash and cash equivalents | $ | 12,504 | ||||||||||
Property and equipment | 3,189 | |||||||||||
Intangible assets acquired: | ||||||||||||
Student base | 177,822 | 3.50 years | ||||||||||
Partnership agreement | 97,656 | 3.50 years | ||||||||||
Non-compete agreement | 2,915 | 2.00 years | ||||||||||
Education license | 2,915 | 1.50 years | ||||||||||
Goodwill | 1,338,753 | |||||||||||
Deferred tax liabilities | (70,327 | ) | ||||||||||
Payable for business acquisition-current | 550,956 | |||||||||||
Payable for business acquisition-non-current | 367,304 | |||||||||||
Obligation absent of IPO | 787,080 | |||||||||||
Total acquisition obligation | 1,705,340 | |||||||||||
Less | ||||||||||||
Discount to present value at date of acquisition | (139,913 | ) | ||||||||||
Total purchase consideration | $ | 1,565,427 | ||||||||||
F-19
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Amortization | ||||||||
period | ||||||||
Cash and cash equivalents | $ | 173,832 | ||||||
Prepaid expense and other current assets | 102,010 | |||||||
Property and equipment | 157,523 | |||||||
Accrued expense and other current liabilities | (344,380 | ) | ||||||
Income tax payable | (1,585 | ) | ||||||
Intangible assets acquired: | ||||||||
Partnership agreement | 330,865 | 3.50 years | ||||||
Trade name | 262,360 | 10.00 years | ||||||
Student base | 164,704 | 3.50 years | ||||||
Non-compete agreement | 16,033 | 3.00 years | ||||||
Education license | 3,207 | 1.67 years | ||||||
Goodwill | 357,300 | |||||||
Deferred tax liabilities | (194,292 | ) | ||||||
Total consideration | $ | 1,027,577 | ||||||
F-20
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the years ended | ||||||||
February 29, | February 28, | |||||||
2008 | 2009 | |||||||
(unaudited) | (unaudited) | |||||||
Net revenues | $ | 9,517,600 | $ | 37,876,116 | ||||
Net income attributable to TAL Education Group | $ | 1,546,449 | $ | 6,598,516 | ||||
Net income per common share | ||||||||
Basic | $ | 0.01 | $ | 0.02 | ||||
Diluted | $ | 0.01 | $ | 0.02 | ||||
Net income per Series A | ||||||||
convertible redeemable preferred share—Basic | — | $ | 17.68 | |||||
4. | Extinguishment of Liabilities |
5. | Available-for-Sale Securities |
F-21
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Balance as of March 1, 2007 | $ | — | ||
Purchase | 660,519 | |||
Foreign exchange difference | 42,567 | |||
Changes in fair value(1) | (73,623 | ) | ||
Balance as of February 29, 2008 | 629,463 | |||
Changes in fair value(1) | (289,045 | ) | ||
Balances as of February 28, 2009 | 340,418 | |||
Purchase | 1,464,231 | |||
Changes in fair value | 112,708 | |||
Foreign exchange difference | 799 | |||
Balance as of February 28, 2010 | $ | 1,918,156 | ||
(1) | The Group determined the decline to be other-than temporary due to the continuing challenging global financial markets, poor performance of the equity markets, as well as the duration and the extent to which the fair value of the securities had continued to be less than the cost and therefore booked an impairment loss in the income statement of $266,111, net of tax effect of $96,557. |
As of February 28, 2009 | As of February 28, 2010 | |||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
unrealized | unrealized | unrealized | unrealized | |||||||||||||||||||||||||||||
Cost | gains | (losses) | Fair value | Cost | gains | (losses) | Fair value | |||||||||||||||||||||||||
Mutual fund | $ | 340,418 | $ | — | $ | — | $ | 340,418 | $ | 1,805,448 | $ | 120,678 | $ | (7,970 | ) | $ | 1,918,156 | |||||||||||||||
6. | Prepaid Expenses and Other Current Assets |
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Prepaid rent | $ | 797,674 | $ | 1,344,238 | ||||
Prepayments to suppliers | 391,049 | 305,782 | ||||||
Staff advances | 165,257 | 450,705 | ||||||
Others | 60,943 | 180,216 | ||||||
$ | 1,414,923 | $ | 2,280,941 | |||||
F-22
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
7. | Property and Equipment, Net |
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Leasehold improvement | $ | 1,280,185 | $ | 3,399,250 | ||||
Computer, network equipment and software | 869,600 | 2,293,808 | ||||||
Vehicles | 458,412 | 624,296 | ||||||
Office equipment and furniture | 377,318 | 462,112 | ||||||
Less: accumulated depreciation and amortization | (514,178 | ) | (1,787,976 | ) | ||||
$ | 2,471,337 | $ | 4,991,490 | |||||
8. | Intangible Assets, Net |
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Domain names | $ | 1,846,858 | $ | 1,846,858 | ||||
Partnership agreement | 425,576 | 425,576 | ||||||
Student base | 348,566 | 348,566 | ||||||
Trade name | 262,360 | 262,360 | ||||||
Non-compete agreement | 19,200 | 19,200 | ||||||
Education license | 9,902 | 9,902 | ||||||
Less: accumulated amortization | (696,148 | ) | (1,537,341 | ) | ||||
Add: foreign exchange difference | 10,029 | 14,039 | ||||||
$ | 2,226,343 | $ | 1,389,160 | |||||
F-23
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
9. | Accrued Expenses and Other Current Liabilities |
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Accrued payroll and bonus | $ | 2,303,069 | $ | 3,893,895 | ||||
Social insurance payable | 38,791 | 453,081 | ||||||
Payable for business acquisitions | 533,035 | 513,062 | ||||||
Other taxes payable | 634,397 | 1,343,425 | ||||||
Others | 100,505 | 614,353 | ||||||
