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ChinaEdu Reports Fourth Quarter and Fiscal Year 2012 Results

March 27, 2013

Fourth Quarter Net Revenue Exceeds Company Guidance, Increasing 12.4 Percent Year-Over-Year

BEIJING, March 27, 2013 /PRNewswire/ — ChinaEdu Corporation (NASDAQ: CEDU) (“ChinaEdu” or the “Company”), a leading online educational services provider in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2012.[1]

Fourth Quarter 2012 Highlights

  • Total net revenue for the fourth quarter of 2012 was $21.8 million, a 12.4 percent increase from $19.4 million in the corresponding period in 2011. Total net revenue exceeded Company guidance for the quarter.
  • Net revenue from online degree programs was $17.7 million, an increase of 13.9 percent from $15.5 million in the corresponding period of 2011.
  • Net income attributable to ChinaEdu was $2.4 million, an increase of 552.8 percent from $0.4 million in the corresponding period of 2011.
  • Adjusted net income attributable to ChinaEdu[2] was $2.9 million, an increase of 257.9 percent from $0.8 million in the corresponding period of 2011.
  • Net income attributable to ChinaEdu per diluted ADS[3] was $0.144, an increase of 542.9 percent from $0.022 in the corresponding period of 2011.
  • Adjusted net income attributable to ChinaEdu per diluted ADS[4] was $0.173, an increase of 248.4 percent from $0.050 in the corresponding period of 2011.
  • The number of revenue students[5] enrolled in online degree programs during the Fall 2012 semester increased 5.1 percent year-over-year to approximately 207,000 students.

Full Year 2012 Highlights

  • Total net revenue for 2012 was $78.4 million, a 12.0 percent increase from $70.0 million in 2011.
  • Net revenue from online degree programs was $63.1 million, an increase of 13.3 percent from $55.7 million in 2011.
  • Net income attributable to ChinaEdu was $6.1 million, an increase of 125.7 percent from $2.7 million in the corresponding period of 2011.
  • Adjusted net income attributable to ChinaEdu was $9.0 million, an increase of 102.4 percent from $4.4 million in 2011.
  • Net income attributable to ChinaEdu per diluted ADS was $0.362, an increase of 126.0 percent from $0.161 in 2011.
  • Adjusted net income attributable to ChinaEdu per diluted ADS was $0.535, an increase of 103.0 percent from $0.263 in 2011.
  • The number of revenue students in online degree programs during 2012 increased roughly 12.4 percent over 2011 to approximately 400,000 students.

Julia Huang, executive chairman of ChinaEdu commented, “2012 was another successful year for ChinaEdu. Remaining focused on growth in our online degree programs, we expanded enrollment during the year to 400,000 revenue students. There were exciting developments in other areas of our business in 2012 as well. Particularly, several non-degree continued education programs for teachers were launched in 2012 and our recently expanded K-12 online interactive tutoring and Q&A programs have already gained traction and are showing encouraging results. Furthermore, enrollments at our private schools grew beyond expectations during the year as our brand name continues to draw in talented students.” She continued, “As we look to 2013, we will continue to grow our core business and explore opportunities that leverage our online-learning enabling capabilities. We remain committed to technological innovation in education and will continue to develop next generation technology platforms and interactive and mobile learning applications. Online learning has become more acceptable to users and mobile devices have become more readily available. We plan to penetrate the market further, applying our technological advantage across all areas of our business platform.”

Mr. Simon Mei, chief financial officer commented, “Recognizing our success in 2012 and the opportunities that lay ahead, the Company recently decided to make a major reinvestment in our business by negotiating a repurchase of shares. The repurchase program was completed at the end of February 2013. The Company repurchased 19,695,552 ordinary shares or the equivalent 6,565,184 ADSs. This is equal to 36.9% of the total issued ordinary shares of 53,428,219 prior to the transaction. The completion of the stock repurchase reflects the board of directors’ and management’s continued commitment to enhancing stockholder value, as well as confidence for the company’s future business perspectives. Other factors being equal, the stock repurchase will increase the Company’s earnings per share.”

Financial Results for the Fourth Quarter Ended December 31, 2012

Net Revenue

Total net revenue for the fourth quarter of 2012 was $21.8 million, a 12.4 percent increase from $19.4 million in the corresponding period in 2011.

Net revenue from online degree programs for the fourth quarter of 2012 was $17.7 million, a 13.9 percent increase over $15.5 million in the corresponding period in 2011. The increase in net revenue from online degree programs was primarily related to continued expansion and optimization of the Company’s learning centers network, as well as organic growth in revenue students enrolled in online degree programs. Enrollment for the 2012 Fall semester online degree programs was approximately 207,000 revenue students, a 5.1 percent increase from approximately 197,000 revenue students enrolled in the Fall semester in 2011.

As of December 31 2012, ChinaEdu’s learning centers network was providing recruiting services for 22 universities with 118 operational learning centers, of which 57 were proprietary centers[6] and 61 were contracted centers[7]. This compares to 105 operational learning centers as of December 31, 2011, of which 61 were proprietary and 44 were contracted centers.

Net revenue from non-degree programs, including online tutoring programs, private primary and secondary schools and international and elite curriculum programs in the fourth quarter of 2012 was $4.1 million, a 6.4 percent increase from $3.8 million in the fourth quarter of 2011. Of that, approximately $0.4 million was attributable to increased enrollment at our private school in the city of Anqing.

