May 29, 2012 at 08:52 AM EDT
Ambow Education Files 2011 Annual Report on Form 20-F and Confirms Adjustments to 2011 Financial Results

BEIJING, May 29, 2012 /PRNewswire-Asia/ -- Ambow Education Holding Ltd. ("Ambow" or the "Company") (NYSE: AMBO), a leading national provider of educational and career enhancement services in China, today announced that it has filed its 2011 annual report on Form 20-F (the "2011 Annual Report") with the U.S. Securities and Exchange Commission (the "SEC"). The 2011 Annual Report is available on the SEC's website at http://www.sec.gov. The Company will provide a hard copy of the 2011 Annual Report containing its audited consolidated financial statements, free of charge, to its shareholders and ADS holders upon request.

The Company also reached a conclusion on certain discussions included in its press release dated May 16, 2012 (the "May 16 Press Release"), regarding the preliminary adjustments to the Company's 2011 unaudited annual financial results included in the Company's press release dated March 5, 2012 (the "March 5 Press Release"), which was included as an exhibit to the Company's Form 6-K furnished to the SEC on March 5, 2012. The Company has determined the following:

1. For those distributors with a proven payment history, the Company will continue to recognize revenue upon delivery of services and products. For those distributors without adequate history of timely payments, the Company will recognize revenue at the later of cash collection or the delivery of services and products.  Accordingly, the Company determined that US$14.1 million[1] (RMB88.8 million) of revenue previously recognized in 2011 should be reversed and recognized in the future when cash is collected from certain distributors without a proven history of timely payments. The related account receivables have also been removed from the balance sheet. This adjustment does not impact revenue in 2010. As of the date of this press release, the Company has collected approximately US$12.2 million (RMB77 million) of the cash associated with the revenue to be deferred as of December 31, 2011, which collected revenue (together with any additional collections before June 30, 2012) will be recognized by the Company in the first half of 2012. Any remaining balance will be recognized when collected. All future sales to distributors without adequate history of timely payment will be recognized on the cash basis until such time as a proven payment history is established. 

[1] The reporting currency of the Company is Renminbi ("RMB"). For the convenience of the reader, RMB amounts presented throughout this press release include translations into U.S. dollars ("US$"). Unless otherwise stated, all translations from RMB to US$ are based on the historical exchange rate of US$1.00 to RMB6.2939, representing the noon buying rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board on December 30, 2011. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

2. The Company determined to make a bad debt provision of US$2.2 million (RMB14.0 million).

3. The Company identified an additional 12 tutoring centers that were already operating in December 2011. As a result, depreciation and other expense were determined to increase by US$0.5 million (RMB3.3 million). The balance sheet is also adjusted accordingly: US$4.4 million (RMB 27.8 million) was reclassified from other non-current assets to leasehold improvements. As of December 31, 2011, the Company had a total of 150 tutoring centers.

As a result of the above adjustments, the corresponding tax impact led to a reduction in income tax expense of US$1.6 million (RMB 9.8 million).

In addition to the above adjustments, the Company determined certain other adjustments which had no impact on the Company's net income.  The major items concerning these other adjustments are as follows:

4. The Company revised the treatment of US$2.6 million (RMB16.6 million) of amortization expense attributable to student population to be reclassified from general and administrative expense to cost of revenue on the basis that this expense contributed directly to revenue generation. At the same time, the Company revised the treatment of US$0.3 million (RMB1.9 million) of expenses, which were research and development in nature, to be reclassified from cost of revenue to research and development expense.

5. In December 2011, the Company signed an agreement to sell Beijing Century College Group and Beijing 21st Century International School ("21st School") to Xihua Investment Group ("Xihua Group").  The transaction was recorded as a disposal as of December 31, 2011 with all the related assets and liabilities removed from the balance sheet in the unaudited annual financial results included in the March 5 Press Release.  It was subsequently determined that as of December 31, 2011, the disposal transaction had not been completed. Accordingly, Beijing Century College Group is currently classified as held for sale on the balance sheet. As of December 31, 2011, assets classified as held for sale were US$61.1 million (RMB384.4 million) and liabilities classified as held for sale were US$23.1 million (RMB145.2 million). 21st School remains included as held for use on the balance sheet since the Company will have significant continuing operation in 21st School following the planned disposal. Accordingly, US$74.1 million (RMB466.5 million) of assets and US$23.8 million (RMB149.5 million) of liabilities from 21st School were consolidated on the Company's balance sheet.