Total | $ | 3,609,797 | $ | 6,817,816 | ||||
Payable for the acquisition of a school in Tianjin | $ | 76,760 | ||||||
Payable for the acquisition of Jianli School | 137,257 | |||||||
Payable for the acquisition of Qianjiang School | 137,257 | |||||||
Payable for the acquisition of Wuhan School | 161,788 | |||||||
Payable for business acquisitions | $ | 513,062 | ||||||
10. | Convertible Loan |
11. | Income Taxes |
F-24
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Current — | ||||||||||||
PRC income tax expenses | $ | 304,620 | $ | 2,620,738 | $ | 1,936,420 | ||||||
Deferred — | ||||||||||||
PRC income tax expenses | (139,879 | ) | (602,485 | ) | (557,895 | ) | ||||||
Total | $ | 164,741 | $ | 2,018,253 | $ | 1,378,525 | ||||||
F-25
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Current deferred tax assets: | ||||||||
Undistributed payroll | $ | 510,275 | $ | 903,939 | ||||
Less: valuation allowance | (29,146 | ) | (72,642 | ) | ||||
Current deferred tax assets, net | 481,129 | 831,297 | ||||||
Non-current deferred tax assets: | ||||||||
Property and equipment | 35,434 | 134,915 | ||||||
Intangible assets | 70,558 | 163,003 | ||||||
Tax losses carry-forward deferred tax assets | 137,639 | 303,909 | ||||||
Less: valuation allowance | (112,342 | ) | (317,859 | ) | ||||
Non-current deferred tax assets, net | 131,289 | 283,968 | ||||||
Non-current deferred tax liabilities: | ||||||||
Intangible assets | 203,776 | 147,433 | ||||||
Unrealized gain onavailable-for-sale securities | — | 28,177 | ||||||
Non-current deferred tax liabilities | $ | 203,776 | $ | 175,610 | ||||
F-26
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Net income before provision for income tax | $ | 1,677,313 | $ | 9,298,922 | $ | 15,623,484 | ||||||
PRC statutory tax rate | 33 | % (1) | 25 | % | 25 | % | ||||||
Income tax at statutory tax rate | 553,513 | 2,324,731 | 3,905,871 | |||||||||
Expenses not deductible for tax purposes: | ||||||||||||
Salaries and employees’ benefits | 64,410 | 214,023 | — | |||||||||
Other expenses not deductable | 23,593 | 257,357 | 289,945 | |||||||||
Effect of income tax exemptions | (476,775 | ) | (923,868 | ) | (3,070,154 | ) | ||||||
Effect of income tax rate difference in other jurisdictions | — | 5,527 | 3,850 | |||||||||
Change in valuation allowance | — | 140,483 | 249,013 | |||||||||
Provision for income tax | $ | 164,741 | $ | 2,018,253 | $ | 1,378,525 | ||||||
(1) | PRC statutory tax rate was 33% for the period between March 1, 2007 and December 31, 2007 and 25% for the period between January 1, 2008 and February 29, 2008. |
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Provision for income tax | $ | 476,775 | $ | 923,868 | $ | 3,070,154 | ||||||
Net income per common share-basic | $ | 0.01 | $ | 0.02 | $ | 0.09 | ||||||
Net income per Series A preferred share-basic | $ | — | $ | 17.68 | $ | 0.09 | ||||||
Net income per common share-diluted | $ | 0.01 | $ | 0.02 | $ | 0.09 | ||||||
F-27
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
12. | Impairment Loss on Intangible Assets and Goodwill |
As of February 28, | ||||||||
2009 | 2010 | |||||||
Goodwill | ||||||||
Beginning balance | $ | — | $ | 762,272 | ||||
Goodwill recognized in business acquisition | 2,021,450 | — | ||||||
Impairment | (1,256,084 | ) | — | |||||
Foreign exchange difference due to translation | (3,094 | ) | 1,530 | |||||
Ending balance | $ | 762,272 | $ | 763,802 | ||||
Accumulated goodwill impairment | ||||||||
Beginning balance | $ | — | $ | (1,256,084 | ) | |||
Impairment | (1,256,084 | ) | — | |||||
Ending balance | $ | (1,256,084 | ) | $ | (1,256,084 | ) | ||
F-28
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
13. | Convertible Redeemable Preferred Shares |
F-29
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
14. | Common Shares |
F-30
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
15. | Net Income per Share |
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Net income attributable to TAL Education Group | $ | 1,512,572 | $ | 7,280,669 | $ | 14,244,959 | ||||||
Deemed dividend on Series A convertible redeemable preferred shares-accretion of redemption premium | — | 4,113,035 | — | |||||||||
Undistributed net income to TAL Education Group shareholders | 1,512,572 | 3,167,634 | 14,244,959 | |||||||||
Numerator used in basic and diluted net income per share: | ||||||||||||
Net income attributable to TAL Education Group shareholders allocated for computing net income per common share-basic | 1,512,572 | 3,161,499 | (i)(ii) | 13,675,161 | (i) | |||||||
Net income attributable to TAL Education Group shareholders allocated for computing net income per Series A convertible redeemable preferred shares-basic | — | 4,119,170 | (i)(iii) | 569,798 | (i) | |||||||
Net income attributable to TAL Education Group shareholders allocated for computing net income per common share-diluted | 1,512,572 | 3,161,499 | 14,244,959 | |||||||||
Shares (denominator): | ||||||||||||
Weighted average shares outstanding used in computing net income per common share—basic | 120,000,000 | 120,000,000 | 120,000,000 | |||||||||
Weighted average shares outstanding used in computing net income per Series A convertible redeemable preferred shares—basic | — | 232,877 | 5,000,000 | |||||||||