Cost of Revenue

Total cost of revenue for the fourth quarter of 2012 was $9.8 million, an increase of 13.3 percent, from $8.7 million in the corresponding period of 2011.

Cost of revenue for online degree programs in the fourth quarter of 2012 was $6.8 million, an increase of 16.2 percent compared to $5.8 million in the corresponding period of 2011. The increase in cost of revenue is mainly attributable to increased staff related costs.

Cost of revenue for non-degree programs in the fourth quarter of 2012 was $3.0 million, an increase of 7.4 percent from $2.8 million in the fourth quarter of 2011. The increase is attributable to increases in staff related costs and service fees for the private school in Anqing as well as the online tutoring program.

Gross Profit and Gross Margin

Gross profit for the fourth quarter of 2012 was $11.9 million, compared to $10.7 million in the corresponding period of 2011. Gross margin decreased slightly to 54.8 percent, compared to 55.1 percent for the corresponding period in 2011.

Gross margin for online degree programs decreased slightly to 61.6 percent, from 62.3 percent in the fourth quarter of 2011. The decrease was primarily due to an overall increase in the percentage of total net revenue contributed by the Company’s learning centers network. The learning centers network’s sales and service based model results in a higher cost of sales, whereas the joint venture model is more operationally driven. In general, more revenue generated from learning centers results in lower gross margin for our overall online degree programs.

Gross margin for online tutoring programs decreased to 37.7 percent, from 55.7 percent in fourth quarter of 2011, mainly due to the increased service fees associated with the expansion of the Company’s interactive course offerings.

Gross margin for private schools in the fourth quarter of 2012 decreased to 20.4 percent, compared to 24.8 percent in the corresponding period in 2011. The decrease of gross margin was primarily due to increased labor costs at our private school in Anqing.

Operating Expenses

Total operating expenses were $7.6 million in the fourth quarter of 2012, a decrease of 3.6 percent, from $7.9 million in the corresponding period in 2011. As a percentage of net revenue, total operating expenses decreased to 34.8 percent, compared to 40.6 percent in the corresponding period in 2011. The decrease in total operating expense was the result of the following:

  • General and administrative expenses for the fourth quarter of 2012 were $3.7 million, a decrease of 4.8 percent from $3.9 million in the corresponding period in 2011. As a percentage of net revenue, general and administrative expenses decreased to 16.9 percent from 20.0 percent in the same period in 2011.
  • Selling and marketing expenses were $2.3 million in the fourth quarter of 2012, a decrease of 6.8 percent compared to $2.5 million in the corresponding period in 2011. As a percentage of net revenue, selling and marketing expenses decreased to 10.6 percent from 12.7 percent in the same period in 2011. The decrease in selling and marketing expenses was primarily due to a reduction in barter transactions related to online tutoring programs.
  • Research and development expenses for the fourth quarter of 2012 were $1.6 million, an increase of 4.6 percent compared to $1.5 million in the corresponding period in 2011. As a percentage of net revenue, the research and development expense was 7.3 percent in the fourth quarter of 2012, decreasing from 7.9 percent in the same period of 2011. The slight increase in research and development expenses was primarily attributable to increased staff costs.

Income from Operations

Income from operations in the fourth quarter of 2012 was $4.3 million, an increase of 54.5 percent compared to $2.8 million in the corresponding period of 2011. Operating margin increased to 19.9 percent in the fourth quarter of 2012, compared to 14.5 percent in the corresponding period of 2011.

Adjusted income from operations, a non-GAAP measure defined as income from operations excluding share-based compensation, amortization of intangible assets, land use rights and intangible assets impairment, was $4.9 million for the fourth quarter of 2012, an increase of 48.6 percent compared to $3.3 million in the corresponding period of 2011.

Adjusted operating margin, a non-GAAP measure defined as the ratio of adjusted income from operations (non-GAAP) over net revenue, for the fourth quarter of 2012 increased to 22.3 percent, compared to 16.9 percent for the corresponding period of 2011.

Interest and Investment Income

Interest and investment income for the fourth quarter of 2012 remained stable at $0.5 million, compared to the corresponding quarter of 2011.

Income Tax Expense

In the fourth quarter of 2012, income tax expense was $0.9 million and the effective income tax rate was 17.5 percent.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests remained stable at $1.8 million in the fourth quarter of 2012, compared to $1.7 million in the corresponding period in 2011.

Net Income Attributable to ChinaEdu

Net income attributable to ChinaEdu, which is net income, excluding net income attributable to non-controlling interests, was $2.4 million in the fourth quarter of 2012, representing a significant increase of 552.8 percent from $0.4 million in the corresponding period of 2011. The increase was primarily due to an increase in gross profit across online degree programs, as well as effective expenses control.

Net income attributable to ChinaEdu per basic and diluted ADS was $0.154 and $0.144, respectively, for the fourth quarter of 2012, compared to $0.024 and $0.022, respectively, for the corresponding period in 2011.

Adjusted net income attributable to ChinaEdu (non-GAAP) was $2.9 million in the fourth quarter of 2012, compared to $0.8 million in the corresponding period of 2011. Adjusted net margin, a non-GAAP measure defined as the ratio of adjusted net income attributable to ChinaEdu (non-GAAP) over net revenue, was 13.5 percent in the fourth quarter of 2012, compared to 4.2 percent in the corresponding period of 2011.