There were three other minor adjustments to the balance sheet, which had no impact on the Company's net income.

All of the adjustments described above had no effect on the Company's cash flow in 2011 and had no negative impact on the Company's previously announced cash balance at December 31, 2011. Cash flow from operating activity in 2011 was US$47.1 million (RMB296.7 million)

After evaluating the potential acquisition impairment charge and tax provision discussed in the May 16 Press Release, the Company has also determined these charges are not necessary.

For ease of comparison, please refer to the tables set forth at the end of this release which set out the primary differences between the unaudited annual financial results included in the March 5 Press Release and the actual annual financial results reflected in the Company's audited financial statements included in the 2011 Annual Report.

About Ambow Education Holding Ltd.

Ambow Education Holding Ltd. (NYSE: AMBO) is a leading national provider of educational and career enhancement services in China, offering high-quality individualized services and products. Ambow has two business divisions: "Better Schools," which includes tutoring centers and K-12 schools; and "Better Jobs," which includes career enhancement centers and colleges. With its extensive network of regional service hubs complemented by a dynamic proprietary learning platform and distributors, Ambow provides its services and products to students in 30 out of the 31 provinces and autonomous regions within China.

Forward-looking Statements

This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Ambow may also make written or oral forward-looking statements in its reports to the SEC, including on Forms 20-F and 6-K, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Ambow's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks related to Ambow's ability to complete its annual audits in a timely manner, risks related to Ambow's ability to file its annual reports on Form 20-F within the time periods prescribed by the rules of the SEC (or any extension period thereof) and risks related to Ambow's identification of adjustments in its audited financial statements subsequent to announcing preliminary financial results, as well as risks outlined in Ambow's filings with the SEC, including its annual reports on Form 20-F. Ambow does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Ambow's consolidated financial results presented in accordance with GAAP, Ambow uses the following measures defined as non-GAAP financial measures by the SEC: [(i) Non-GAAP operating income from continuing operations, (ii) Net income from continuing operations excluding disposal loss from continuing operations, (iii) Non-GAAP net income from continuing operations excluding disposal loss from continuing operations, (iv) Non-GAAP net income from continuing operations, (v) EBITDA from continuing operations excluding disposal loss from continuing operations, (vi) Adjusted EBITDA from continuing operations excluding disposal loss from continuing operations, (vii) Non-GAAP net income from continuing operations per ADS basic and diluted.  The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.  For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

Ambow believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity that may not be indicative of its operating performance from a cash perspective.  Ambow believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Ambow's historical performance and liquidity.  Ambow computes its non-GAAP financial measures using the same consistent method from quarter to quarter.  These non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers.  These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.  Ambow believes that these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.  Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations with GAAP financial measures that are most directly comparable to non-GAAP financial measures.

For investor and media inquiries please contact:

Ms. Mandy Li
IR Manager
Ambow Education Holding Ltd.
Tel: +86-10-6206-8130
Email: ir@ambow.com

AMBOW EDUCATION HOLDING LTD

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(ALL AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)



For the year ended December 31


6-K


Adjusted


2011


2011


2011


2011


USD


RMB


USD


RMB

Better Schools








Tutoring

127,897


804,969


127,897


804,969


Revenue deferred (adjustment 1)

-


-


(4,290)


(27,000)

K-12 Schools

42,908


270,059


42,908


270,059

Better Job








Career Enhancement

90,088


567,005


90,088


567,005


Revenue deferred (adjustment 1)

-


-


(9,820)


(61,803)

Colleges

18,428


115,982


18,428


115,982

NET REVENUES

279,321


1,758,015


265,211


1,669,212

Cost of revenues

(111,594)


(702,364)


(111,594)


(702,364)


Depreciation (adjustment 3)

-


-


(523)


(3,293)


Associated with revenue deferred

-


-


796


5,014


Amortization reclassified from G&A (adjustment 4)

-


-


(2,631)


(16,560)


Expenses reclassified to R&D (adjustment 4)

-


-


297


1,871

GROSS PROFIT

167,727


1,055,651


151,556


953,880

Operating expenses:








Selling and marketing

(56,154)


(353,425)


(56,154)


(353,425)

General and administrative

(52,825)


(332,473)


(52,825)


(332,473)


Bad debt provision (adjustment 2)

-


-


(2,224)


(14,000)


Amortization reclassified to cost (adjustment 4)

-


-


2,631


16,560

Research and development

(5,985)


(37,670)


(5,985)


(37,670)


Expensed reclassified from cost (adjustment 4)

-


-


(297)


(1,871)

Impairment loss (note 2)

-


-


(4,025)


(25,336)

TOTAL OPERATING EXPENSES

(114,964)


(723,568)


(118,879)


(748,215)

OPERATING INCOME

52,763


332,083


32,677


205,665









OTHER EXPENSE








Interest expense, net

(3,909)


(24,603)


(3,909)


(24,603)

Foreign exchange losses, net

(849)


(5,343)


(849)


(5,343)

Other income, net

367


2,312


367


2,312

Disposal loss from continuing operations (note 2)

(4,025)


(25,336)


-


-

INCOME BEFORE TAX AND NON-CONTROLLING INTEREST

44,347


279,113


28,286


178,031

Income tax expense

(8,265)


(52,019)


(8,265)


(52,019)


Decrease due to lower taxable income

-


-


1,555


9,788

INCOME FROM CONTINUING OPERATIONS

36,082


227,094


21,576


135,800

Income (Loss) from discontinued operations, net of income taxes

(19,000)


(119,581)


(19,000)


(119,581)

NET INCOME/(LOSS)

17,082


107,513


2,576


16,219

Add: Net loss attributable to non-controlling interest

789


4,966


789


4,966

NET INCOME/(LOSS) ATTRIBUTABLE TO AMBOW EDUCATION HOLDING LTD

17,871


112,479


3,365


21,185










Preferred shares redemption value accretion

-


-


-


-

Allocation of net income to participating preferred shareholders

-


-


-


-

NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS

17,871


112,479


3,365


21,185









Net income/(loss) from continued operations per ADS attributable to ordinary shareholders 








Basic

0.52


3.25


0.32


1.96

Diluted

0.49


3.09


0.30


1.88










Net income/(loss) from discontinued operations per ADS attributable to ordinary shareholders 








Basic

(0.27)


(1.67)


(0.27)


(1.67)

Diluted

(0.25)


(1.59)


(0.25)


(1.59)









Weighted average number of ADS (note1)








Basic

71,469,519


71,469,519


71,469,519


71,469,519

Diluted

75,216,406


75,216,406


75,216,406


75,216,406









Supplementary Information:








Share-based compensation expense included in:








Selling and marketing

1,158


7,286


1,158


7,286

General and administrative

4,007


25,220


4,007


25,220

Research and development

134


842


134


842



5,299


33,348


5,299


33,348

Note1:     Each ADS represents two common shares.


Note2:     Impairment loss was reclassified from other operating expense to operating expense as of Dec 31, 2011.

 

 

AMBOW EDUCATION HOLDING LTD

RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES

(ALL AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)



For the year ended December 31



 6-K


Adjusted



2011


2011


2011


2011



USD


RMB


USD


RMB

Operating income from continuing operations


52,763


332,083


32,677


205,665

Share-based compensation expenses


5,299


33,348


5,299


33,348

Impairment loss


-


-


4,025


25,336

Non-GAAP operating income from continuing operations


58,062


365,431


42,001


264,349










Net income from continuing operations 


36,871


232,060


22,365


140,766

Impairment loss


4,025


25,336


4,025


25,336

Net income from continuing operations excluding impairment loss from continuing operations attributable to Ambow


40,896


257,396


26,390


166,102

Share-based compensation expenses


5,299


33,348


5,299


33,348

Non-GAAP net income from continuing operations 


46,195


290,744


31,689


199,450










Net income from continuing operations margin 


13.2%


13.2%


8.4%


8.4%

Non-GAAP net income from continuing operations margin 


16.5%


16.5%


11.9%


11.9%










Net income from continuing operations per ADS attributable to Ordinary Shareholders - Basic (note4) 


0.52


3.25


0.32


1.96

Net income from continuing operations per ADS attributable to Ordinary Shareholders - Diluted