Weighted average shares outstanding used in computing net income per common share—diluted | 120,000,000 | 120,000,000 | 125,000,000 | |||||||||
Net income per common share attributable to TAL Education Group shareholders-basic | $ | 0.01 | $ | 0.03 | $ | 0.11 | ||||||
Net income per Series A convertible redeemable preferred share-basic | $ | — | $ | 17.69 | $ | 0.11 | ||||||
Net income per common share attributable to TAL Education Group shareholders-basic-diluted | $ | 0.01 | $ | 0.03 | $ | 0.11 | ||||||
(i) | In 2009 and 2010, undistributed net income was allocated between common shares and preferred shares on pro rata basis on the dividend participating rights. Since each Series A convertible redeemable preferred share has the same participating right as each common share, the allocation was based on the |
F-31
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
weighted average numbers of common shares and Series A convertible redeemable preferred shares. The net income allocated for computing net income per preferred share-basic also contains the deemed dividend for accretion of the redemption premium. | ||
(ii) | For the year ended February 28, 2009, $3,167,634 of undistributed net income was allocated between the weighted average numbers of 120,000,000 common shares and 232,877 Series A convertible redeemable preferred shares. Therefore, undistributed net income allocated for common shares was $3,161,499 and $6,135 for Series A convertible redeemable preferred shares. |
(iii) | For the year ended February 28, 2009, net income allocated for computing net income per Series A convertible redeemable preferred shares-basic was $4,119,170 of which $6,135 was undistributed net income allocated between the weighted average numbers of common shares and Series A convertible redeemable preferred shares and $4,113,035 was deemed dividend on Series A convertible redeemable preferred shares. |
16. | Commitments and Contingencies |
Fiscal year ending | ||||
February 2011 | $ | 13,154,964 | ||
February 2012 | 12,113,895 | |||
February 2013 | 8,044,734 | |||
February 2014 | 6,134,223 | |||
February 2015 and after | 3,226,231 | |||
Total | $ | 42,674,047 | ||
17. | Segment Information |
F-32
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Revenues: | ||||||||||||
Educational programs and services | $ | 8,882,191 | $ | 37,152,739 | $ | 69,138,216 | ||||||
Educational materials and others | — | 322,844 | 455,307 | |||||||||
Total revenues | $ | 8,882,191 | $ | 37,475,583 | $ | 69,593,523 | ||||||
18. | Mainland China Contribution Plan |
19. | Statutory Reserves and Restricted Net Assets |
F-33
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
20. | Related Party Transactions |
(a) | Amounts due from the founding shareholders-non-trading |
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Founding shareholders | $ | 92,112 | (i) | $ | — | |||
i. | The amounts represent cash advances to the founding shareholders for business expansion. |
(b) | Amount due to the founding shareholders-non-trading |
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Founding shareholders | $ | 101,043 | (ii) | $ | 108,204 | (ii) | ||
ii. | The amount represents rental deposits and acquisition consideration paid by the founding shareholder on behalf of the Group. |
21. | Capital Contribution |
22. | Distribution to Shareholders |
23. | Pro Forma Information (Unaudited) |
F-34
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
24. | Subsequent Events |
F-35
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-36
Table of Contents
Additional Information—Financial Statement Schedule I
Condensed Financial Information of Parent Company Balance Sheets
(In US$, except share and share related data)
As of | As of | |||||||
February 28, | February 28, | |||||||
2009 | 2010 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 5,000,000 | $ | 500,000 | ||||
Total current assets | 5,000,000 | 500,000 | ||||||
Amounts due from subsidiaries, VIEs and VIEs’ subsidiaries | — | 5,000,000 | ||||||
Investments in subsidiaries, VIEs and VIEs’ subsidiaries | 7,490,488 | 22,076,253 | ||||||
Total assets | $ | 12,490,488 | $ | 27,576,253 | ||||
Liabilities, Convertible Redeemable Preferred Shares and Equity | ||||||||
Current liabilities | ||||||||
Amounts due to subsidiaries, VIEs and VIEs’ subsidiaries | $ | 126,463 | $ | 135,233 | ||||
Accrued expenses and other current liabilities | 8,680 | 14,949 | ||||||
Total current liabilities | 135,143 | 150,182 | ||||||
Convertible loan | — | 500,000 | ||||||
Total liabilities | 135,143 | 650,182 | ||||||
Series A convertible redeemable preferred shares ($0.001 par value, 5,000,000 shares and 5,000,000 shares authorized, issued and outstanding as of February 28, 2009 and February 28, 2010, respectively, liquidation value $5,000,000) | 9,000,000 | 9,000,000 | ||||||
Equity | ||||||||
Class A common shares ($0.001 par value, 500,000,000 shares authorized, nil issued and outstanding as of February 28, 2009 and February 28, 2010) | — | — | ||||||
Class B common shares ($0.001 par value, 495,000,000 shares authorized as of February 28, 2009 and February 28, 2010; 120,000,000 shares and 120,000,000 shares issued and outstanding as of February 28, 2009 and February 28, 2010, respectively) | 120,000 | 120,000 | ||||||
Class B common shares subscription receivable | (120,000 | ) | (120,000 | ) | ||||