Adjusted net income attributable to ChinaEdu per basic and diluted ADS (non-GAAP) was $0.185 and $0.173 respectively, for the fourth quarter of 2012, compared to $0.051 and $0.050, respectively, for the corresponding period of 2011.

Deferred Revenue

As of December 31, 2012, deferred revenue was $23.2 million, consisting of current deferred revenue in the amount of $21.5 million and non-current deferred revenue in the amount of $1.7 million.

In general, Fall semester tuition for online degree programs is received during the fourth quarter but is recognized both in the fourth quarter of the current year and the first quarter of the following year.

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

Cash and Cash Equivalents and Term Deposits

As of December 31, 2012, the Company reported cash and cash equivalents and term deposits of $76.7 million, which primarily consisted of cash and cash equivalents, and term deposits with original maturity terms of greater than three months but less than one year.

Amounts Due from Related Parties

Amounts due from related parties, which represents cash owed to the Company by collaborative alliance partners, were $48.5 million as of December 31, 2012 compared to $38.2 million as of December 31, 2011.

Fiscal Year 2012 Results

Net Revenue

Total net revenue in 2012 was $78.4 million, an increase of 12.0 percent from $70.0 million in 2011.

Net revenue from online degree programs in 2012 was $63.1 million, a 13.3 percent increase from $55.7 million in 2011. This increase was primarily attributable to strong enrollment growth in online degree programs in 2012, particularly through our learning centers network. In aggregate, the number of revenue students enrolled in online degree programs was approximately 400,000 in 2012, a 12.4 percent increase from approximately 356,000 revenue students enrolled in online degree programs in 2011.

Net revenue from non-degree programs in 2012 was $15.2 million, compared to $14.2 million in 2011. The 7.0 percent increase was primarily attributable to increased student enrollments and increased tuition fees at our Anqing private school.

Cost of Revenue

Total cost of revenue in 2012 was $32.4 million, an increase of 8.9 percent from $29.8 million in 2011.

Cost of revenue for online degree programs in 2012 was $22.1 million, an increase of 10.8 percent compared to $19.9 million in 2011. The increase in cost of revenue was primarily due to an increase in staff costs resulting from headcount increases across the Company, as well as an increase in courseware costs related to new training courses and the growth of student body. Additionally, the learning centers network’s sales and service based model results in a higher cost of sales. The more revenue generated from learning centers, the higher the cost of revenue incurred.

Cost of revenue for non-degree programs in 2012 was $10.3 million, an increase of 5.0 percent compared to $9.8 million in 2011. The increase was primarily attributable to increased staff and transportation costs at the Anqing School, as well as an increase in service costs and leasing costs related to our online tutoring business.

Gross Profit

Gross profit for 2012 was $45.9 million, an increase of 14.4 percent compared with $40.2 million in 2011.

Gross margin in 2012 was 58.6 percent, compared with gross margin of 57.4 percent in 2011. The increase was primarily due to an increase in net revenue coupled with stringent cost controls over the year.

Operating Expenses

Total operating expenses in 2012 were $31.3 million, a 4.1 percent increase from $30.1 million in 2011. The increase was primarily attributable to the following:

  • General and administrative expenses in 2012 were $16.1 million, a 6.7 percent increase from $15.1 million in 2011. The increase was mainly the result of an early termination of a lease agreement, an increase in stock related expenses due to the granting of restricted shares for staff, as well as an increase in conference attendance and travel costs.
  • Selling and marketing expenses in 2012 were $7.8 million, an 8.3 percent decrease from $8.5 million in 2011. The decrease in selling and marketing expenses was primarily attributable to a significant decrease in marketing activities surrounding international and elite curriculum programs.
  • Research and development expenses in 2012 were $6.5 million, flat with 2011.
  • The Company incurred an intangible asset impairment charge in relation to the BCIT (British Columbia Institute of Technology) and FEC (Friendly Experimental Class) programs in the international and elite curriculum division in the third quarter of 2012, resulting in an aggregate non-cash charge of $0.9 million (RMB5.9 million).
  • Share-based compensation in 2012, which was allocated to the related cost of revenue and operating expense line items, was $1.3 million, increased 27.4% percent from $1.0 million in 2011.

Income from Operations

Income from operations was $14.6 million in 2012, an increase of 44.9 percent from $10.1 million in 2011. Operating margin was 18.7 percent in 2012, compared to 14.4 percent in 2011.

Adjusted income from operations (non-GAAP) in 2012 was $17.6 million, an increase of 48.1 percent compared to $11.9 million in 2011. Adjusted operating margin (non-GAAP) was 22.5 percent in 2012, compared to 17.0 percent in 2011.

Interest Income and Investment Income

Interest income and investment income increased 52.1 percent to $2.4 million in 2012, compared to $1.6 million in 2011. Interest income increased $0.7 million while investment income increased $0.1 million in 2012.

Income Tax Expense

Income tax expense in 2012 was $4.2 million, compared with $2.7 million in 2011. The 2012 effective tax rate was 24.1 percent, compared with 23.2 percent of 2011.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests was $7.3 million in 2012, an increase of 14.1 percent compared to $6.4 million in 2011. The increase was primarily due to the non-controlling interest impact related to the increase in net income from online degree programs.