Retained earnings | 2,682,218 | 16,927,177 | ||||||
Additional paid-in capital | 559,898 | 779,641 | ||||||
Accumulated other comprehensive income | 113,229 | 219,253 | ||||||
Total equity | 3,355,345 | 17,926,071 | ||||||
Total liabilities, convertible redeemable preferred shares and equity | $ | 12,490,488 | $ | 27,576,253 | ||||
F-37
Table of Contents
Additional Information—Financial Statement Schedule I
Condensed Financial Information of Parent Company Statements of Operations
(In US$, except share and share related data)
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Total operating expenses | $ | — | $ | (22,126 | ) | $ | (8,834 | ) | ||||
Operating loss | — | (22,126 | ) | (8,834 | ) | |||||||
Interest income | — | 18 | 43 | |||||||||
Interest expense | — | — | (6,248 | ) | ||||||||
Equity in earnings of subsidiaries, VIEs and VIEs’ subsidiaries | 1,512,572 | 7,302,777 | 14,259,998 | |||||||||
Net income | $ | 1,512,572 | $ | 7,280,669 | $ | 14,244,959 | ||||||
F-38
Table of Contents
Additional Information—Financial Statement Schedule I
Consolidated Statements of Changes in Equity and Comprehensive Income
(In U.S. dollars, except share and share related data)
Class B | (Accumulated | Accumulated | ||||||||||||||||||||||||||||||
Class B | common share | Additional | deficit) | other | ||||||||||||||||||||||||||||
common shares | subscription | paid-in | Retained | comprehensive | Total | Comprehensive | ||||||||||||||||||||||||||
Shares | Amount | receivable | capital | earnings | Income (loss) | equity | income | |||||||||||||||||||||||||
Balance as of March 1, 2007 | 1,000 | $ | 1 | $ | (1 | ) | $ | 62,580 | $ | (555,968 | ) | $ | — | $ | (493,388 | ) | $ | — | ||||||||||||||
Capital contribution | — | — | — | 131,810 | — | — | 131,810 | — | ||||||||||||||||||||||||
Net income | — | — | — | 1,512,572 | — | 1,512,572 | 1,512,572 | |||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | �� | — | — | — | 42,102 | 42,102 | 42,102 | |||||||||||||||||||||||
Net unrealized (losses) onavailable-for-sale securities, net of tax effect of $24,296 | — | — | — | — | — | (49,327 | ) | (49,327 | ) | (49,327 | ) | |||||||||||||||||||||
Balance as of February 29, 2008 | 1,000 | 1 | (1 | ) | 194,390 | 956,604 | (7,225 | ) | 1,143,769 | $ | 1,505,347 | |||||||||||||||||||||
Capital contribution | — | — | — | 365,508 | — | — | 365,508 | — | ||||||||||||||||||||||||
Net income | — | — | — | — | 7,280,669 | — | 7,280,669 | 7,280,669 | ||||||||||||||||||||||||
Issuance of Class B common shares | 119,999,000 | 119,999 | (119,999 | ) | — | — | — | — | — | |||||||||||||||||||||||
Distribution to shareholders | — | — | — | — | (1,442,020 | ) | — | (1,442,020 | ) | — | ||||||||||||||||||||||
Accretion for Series A convertible redeemable preferred shares redemption premium | — | — | — | — | (4,113,035 | ) | — | (4,113,035 | ) | — | ||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | 71,127 | 71,127 | 71,127 | ||||||||||||||||||||||||
Net unrealized (losses) onavailable-for-sale securities, net of tax effect of $72,261 | — | — | — | — | — | (216,784 | ) | (216,784 | ) | (216,784 | ) | |||||||||||||||||||||
Transfer to the statements of operation ofother-than-temporary-impairment, net of tax effect of ($96,557) | — | — | — | — | — | 266,111 | 266,111 | 266,111 | ||||||||||||||||||||||||
Balance as of February 28, 2009 | 120,000,000 | 120,000 | (120,000 | ) | 559,898 | 2,682,218 | 113,229 | 3,355,345 | $ | 7,401,123 | ||||||||||||||||||||||
Capital contribution | — | — | — | 219,743 | — | — | 219,743 | — | ||||||||||||||||||||||||
Net income | — | — | — | — | 14,244,959 | — | 14,244,959 | 14,244,959 | ||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | 21,493 | 21,493 | 21,493 | ||||||||||||||||||||||||
Net unrealized gains onavailable-for-sale securities, net of tax effect of ($28,177) | — | — | — | — | — | 84,531 | 84,531 | 84,531 | ||||||||||||||||||||||||
Balance as of February 28, 2010 | 120,000,000 | $ | 120,000 | $ | (120,000 | ) | $ | 779,641 | $ | 16,927,177 | $ | 219,253 | $ | 17,926,071 | $ | 14,350,983 | ||||||||||||||||
F-39
Table of Contents
Additional Information—Financial Statement Schedule I
Condensed Financial Information of Parent Company Cash Flow Statements
(In US$, except share and share related data)
For the year ended | For the year ended | For the year ended | ||||||||||
February 29, | February 28, | February 28, | ||||||||||
2008 | 2009 | 2010 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 1,512,572 | $ | 7,280,669 | $ | 14,244,959 | ||||||
Equity in subsidiaries, VIEs and VIEs’ subsidiaries | (1,512,572 | ) | (7,302,777 | ) | (14,259,998 | ) | ||||||
Changes in operating assets and liabilities | ||||||||||||
Amounts due to subsidiaries, VIEs and VIEs’ subsidiaries | — | 126,463 | 8,770 | |||||||||
Accrued expenses and other current liabilities | — | 8,680 | 6,269 | |||||||||
Net cash provided (used in) by operating activities | — | 113,035 | — | |||||||||
Cash flows from financing activities | ||||||||||||
Proceeds from issuance of Series A convertible redeemable preferred shares, net of issuance cost of $113,035 | — | 4,886,965 | — | |||||||||
Convertible loan | — | — | 500,000 | |||||||||
Loan provided to subsidiaries, VIEs and VIEs’ subsidiaries | — | — | (5,000,000 | ) | ||||||||
Net cash provided by (used in) financing activities | — | 4,886,965 | (4,500,000 | ) | ||||||||
Net increase in cash and cash equivalents | — | 5,000,000 | (4,500,000 | ) | ||||||||
Cash and cash equivalents at beginning of year | — | — | 5,000,000 | |||||||||
Cash and cash equivalents at end of year | $ | — | $ | 5,000,000 | $ | 500,000 | ||||||
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(In U.S. dollars, except share and share related data)
As of | As of | As of | ||||||||||
February 28, | August 31, | August 31, | ||||||||||
2010 | 2010 | 2010 | ||||||||||
Pro forma | ||||||||||||
(unaudited) | ||||||||||||
(Note 2) | ||||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 50,752,481 | $ | 81,494,598 | $ | 81,494,598 | ||||||
Available-for-sale securities | 1,918,156 | 448,277 | 448,277 | |||||||||
Inventory | 121,819 | 252,268 | 252,268 | |||||||||
Deferred costs in connection with initial public offering | — | 437,152 | 437,152 | |||||||||
Deferred tax assets-current | 831,297 | 1,226,469 | 1,226,469 | |||||||||
Prepaid expenses and other current assets | 2,280,941 | 3,838,203 | 3,838,203 | |||||||||
Total current assets | 55,904,694 | 87,696,967 | 87,696,967 | |||||||||
Property and equipment, net | 4,991,490 | 5,550,290 | 5,550,290 | |||||||||
Deferred tax assets-non-current | 283,968 | 167,989 | 167,989 | |||||||||
Rental deposit | 2,170,548 | 2,308,268 | 2,308,268 | |||||||||
Intangible assets, net | 1,389,160 | 1,025,325 | 1,025,325 | |||||||||
Goodwill | 763,802 | 765,923 | 765,923 | |||||||||
Total assets | $ | 65,503,662 | $ | 97,514,762 | $ | 97,514,762 | ||||||
Liabilities, Convertible Redeemable Preferred Shares and Equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable (including accounts payable of the consolidated VIEs without recourse to TAL Education Group of 915,408 and 485,115 as of February 28, 2010, and August 31, 2010, respectively) | $ | 987,742 | $ | 712,710 | $ | 712,710 | ||||||
Deferred revenue (including deferred revenue of the consolidated VIEs without recourse to TAL Education Group of 24,631,648 and 31,858,213 as of February 28, 2010 and August 31, 2010, respectively) | 29,407,994 | 42,100,775 | 42,100,775 | |||||||||
Amounts due to related parties (including amounts due to related parties of the consolidated VIEs without recourse to TAL Education Group of 108,204 and 100,571 as of February 28, 2010 and August 31, 2010, respectively) | 108,204 | 100,571 | 100,571 | |||||||||
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities without recourse to TAL Education Group of 6,588,552 and 7,652,977 as of February 28, 2010 and August 31, 2010, respectively) | 6,817,816 | 9,618,867 | 9,618,867 | |||||||||
Income tax payable (including income tax payable of the consolidated VIEs without recourse to TAL Education | ||||||||||||
Group of 2,653,324 and 2,841,863 as of February 28, 2010, and August 31, 2010, respectively) | 580,225 | 3,054,408 | 3,054,408 | |||||||||
Dividend proposed | — | — | 30,000,000 | |||||||||
Total current liabilities | 37,901,981 | 55,587,331 | 85,587,331 | |||||||||
Convertible loan | 500,000 | 500,000 | 500,000 | |||||||||
Deferred tax liabilities-non-current | 175,610 | 146,684 | 146,684 | |||||||||
Total liabilities | 38,577,591 | 56,234,015 | 86,234,015 | |||||||||
Commitments and contingencies (Note 12) | ||||||||||||
Series A convertible redeemable preferred shares ($0.001 par value, 5,000,000 shares and 5,000,000 shares authorized, issued and outstanding as of February 28, 2010 and August 31, 2010, respectively, liquidation value $5,000,000) | 9,000,000 | 9,000,000 | — | |||||||||
Equity | ||||||||||||
TAL Education Group Shareholders’ Equity | ||||||||||||
Class A common shares ($0.001 par value, 500,000,000 shares authorized, nil issued and outstanding as of February 28, 2010 and August 31, 2010) | — | — | — | |||||||||
Class B common shares ($0.001 par value, 495,000,000 shares authorized as of February 28, 2010 and August 31, 2010; 120,000,000 shares and 120,000,000 shares issued and outstanding as of February 28, 2010 and August 31, 2010, respectively) | 120,000 | 120,000 | 125,000 | |||||||||
Class B common shares subscription receivable | (120,000 | ) | — | — | ||||||||
Additional paid-in capital | 779,641 | 1,699,503 | (19,305,497 | ) | ||||||||
Statutory reserve | 4,857,443 | 4,857,443 | 4,857,443 | |||||||||
Retained earnings | 12,069,734 | 25,315,575 | 25,315,575 | |||||||||
Accumulated other comprehensive income | 219,253 | 288,226 | 288,226 | |||||||||
Total TAL Education Group’s Equity | 17,926,071 | 32,280,747 | 11,280,747 | |||||||||
Total liabilities, convertible redeemable preferred shares and equity | $ | 65,503,662 | $ | 97,514,762 | $ | 97,514,762 | ||||||
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Six-Month | Six-Month | |||||||
Period Ended | Period Ended | |||||||
August 31, | August 31, | |||||||
2009 | 2010 | |||||||
Net revenues | $ | 32,983,005 | $ | 53,022,037 | ||||
Cost of revenues (included share-based compensation nil and 109,413 for the periods ended August 31, 2009 and 2010, respectively) | 16,067,926 | 26,254,975 | ||||||
Gross profit | 16,915,079 | 26,767,062 | ||||||
Operating expenses | ||||||||
Selling and marketing (included share-based compensation nil and 162,998 for the periods ended August 31, 2009 and 2010, respectively) | 1,958,295 | 4,183,992 | ||||||