Net Income attributable to ChinaEdu

Net income attributable to ChinaEdu was $6.1 million in 2012, representing an increase of 125.7 percent from $2.7 million in 2011. Net margin was 7.8 percent in 2012, compared to 3.9 percent in 2011.

Adjusted net margin was 11.5 percent in 2012, compared to 6.4 percent in 2011.

First Quarter 2013 Guidance

ChinaEdu management expects total net revenue in the first quarter of 2013 to range from RMB116 million to RMB120 million or $18.6 million to $19.3 million, representing a 1.8 percent to 5.3 percent increase from RMB114 million or $18.3 million compared to the corresponding period in 2012.

Conference Call

ChinaEdu’s management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on March 28, 2013 (8:00 p.m. Beijing/Hong Kong Time on March 28, 2013).

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

    International:      +65 67239382

    Hong Kong:         +852 25214709

    United States: +1 (718) 354-1231
    Toll-free China, Mobile:                            4006208038

    Toll-free China:                                    8008190121

    Toll-free United States:                      1 (866) 519-4004

    Conference ID:                                        21948711

    Conference Password:                          ChinaEdu

A live and archived webcast of the conference call will be available on the investor relations page of ChinaEdu’s website at http://ir.chinaedu.net and a replay of the conference call may be accessed by phone until April 5, 2013.

Dial-in numbers for the replay are as follows:

    Toll Free United States          +1 (855) 452-5696

    International                      +61 2 8199 0299

    Conference ID:                            21948711

    Conference Password:    ChinaEdu

Non-GAAP Financial Measures

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

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

About ChinaEdu

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

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

Forward-Looking Statements

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

    [1]           The reporting currency of the
                  Company is RMB, but for the
                  convenience of the reader, the
                  amounts for the three months and
                  the years ended on December 31,
                  2012 and 2011 are presented in
                  U.S. dollars. Unless otherwise
                  stated, all translations from RMB
                  to U.S. dollars were made at the
                  rate of RMB6.2301 to $1.00, the
                  noon buying rate in effect on
                  December 31, 2012 in the H.10
                  statistical release of the Federal
                  Reserve Board. The Company makes
                  no representation that the RMB or
                  U.S. dollar amounts referred could
                  be converted into U.S. dollars or
                  RMB, as the case may be, at any
                  particular rate or at all. For
                  analytical presentation, all
                  percentages are calculated using
                  the numbers presented in the
                  financial statements contained in
                  this earnings release. An
                  explanation of the Company's non-
                  GAAP financial measures is
                  included in the section entitled
                  "Non-GAAP Financial Measures"
                  below, and the related
                  reconciliations to GAAP financial
                  measures are presented in the
                  accompanying financial statements.

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

    [3]           "ADS" is American Depositary Share.
                  Each ADS represents three ordinary
                  shares.

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

    [5]           "Revenue students" refers to
                  students of university online
                  degree programs who have paid
                  tuitions. The numbers for the
                  three months ended December 31,
                  2012 and 2011 are revenue students
                  in fall 2012 and fall 2011,
                  respectively. The numbers for the
                  years ended December 31, 2012 and
                  2011 are total revenue students in
                  spring 2012 and fall 2012, in
                  spring 2011 and fall 2011
                  respectively.

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

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

For investor and media inquiries, please contact:

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

Simon Mei
Chief Financial Officer
ChinaEdu Corporation
Phone: +86 13810568391
E-mail: simon@chinaedu.net

                                                                                                                                       ChinaEdu Corporation

                                                                                                                          Unaudited Condensed Consolidated Balance Sheets

                                                                                                                                     (in thousands, unaudited)

                                                                                                                                   December 31, 2011                      December 31, 2012 December 31, 2012
                                                                                                                                   -----------------                      ----------------- -----------------

                                                                                                                                          RMB                                    RMB               US$

    Current assets:

                            Cash and cash equivalents                                                                                                                               273,746           385,922  61,945

                            Term deposits                                                                                                                                            98,163            92,028  14,772

                            Short-term investments                                                                                                                                   34,648            23,575   3,784

                            Accounts receivable, net                                                                                                                                 31,478            34,917   5,605

                            Prepaid expenses and other current assets                                                                                                                22,725            23,455   3,763

                            Amounts due from related parties-current                                                                                                                238,016           260,184  41,762

                            Deferred tax assets-current                                                                                                                               5,697             9,571   1,536

    Total current assets                                                                                                                                                            704,473           829,652 133,167
                                                                                                                                                                                    -------           ------- -------

                            Property and equipment, net                                                                                                                             239,210           238,563  38,292

                            Amounts due from related party-non-current                                                                                                                    -            41,979   6,739

                            Land use rights                                                                                                                                          26,657            26,049   4,181

                            Deposits paid for acquisition of property and equipment                                                                                                  17,902             3,873     622

                            Deferred tax assets-non-current                                                                                                                           8,217             2,085     335

                            Long-term investments                                                                                                                                         -               801     129

                            Rental deposits                                                                                                                                           2,213             1,497     240

                            Acquired intangible assets, net                                                                                                                          63,638            54,499   8,748

                            Goodwill                                                                                                                                                 43,255            43,255   6,943

    Total assets                                                                                                                                                                  1,105,565         1,242,253 199,396
                                                                                                                                                                                  =========         ========= =======

    Liabilities and equity

    Current liabilities:

                            Accounts payable (including accounts payable of the consolidated VIE without recourse to the                                                              2,239             2,401     385
                              Group of 1,975 and 2,007 as of December 31, 2011 and December 31, 2012, respectively)

                            Deferred revenues-current (including deferred revenues of the consolidated VIE without recourse to                                                      125,332           134,175  21,537
                              the Group of 20,525 and 23,518 as of December 31, 2011 and December 31, 2012, respectively)

                            Accrued expenses and other current liabilities (including accrued expenses and other current                                                             91,980           113,558  18,228
                              liabilities of the consolidated VIE without recourse to the Group of 18,644 and 22,113
                              as of December 31, 2011 and December 31, 2012, respectively)

                            Amounts due to related parties-current (including amounts due to related parties of the consolidated                                                     13,146            35,507   5,699
                            VIE without recourse to the Group of 1,953 and 1,926 as of December 31, 2011 and December 31, 2012,
                            respectively)

                            Income taxes payable (including income taxes payable of the consolidated VIE without recourse to the                                                     51,448            49,294   7,912
                              Group of 8,893 and 10,004 as of December 31, 2011 and December 31, 2012, respectively)

                            Other taxes payable (including other taxes payable of the consolidated VIE without recourse to the                                                       21,970            27,294   4,381
                              Group of 3,047 and 4,442 as of December 31, 2011 and December 31, 2012, respectively)

    Total current liabilities                                                                                                                                                       306,115           362,229  58,142
                                                                                                                                                                                    -------           -------  ------

                            Deferred revenues-non-current (including deferred revenues of the consolidated VIE without recourse                                                      12,059            10,654   1,710
                              to the Group of 33 and 29 as of December 31, 2011 and December 31, 2012, respectively)

                            Deferred tax liabilities-non-current (including deferred tax liabilities of the consolidated VIE without                                                  9,243            13,473   2,163
                              recourse to the Group of 1,017 and 978 as of December 31, 2011 and December 31, 2012, respectively)

                            Unrecognized tax benefit (including unrecognized tax benefit of the consolidated VIE without                                                              6,089             8,795   1,412
                              recourse to the Group of 2,364 and 3,555 as of December 31, 2011 and December 31, 2012, respectively)

    Total liabilities                                                                                                                                                               333,506           395,151  63,427
                                                                                                                                                                                    =======           =======  ======

        ChinaEdu shareholders' equity                                                                                                                                               604,806           650,191 104,363

                            Noncontrolling interests                                                                                                                                167,253           196,911  31,606

    Total  equity                                                                                                                                                                   772,059           847,102 135,969
                                                                                                                                                                                    -------           ------- -------

    Total liabilities and equity                                                                                                                                                  1,105,565         1,242,253 199,396
                                                                                                                                                                                  =========         ========= =======

                                                                                                             ChinaEdu Corporation

                                                                                           Unaudited Condensed Consolidated Statements of Operations

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

                                        Three Months Ended                                               Twelve Months Ended
                                        ------------------                                               -------------------

                                  December 31, 2011          December 31, 2012                               December 31, 2012                             December 31, 2011          December 31, 2012          December 31, 2012
                                  -----------------          -----------------                               -----------------                             -----------------          -----------------          -----------------

                                         RMB                        RMB                                             US$                                           RMB                        RMB                        US$

    Gross Revenue *                                 123,127                    135,889                                          21,812                                       453,116                    504,052                     80,904

    Business Tax                                      2,569                        347                                              55                                        17,257                     15,730                      2,525

    Net Revenue:

    Online degree programs                           96,760                    110,230                                          17,693                                       347,107                    393,343                     63,135

    Online tutoring programs                          6,057                      6,843                                           1,099                                        25,755                     25,266                      4,055

    Private primary and secondary
     schools                                         14,088                     16,275                                           2,613                                        49,653                     59,937                      9,620

    International and elite
     curriculum programs                              3,653                      2,194                                             352                                        13,344                      9,776                      1,569
                                                      -----                      -----                                             ---                                        ------                      -----                      -----

    Total net revenue                               120,558                    135,542                                          21,757                                       435,859                    488,322                     78,379

    Cost of revenue:

    Online degree programs                           36,433                     42,353                                           6,798                                       124,242                    137,689                     22,101

    Online tutoring programs                          2,683                      4,262                                             684                                         9,107                     11,861                      1,904

    Private primary and secondary
     schools                                         10,589                     12,962                                           2,081                                        36,127                     42,713                      6,856

    International and elite
     curriculum programs                              4,393                      1,741                                             279                                        16,128                      9,846                      1,580
                                                      -----                      -----                                             ---                                        ------                      -----                      -----

    Total cost of revenue                            54,098                     61,318                                           9,842                                       185,604                    202,109                     32,441

    Gross profit:

    Online degree programs                           60,327                     67,877                                          10,895                                       222,865                    255,654                     41,034

    Online tutoring programs                          3,374                      2,581                                             415                                        16,648                     13,405                      2,151

    Private primary and secondary
     schools                                          3,499                      3,313                                             532                                        13,526                     17,224                      2,764

    International and elite
     curriculum programs                               (740)                       453                                              73                                        (2,784)                       (70)                       (11)
                                                       ----                        ---                                             ---                                        ------                        ---                        ---