General and administrative (included share-based compensation nil and 647,451 for the periods ended August 31, 2009 and 2010, respectively) | 4,601,514 | 7,807,640 | ||||||
Total operating expenses | 6,559,809 | 11,991,632 | ||||||
Income from operations | 10,355,270 | 14,775,430 | ||||||
Interest income | 102,839 | 205,340 | ||||||
Interest expense | — | (43,452 | ) | |||||
Other expenses, net | (118,730 | ) | (27,373 | ) | ||||
Gain from sales ofavailable-for-sale securities | — | 6,429 | ||||||
Income before income tax provision | 10,339,379 | 14,916,374 | ||||||
Provision for income tax | 912,268 | 1,670,533 | ||||||
Net income | 9,427,111 | 13,245,841 | ||||||
Net income attributable to TAL Education Group | 9,427,111 | 13,245,841 | ||||||
Net income attributable to common shareholders of TAL Education Group | 9,427,111 | 13,245,841 | ||||||
Net income per common share | ||||||||
Basic | $ | 0.08 | $ | 0.11 | ||||
Diluted | $ | 0.08 | $ | 0.11 | ||||
Net income per Series A convertible redeemable preferred share-Basic | $ | 0.08 | $ | 0.11 | ||||
Weighted average shares used in calculating net income per common share | ||||||||
Basic | 120,000,000 | 120,000,000 | ||||||
Diluted | 125,000,000 | 125,193,360 | ||||||
Weighted average shares used in calculating net income per Series A convertible redeemable preferred share-basic | 5,000,000 | 5,000,000 | ||||||
Pro forma net income per common share (Note 2) | ||||||||
Basic | — | $ | 0.10 | |||||
Diluted | — | $ | 0.10 | |||||
Weighted average shares used in calculating pro forma net income per common share (Note 2) | ||||||||
Basic | — | 123,350,832 | ||||||
Diluted | — | 128,350,832 |
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Class B | Total TAL | |||||||||||||||||||||||||||||||||||
common | Accumulated | Education | ||||||||||||||||||||||||||||||||||
Class B | shares | Additional | other | Group | ||||||||||||||||||||||||||||||||
common shares | subscription | paid-in | Statutory | Retained | comprehensive | shareholders’ | Comprehensive | |||||||||||||||||||||||||||||
Shares | Amount | receivable | capital | reserve | earnings | income | equity | income | ||||||||||||||||||||||||||||
Balance as of February 28, 2009 | 120,000,000 | $ | 120,000 | $ | (120,000 | ) | $ | 559,898 | $ | 2,660,818 | $ | 21,400 | $ | 113,229 | $ | 3,355,345 | $ | — | ||||||||||||||||||
Net income | — | — | — | — | — | 9,427,111 | — | 9,427,111 | 9,427,111 | |||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | 19,702 | 19,702 | 19,702 | |||||||||||||||||||||||||||
Net unrealized gains onavailable-for-sale securities, net of tax effect of $(18,528) | — | — | — | — | — | — | 41,739 | 41,739 | 41,739 | |||||||||||||||||||||||||||
Balance as of August 31, 2009 | 120,000,000 | $ | 120,000 | $ | (120,000 | ) | $ | 559,898 | $ | 2,660,818 | $ | 9,448,511 | $ | 174,670 | $ | 12,843,897 | $ | 9,488,552 | ||||||||||||||||||
Balance as of February 28, 2010 | 120,000,000 | $ | 120,000 | $ | (120,000 | ) | $ | 779,641 | $ | 4,857,443 | $ | 12,069,734 | $ | 219,253 | $ | 17,926,071 | $ | — | ||||||||||||||||||
Subscription received | — | — | 120,000 | — | — | — | — | 120,000 | — | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | 13,245,841 | — | 13,245,841 | 13,245,841 | |||||||||||||||||||||||||||
Share-based compensation | — | — | — | 919,862 | — | — | — | 919,862 | — | |||||||||||||||||||||||||||
Foreign currency translation-adjustment | — | — | — | — | — | — | 72,615 | 72,615 | 72,615 | |||||||||||||||||||||||||||
Transfer to statements of operations of realized losses onavailable-for-sale securities, net of tax effect of $(1,997) | — | — | — | — | — | — | 5,973 | 5,973 | 5,973 | |||||||||||||||||||||||||||
Net unrealized (losses) onavailable-for-sale securities, net of tax effect of $3,204 | — | — | — | — | — | — | (9,615 | ) | (9,615 | ) | (9,615 | ) | ||||||||||||||||||||||||
Balance as of August 31, 2010 | 120,000,000 | $ | 120,000 | $ | — | $ | 1,699,503 | $ | 4,857,443 | $ | 25,315,575 | $ | 288,226 | $ | 32,280,747 | $ | 13,314,814 | |||||||||||||||||||
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(In U.S. dollars, except share and share related data)
Six-Month | Six-Month | |||||||
Periods Ended | Periods Ended | |||||||
August 31, | August 31, | |||||||
2009 | 2010 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 9,427,111 | $ | 13,245,841 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation of property and equipment | 438,369 | 1,140,156 | ||||||
Amortization of intangible assets | 335,783 | 367,471 | ||||||
Share-based compensation | — | 919,862 | ||||||
Changes in operating assets and liabilities | ||||||||
Amounts due from related parties | 92,223 | — | ||||||
Inventory | (48,578 | ) | (130,501 | ) | ||||
Prepaid expenses and other current assets | (705,149 | ) | (1,690,015 | ) | ||||
Deferred costs in connection with initial public offering | — | (274,942 | ) | |||||
Deferred income taxes | (369,207 | ) | (308,730 | ) | ||||
Rental deposit | (393,576 | ) | (157,500 | ) | ||||
Accounts payable | 84,417 | (258,742 | ) | |||||
Deferred revenue | 5,672,499 | 12,577,482 | ||||||
Amounts due to related parties | 283,209 | (7,948 | ) | |||||
Accrued expenses and other current liabilities | 1,480,818 | 3,054,910 | ||||||
Income tax payable | (99,657 | ) | 2,477,391 | |||||
Net cash provided by operating activities | 16,198,262 | 30,954,735 | ||||||
Cash flows from investing activities | ||||||||
Purchase of property and equipment | (695,551 | ) | (1,684,984 | ) | ||||
Sales of available-for-sale securities | — | 1,470,660 | ||||||
Net cash (used in) investing activities | (695,551 | ) | (214,324 | ) | ||||
Cash flows from financing activities | ||||||||
Payment of deferred consideration | (180,345 | ) | (283,180 | ) | ||||
Distribution to shareholders | (1,442,020 | ) | — | |||||
Subscription received | — | 120,000 | ||||||
Net cash (used in) financing activities | (1,622,365 | ) | (163,180 | ) | ||||
Effect of exchange rate changes | 25,399 | 164,886 | ||||||
Net increase in cash and cash equivalents | 13,905,745 | 30,742,117 | ||||||
Cash and cash equivalents at the beginning of period | 29,692,901 | 50,752,481 | ||||||
Cash and cash equivalents at the end of period | 43,598,646 | 81,494,598 | ||||||
Supplement disclosure of cash flow information | ||||||||
Income tax paid | 1,381,236 | 1,369,739 | ||||||
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As of | As of | |||||||
February 28, | August 31, | |||||||
2010 | 2010 | |||||||
Total current assets | $ | 45,171,584 | $ | 55,158,850 | ||||
Total non-current assets | 8,792,445 | 8,366,390 | ||||||
Total assets | 53,964,029 | 63,525,240 | ||||||
Total current liabilities | 34,897,136 | 42,938,739 | ||||||
Total non-current liabilities | 175,610 | 146,684 | ||||||
Total liabilities | $ | 35,072,746 | $ | 43,085,423 | ||||
Six-Month | Six-Month | |||||||
Periods Ended | Periods Ended | |||||||
August 31, | August 31, | |||||||
2009 | 2010 | |||||||
Net revenues | $ | 32,983,005 | $ | 46,589,727 | ||||
Net income | $ | 10,385,657 | $ | 14,324,095 |
Six-Month | Six-Month | |||||||
Periods Ended | Periods Ended | |||||||
August 31, | August 31, | |||||||
2009 | 2010 | |||||||
Net cash provided by operating activities | $ | 16,902,677 | $ | 9,329,391 | ||||
Net cash (used in)/ provided by investing activities | $ | (1,137,634 | ) | $ | 635,540 | |||
Net cash (used in) financing activities | $ | (1,622,365 | ) | $ | (283,180 | ) |
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2. | Unaudited Pro Forma Information |
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Balance as of March 1, 2010 | 1,918,156 | |||
Disposed | (1,456,261 | ) | ||
Changes in fair value | (12,819 | ) | ||
Foreign exchange difference | (799 | ) | ||
Balance as of August 31, 2010 | $ | 448,277 | ||
As of February 28, 2010 | As of August 31, 2010 | |||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
unrealized | unrealized | unrealized | unrealized | |||||||||||||||||||||||||||||
Cost | gains | (losses) | Fair value | Cost | gains | (losses) | Fair value | |||||||||||||||||||||||||
Mutual fund | $ | 1,805,448 | $ | 120,678 | $ | (7,970 | ) | $ | 1,918,156 | $ | 340,418 | $ | 107,859 | — | $ | 448,277 | ||||||||||||||||
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As of | As of | |||||||
February 28, | August 31, | |||||||
2010 | 2010 | |||||||
Prepaid rent | $ | 1,344,238 | $ | 2,262,829 | ||||
Prepayments to suppliers | 305,782 | 247,566 | ||||||
Staff advances | 450,705 | 197,781 | ||||||
VAT refund receivable | — | 603,146 | ||||||
Others | 180,216 | 526,881 | ||||||
$ | 2,280,941 | $ | 3,838,203 | |||||
As of | As of | |||||||
February 28, | August 31, | |||||||
2010 | 2010 | |||||||
Leasehold improvement | $ | 3,399,250 | $ | 3,931,921 | ||||
Computer, network equipment and software | 2,293,808 | 3,252,549 | ||||||
Vehicles | 624,296 | 757,688 | ||||||
Office equipment and furniture | 462,112 | 541,560 | ||||||
Less: accumulated depreciation and amortization | (1,787,976 | ) | (2,933,428 | ) | ||||
$ | 4,991,490 | $ | 5,550,290 | |||||
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As of | As of | |||||||
February 28, | August 31, | |||||||
2010 | 2010 | |||||||
Domain names | $ | 1,846,858 | $ | 1,846,858 | ||||
Partnership agreement | 425,576 | 425,576 | ||||||
Student base | 348,566 | 348,566 | ||||||
Trade name | 262,360 | 262,360 | ||||||
Non-compete agreement | 19,200 | 19,200 | ||||||
Education license | 9,902 | 9,902 | ||||||
Less: accumulated amortization | (1,537,341 | ) | (1,904,812 | ) | ||||
Add: foreign exchange difference | 14,039 | 17,675 | ||||||
$ | 1,389,160 | $ | 1,025,325 | |||||
8. | Accrued Expenses and Other Current Liabilities |
As of | As of | |||||||
February 28, | August 31, | |||||||
2010 | 2010 | |||||||
Accrued payroll and bonus | $ | 3,893,895 | $ | 5,509,769 | ||||
Social insurance payable | 453,081 | 705,402 | ||||||
Payable for business acquisitions | 513,062 | 240,198 | ||||||
Other taxes payable | 1,343,425 | 2,250,961 | ||||||
Others | 614,353 | 912,537 | ||||||
Total | $ | 6,817,816 | $ | 9,618,867 | ||||
Payable for the acquisition of a school in Tianjin | $ | 76,760 | $ | 77,128 | ||||
Payable for the acquisition of Jianli School | 137,257 | — | ||||||
Payable for the acquisition of Qianjiang School | 137,257 | — | ||||||
Payable for the acquisition of Wuhan School | 161,788 | 163,070 | ||||||
Payable for business acquisitions | $ | 513,062 | $ | 240,198 | ||||
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9. | Income Taxes |
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Six-Month | Six-Month | |||||||