    Total gross profit                               66,460                     74,224                                          11,915                                       250,255                    286,213                     45,938

    Online degree programs                             62.3%                      61.6%                                           61.6%                                         64.2%                      65.0%                      65.0%

    Online tutoring programs                           55.7%                      37.7%                                           37.7%                                         64.6%                      53.1%                      53.1%

    Private primary and secondary
     schools                                           24.8%                      20.4%                                           20.4%                                         27.2%                      28.7%                      28.7%

    International and elite
     curriculum programs                             (20.3%)                      20.6%                                           20.6%                                       (20.9%)                     (0.7%)                     (0.7%)

    Gross margin                                       55.1%                      54.8%                                           54.8%                                         57.4%                      58.6%                      58.6%

    Operating expenses:

    General and administrative                       24,121                     22,961                                           3,685                                        93,950                    100,204                     16,084

    Selling and marketing                            15,362                     14,313                                           2,297                                        52,777                     48,407                      7,770

    Research and development                          9,487                      9,927                                           1,593                                        40,589                     40,512                      6,503

    Intangible assets impairment                          -                          -                                               -                                             -                      5,901                        947
                                                                                                                                                                                 ---

    Total operating expenses                         48,970                     47,201                                           7,575                                       187,316                    195,024                     31,304
                                                     ------                     ------                                           -----                                       -------                    -------                     ------

    Income from operations                           17,490                     27,023                                           4,340                                        62,939                     91,189                     14,634

    Operating margin                                   14.5%                      19.9%                                           19.9%                                         14.4%                      18.7%                      18.7%

    Interest income                                   2,641                      3,330                                             536                                         8,843                     13,253                      2,127

    Gain on disposal of assets                            -                        894                                             143                                             -                      2,197                        353

    Investment income                                   166                          -                                               -                                           832                      1,460                        234

    Other income                                        284                        459                                              74                                         1,003                      1,376                        221
                                                        ---                        ---                                             ---                                         -----                      -----                        ---

    Income before income tax and
     equity method investments                       20,581                     31,706                                           5,093                                        73,617                    109,475                     17,569

    Income tax expense                               (7,691)                    (5,603)                                           (899)                                      (17,044)                   (26,427)                    (4,242)
                                                     ------                     ------                                            ----                                       -------                    -------                     ------

    Net income before income from
     equity method investments                       12,890                     26,103                                           4,194                                        56,573                     83,048                     13,327

    Income from equity method
     investments, net of taxes                            -                        261                                              42                                             -                        261                         42
                                                        ---                        ---                                             ---                                           ---                        ---                        ---

    Net income                                       12,890                     26,364                                           4,236                                        56,573                     83,309                     13,369

    Net income attributable to
     the noncontrolling interests                   (10,557)                   (11,134)                                         (1,787)                                      (39,752)                   (45,338)                    (7,277)

    Net income attributable to
     ChinaEdu                                         2,333                     15,230                                           2,449                                        16,821                     37,971                      6,092
                                                      =====                     ======                                           =====                                        ======                     ======                      =====

    Net margin                                          1.9%                      11.2%                                           11.2%                                          3.9%                       7.8%                       7.8%

    Net income attributable to
     ChinaEdu per ADS:

          Basic                                        0.15                       0.96                                           0.154                                          1.06                       2.40                      0.385

          Diluted                                      0.14                       0.90                                           0.144                                          1.00                       2.26                      0.362

    Weighted average aggregate
     number of ADSs outstanding:

          Basic                                  15,756,432                 15,880,826                                      15,880,826                                    15,817,977                 15,841,125                 15,841,125

          Diluted                                16,569,830                 17,001,590                                      17,001,590                                    16,889,743                 16,829,078                 16,829,078

    * Gross revenue is detailed
     as follows:

    Online degree programs                           98,978                    110,363                                          17,714                                       362,888                    407,869                     65,466

    Online tutoring programs                          6,177                      7,025                                           1,128                                        26,381                     25,874                      4,153

    Private primary and secondary
     schools                                         14,106                     16,289                                           2,615                                        49,726                     60,066                      9,641

    International and elite
     curriculum programs                              3,866                      2,212                                             355                                        14,121                     10,243                      1,644

                                                                                                                ChinaEdu Corporation

                                                                                         Unaudited Condensed Consolidated Statements of Comprehensive Income

                                                                                                              (in thousands, unaudited)

                                                                                 Three Months Ended                                                          Twelve Months Ended
                                                                                 ------------------                                                          -------------------

                                                                            December 31, 2011                            December 31, 2012                      December 31, 2012        December 31, 2011         December 31, 2012         December 31, 2012
                                                                            -----------------                            -----------------                      -----------------        -----------------         -----------------         -----------------

                                                                                   RMB                                          RMB                                    US$                      RMB                       RMB                       US$

    Net income                                                                                 12,890                                       26,364                                4,236                    56,573                    83,309                    13,369

    Other comprehensive income, net of taxes

      Foreign currency translation adjustments                                                  1,143                                          (94)                                 (15)                     (751)                      (87)                      (14)

      Change in fair value of available for sale investments                                     (539)                                         290                                   47                       187                     1,247                       200
                                                                                                 ----                                          ---                                  ---                       ---                     -----                       ---