Periods ended | Periods ended | |||||||
August 31, | August 31, | |||||||
2009 | 2010 | |||||||
Current — PRC income tax expenses | $ | 1,281,475 | $ | 1,973,863 | ||||
Deferred — PRC income tax benefits | (369,207 | ) | (303,330 | ) | ||||
Total | $ | 912,268 | $ | 1,670,533 | ||||
As of | As of | |||||||
February 28, | August 31, | |||||||
2010 | 2010 | |||||||
Current deferred tax assets: | ||||||||
Undistributed payroll | $ | 903,939 | $ | 1,299,540 | ||||
Less: valuation allowance | (72,642 | ) | (73,071 | ) | ||||
Current deferred tax assets, net | 831,297 | 1,226,469 | ||||||
Non-current deferred tax assets: | ||||||||
Property and equipment | 134,915 | 196,579 | ||||||
Intangible assets | 163,003 | 162,914 | ||||||
Tax losses carry-forward deferred tax assets | 303,909 | 587,294 | ||||||
Less: valuation allowance | (317,859 | ) | (778,798 | ) | ||||
Non-current deferred tax assets, net | 283,968 | 167,989 | ||||||
Non-current deferred tax liabilities: | ||||||||
Intangible assets | 147,433 | 120,127 | ||||||
Unrealized gain on available-for-sale securities | 28,177 | 26,557 | ||||||
Non-current deferred tax liabilities | $ | 175,610 | $ | 146,684 | ||||
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10. | Goodwill |
As of | As of | |||||||
February 28, | August 31, | |||||||
2010 | 2010 | |||||||
Goodwill | ||||||||
Beginning balance | $ | 762,272 | $ | 763,802 | ||||
Foreign exchange difference due to translation | 1,530 | 2,121 | ||||||
Ending balance | $ | 763,802 | $ | 765,923 | ||||
11. | Net Income Per Share |
Six-Month | Six-Month | |||||||
Periods ended | Periods ended | |||||||
August 31, | August 31, | |||||||
2009 | 2010 | |||||||
Net income attributable to TAL Education Group | $ | 9,427,111 | $ | 13,245,841 | ||||
Undistributed net income to TAL Education Group shareholders | 9,427,111 | 13,245,841 | ||||||
Numerator used in basic and diluted net income per share: | ||||||||
Net income attributable to TAL Education Group shareholders allocated for computing net income per common share-basic | 9,050,027 | (i) | 12,716,007 | (i) | ||||
Net income attributable to TAL Education Group shareholders allocated for computing net income per Series A convertible redeemable preferred shares-basic | 377,084 | (i) | 529,834 | (i) | ||||
Net income attributable to TAL Education Group shareholders allocated for computing net income per common share-diluted | 9,427,111 | 13,245,841 | ||||||
Shares (denominator): | ||||||||
Weighted average shares outstanding used in computing net income per common share — basic | 120,000,000 | 120,000,000 | ||||||
Weighted average shares outstanding used in computing net income per Series A convertible redeemable preferred shares — basic | 5,000,000 | 5,000,000 | ||||||
Dilutive effect of nonvested share awards | — | 193,360 | (ii) | |||||
Weighted average shares outstanding used in computing net income per common share — diluted | 125,000,000 | 125,193,360 | ||||||
Net income per common share attributable to TAL Education Group shareholders-basic | $ | 0.08 | $ | 0.11 | ||||
Net income per Series A convertible redeemable preferred share-basic | $ | 0.08 | $ | 0.11 | ||||
Net income per common share attributable to TAL Education Group shareholders-diluted | $ | 0.08 | $ | 0.11 | ||||
(i) | Undistributed net income was allocated between common shares and preferred shares prorated on the dividend participation rights. Since each Series A convertible redeemable preferred share has the same participating right as each common share, the allocation was based on the numbers of common shares and Series A convertible redeemable preferred shares. | |
(ii) | The Group has nonvested shares outstanding which could diluted basic net income per share in the future. |
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12. | Commitments and Contingencies |
Six-month periods ending February 28, 2011 | $ | 7,590,469 | ||
Fiscal years ending | ||||
February 2012 | 13,602,220 | |||
February 2013 | 9,882,230 | |||
February 2014 | 7,128,243 | |||
February 2015 and after | 4,071,011 | |||
Total | $ | 42,274,173 | ||
13. | Segment Information |
Six-Month | Six-Month | |||||||
Periods Ended | Periods Ended | |||||||
August 31, | August 31, | |||||||
2009 | 2010 | |||||||
Revenues: | ||||||||
Educational programs and services | $ | 32,829,477 | $ | 52,859,699 | ||||
Educational materials and others | 153,528 | 162,338 | ||||||
Total revenues | $ | 32,983,005 | $ | 53,022,037 | ||||
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14. | Mainland China Contribution Plan |
15. | Related Party Transactions |
As of | As of | |||||||
February 28, | August 31, | |||||||
2010 | 2010 | |||||||
Founding shareholders | $ | 108,204 | (i) | $ | 100,571 | (i) | ||
i. | The amount represents rental deposits and acquisition consideration paid by the founding shareholder on behalf of the Group. |
16. | Share-Based Compensation |
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Number of | ||||
nonvested | ||||
shares | ||||
Outstanding as of March 1, 2010 | — | |||
Granted | 5,419,500 | |||
Forfeited | — | |||
Vested | — | |||
Outstanding as of August 31, 2010 | 5,419,500 | |||
17. | Subsequent Events |
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Credit Suisse | Morgan Stanley |
Piper Jaffray | Oppenheimer & Co. |