    Comprehensive income                                                                       13,494                                       26,560                                4,268                    56,009                    84,469                    13,555

    Less: comprehensive income attributable to the noncontrolling interests                    11,627                                       12,694                                2,038                    46,020                    47,836                     7,678
                                                                                               ------                                       ------                                -----                    ------

    Comprehensive income attributable to Chinaedu                                               1,867                                       13,866                                2,230                     9,989                    36,633                     5,877
                                                                                                =====                                       ======                                =====                     =====                    ======                     =====

                                                                                                         ChinaEdu Corporation

                                                                                       Unaudited Condensed Consolidated Statements of Cash Flow

                                                                                                       (in thousands, unaudited)

                                                                                 Three Months Ended                                                      Twelve Months Ended
                                                                                 ------------------                                                      -------------------

                                                                                 December 31, 2011                            December 31, 2012             December 31, 2012         December 31, 2011          December 31, 2012          December 31, 2012
                                                                                 -----------------                            -----------------             -----------------         -----------------          -----------------          -----------------

                                                                                        RMB                                          RMB                           US$                       RMB                        RMB                        US$

    Operating activities:

           Net income                                                                               12,890                                       26,364                        4,236                     56,573                     83,309                     13,369

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

               Share-based compensation                                                              1,660                                        2,262                          363                      6,483                      8,258                      1,326

               Depreciation and amortization of property and equipment                               6,637                                        6,414                        1,030                     23,900                     25,377                      4,073

               Amortization of land use rights                                                         152                                          152                           24                        608                        608                         98

               Amortization of acquired intangible assets                                            1,078                                          847                          136                      4,171                      3,903                        626

               Accounts receivable write-off                                                             -                                            -                            -                          -                        340                         55

               Intangible assets impairment                                                              -                                            -                            -                          -                      5,901                        947

               Investment income                                                                      (166)                                           -                            -                        201                     (1,460)                      (234)

               Gain on disposal of assets                                                                -                                         (894)                        (143)                         -                     (2,197)                      (353)

               Income from equity method investments                                                     -                                          219                           35                          -                        219                         35

               Loss from disposal of property and equipment                                             81                                          197                           32                        234                      1,611                        259

           Changes in assets and liabilities

               Accounts receivable                                                                  (8,033)                                       4,072                          654                      3,613                     (3,779)                      (607)

               Inventory                                                                                 -                                            -                            -                        358                          -                          -

               Prepaid expenses and other current assets                                             4,436                                        2,565                          411                      7,458                        532                         86

               Amounts due from related parties                                                     (8,708)                                     (44,974)                      (7,221)                     8,646                    (64,325)                   (10,324)

               Rental deposits                                                                         409                                          (17)                          (3)                    (1,277)                       716                        115

               Accounts payable                                                                     (8,449)                                      (7,627)                      (1,224)                    (2,013)                       162                         26

               Deferred revenues                                                                    81,115                                       81,946                       13,153                     21,858                      7,438                      1,195

               Accrued expenses and other current liabilities                                       (9,464)                                      (5,958)                        (956)                     8,700                     20,851                      3,348

               Amounts due to related parties                                                      (10,136)                                      14,847                        2,381                    (19,717)                    22,468                      3,606

               Income tax payable                                                                    9,319                                          965                          155                      6,836                     (2,154)                      (346)

               Other taxes payable                                                                   3,480                                        3,167                          508                      1,462                      5,324                        855

               Deferred income taxes                                                                (2,894)                                         615                           99                     (6,034)                     6,488                      1,041

               Unrecognized tax benefit                                                                667                                          844                          135                      2,398                      2,706                        434

    Net cash provided by operating activities                                                       74,074                                       86,006                       13,805                    124,458                    122,296                     19,630
                                                                                                    ------                                       ------                       ------                    -------                    -------                     ------

    Investing activities:

               Purchase of property and equipment                                                   (2,702)                                      (3,538)                        (568)                   (20,788)                   (12,407)                    (1,991)

               Proceeds from disposal of assets                                                          -                                        1,335                          214                          -                      5,430                        872

               Deposits paid for acquisition of property and equipment                              (3,873)                                           -                            -                    (18,863)                         -                          -

               (Purchase) maturity of term deposits                                                (11,000)                                     107,000                       17,175                     22,337                      6,135                        985

               Purchase of investments                                                              (2,556)                                           -                            -                    (19,556)                   (13,591)                    (2,182)

               Proceeds from the sale of short term investments                                      4,119                                            -                            -                     16,306                     26,187                      4,203

               Purchase of exclusive partnership with universities                                       -                                            -                            -                     (1,960)                      (980)                      (157)

               Proceeds from disposal of property and equipment                                         20                                            -                            -                        275                          -                          -

    Net cash (used in) provided by investing activities                                            (15,992)                                     104,797                       16,821                    (22,249)                    10,774                      1,730
                                                                                                   -------                                      -------                       ------                    -------                     ------                      -----

    Financing activities:

               Deferred payment of purchase of property and equipment                               (1,479)                                           -                            -                     (1,479)                         -                          -

               Cash dividends paid to noncontrolling shareholders                                      (49)                                           -                            -                    (13,510)                   (21,441)                    (3,442)

               Capital contributions by noncontrolling shareholders                                      -                                            -                            -                      2,960                          -                          -

               Proceeds from exercise of share options                                                  20                                        1,330                          213                        598                      5,068                        813

               Prepayment for shares repurchase                                                        (38)                                           -                            -                       (168)                         -                          -

               Repurchase and cancellation of ordinary shares                                         (688)                                      (1,846)                        (296)                    (7,437)                    (4,574)                      (734)

               Repayment of loan from related party                                                (14,500)                                           -                            -                          -                          -                          -

               Loan from related party                                                              10,000                                            -                            -                          -                          -                          -

    Net cash used in financing activities                                                           (6,734)                                        (516)                         (83)                   (19,036)                   (20,947)                    (3,363)
                                                                                                    ------                                         ----                          ---                    -------                    -------                     ------

    Effect of foreign exchange rate changes                                                            (23)                                          57                           10                         80                         53                          9
                                                                                                       ---                                          ---                          ---                        ---                        ---                        ---

    CASH AND CASH EQUIVALENTS, beginning of period                                                 222,421                                      195,578                       31,392                    190,493                    273,746                     43,939
                                                                                                   -------                                      -------                       ------                    -------                    -------                     ------

    CASH AND CASH EQUIVALENTS, end of period                                                       273,746                                      385,922                       61,945                    273,746                    385,922                     61,945
                                                                                                   =======                                      =======                       ======                    =======                    =======                     ======

    Net  increase in cash and cash equivalents                                                      51,325                                      190,344                       30,553                     83,253                    112,176                     18,006
                                                                                                    ------                                      -------                       ------                     ------                    -------                     ------

                                                                                                                                                ChinaEdu Corporation

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

                                                                                                                                              (in thousands, unaudited)

                                                                                              Three Months Ended                                                                    Twelve Months Ended
                                                                                              ------------------                                                                    -------------------

                                                                                        December 31, 2011                               December 31, 2012                               December 31, 2012                        December 31, 2011          December 31, 2012          December 31, 2012
                                                                                        -----------------                               -----------------                               -----------------                        -----------------          -----------------          -----------------

                                                                                               RMB                                             RMB                                             US$                                                     RMB                        RMB                        US$

    Net revenue                                                                                           120,558                                         135,542                                          21,757                                  435,859                    488,322                     78,379

    Income from operations                                                                                 17,490                                          27,023                                           4,340                                   62,939                     91,189                     14,634

    Adjustments:

      Share-based compensation                                                                              1,660                                           2,262                                             363                                    6,483                      8,258                      1,326

      Amortization of intangible assets and land use rights                                                 1,230                                             999                                             160                                    4,779                      4,511                        724

      Intangible assets impairment                                                                              -                                               -                                               -                                        -                      5,901                        947

    Adjusted income from operations (non-GAAP)                                                             20,380                                          30,284                                           4,863                                   74,201                    109,859                     17,631
                                                                                                           ======                                          ======                                           =====                                   ======                    =======                     ======

    Adjusted operating margin (non-GAAP)                                                                     16.9%                                           22.3%                                           22.3%                                    17.0%                      22.5%                      22.5%

                                                                                                                                          ChinaEdu Corporation

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

                                                                                                                                        (in thousands, unaudited)

                                                                                            Three Months Ended                                                                 Twelve Months Ended
                                                                                            ------------------                                                                 -------------------

                                                                                        December 31, 2011                               December 31, 2012                               December 31, 2012                        December 31, 2011          December 31, 2012          December 31, 2012
                                                                                        -----------------                               -----------------                               -----------------                        -----------------          -----------------          -----------------

                                                                                               RMB                                             RMB                                             US$                                      RMB                        RMB                        US$

    Net revenue                                                                                           120,558                                         135,542                                          21,757                                  435,859                    488,322                     78,379

    Net income attributable to ChinaEdu                                                                     2,333                                          15,230                                           2,449                                   16,821                     37,971                      6,092

    Adjustments:

      Share-based compensation                                                                              1,660                                           2,262                                             363                                    6,483                      8,258                      1,326

      Share-based compensation attributable to the noncontrolling interest                                   (110)                                           (193)                                            (31)                                    (376)                      (562)                       (90)

      Amortization of intangible assets and land use rights                                                 1,230                                             999                                             160                                    4,779                      4,511                        724

      Intangible assets impairment                                                                              -                                               -                                               -                                        -                      5,901                        947

    Adjusted net income attributable to ChinaEdu (non-GAAP)                                                 5,113                                          18,298                                           2,941                                   27,707                     56,079                      8,999
                                                                                                            =====                                          ======                                           =====                                   ======                     ======                      =====

    Adjusted net margin (non-GAAP)                                                                            4.2%                                           13.5%                                           13.5%                                     6.4%                      11.5%                      11.5%

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

          Basic                                                                                              0.32                                            1.15                                           0.185                                     1.75                       3.54                      0.568

          Diluted                                                                                            0.31                                            1.08                                           0.173                                     1.64                       3.33                      0.535

    Weighted average aggregate number of ADSs outstanding:

          Basic                                                                                        15,756,432                                      15,880,826                                      15,880,826                               15,817,977                 15,841,125                 15,841,125

          Diluted                                                                                      16,569,830                                      17,001,590                                      17,001,590                               16,889,743                 16,829,078                 16,829,078

SOURCE ChinaEdu Corporation


Source: PR Newswire