0.49


3.09


0.30


1.88










Net income from continuing operations per adjusted ADS attributable to Ambow - Basic 


0.52


3.25


0.32


1.96

Net income from continuing operations per adjusted ADS attributable to Ambow – Diluted  (note3)


0.49


3.09


0.30


1.88










Non-GAAP net income from continuing operations per adjusted ADS attributable to Ambow - Basic 


0.65


4.07


0.44


2.79

Non-GAAP net income from continuing operations per adjusted ADS attributable to Ambow – Diluted 


0.61


3.87


0.42


2.65










Adjusted weighted average number of ADS used in calculating net and non GAAP from continuing operations net income attributable to Ambow per ADS - basic


71,469,519


71,469,519


71,469,519


71,469,519

Adjusted weighted average number of ADS used in calculating net income and non GAAP net income from continuing operations attributable to Ambow per ADS - diluted


75,216,406


75,216,406


75,216,406


75,216,406



















EBITDA from continuing operations excluding impairment loss from continuing operations (note1)


70,061


440,957


55,267


347,842

Share-based compensation expenses


5,299


33,348


5,299


33,348

Adjusted EBITDA from continuing operation excluding impairment loss from continuing operations (note2)


75,360


474,305


60,566


381,190










EBITDA margin from continuing operations excluding impairment loss from continuing operations


25.1%


25.1%


20.8%


20.8%

Adjusted EBITDA margin from continuing operations excluding impairment loss from continuing operations


27.0%


27.0%


22.8%


22.8%










Note1:     EBITDA from continuing operations, a non-GAAP measure,  being net income from continuing operations attributable to Ambow excluding interest expense, income tax expenses, depreciation and amortization.  The depreciation and amortization from continuing operations for the twelve months of 2011(6-k) and 2011 (adjusted) were RMB 106,940 and RMB 114,906, respectively.










Note2:      Adjusted EBITDA from continuing operations being EBITDA from continuing operations excluding share based compensation.










Note3:     Net income from continuing operations per adjusted ADS attributable to Ambow  - diluted is computed by dividing net income  from continuing operations attributable to Ambow by weighted average number of common shares outstanding for the period plus (1) shares issuable upon the exercise of outstanding share options and (2) the number of common shares resulting from the assumed conversion of all the outstanding redeemable convertible preferred share and exercise of warrants upon closing of the initial public offering as if the conversion or exercise had occurred at the beginning of the period.










Note4:     Net income from continuing operations used to calculate EPADS is equal to net income (loss) attributable to AMBOW EDUCATION HOLDING LTD minus income (loss) from discontinued operations, net of income taxes.

AMBOW EDUCATION HOLDING LTD

CONDENSED CONSOLIDATED BALANCE SHEETS

(ALL AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)












As of December 31,



6-K 


Adjusted 



2011


2011


2011


2011



USD


RMB


USD


RMB

ASSETS









Current assets:









Cash and cash equivalents


61,818


389,075


74,784


470,682

Restricted cash


350


2,200


350


2,200

Term deposits


7,341


46,205


7,341


46,205

Accounts receivable, net


33,820


212,857


17,199


108,247

Amounts due from related parties


10,569


66,521


10,569


66,521

Deferred tax assets, current


2,406


15,142


2,721


17,126

Prepaid and other current assets


130,498


821,344


91,219


574,123

Assets classified as held for sale (adjustment 5)


-


-


61,075


384,401

TOTAL CURRENT ASSETS


246,802


1,553,344


265,258


1,669,505

Property and equipment, net


101,563


639,225


125,362


789,016

Intangible assets and land use rights, net


119,985


755,174


120,082


755,784

Goodwill


170,796


1,074,980


184,207


1,159,386

Deferred tax assets, non-current


763


4,800


763


4,800

Amounts due from related parties


3,569


22,463


3,569


22,463

Other non-current assets


53,170


334,645


50,791


319,673

TOTAL NON-CURRENT ASSETS


449,846


2,831,287


484,774


3,051,122

TOTAL ASSETS


696,648


4,384,631


750,032


4,720,627










LIABILITIES AND SHAREHOLDERS' EQUITY









Current liabilities:









Short-term borrowings


18,759


118,070


18,759


118,070

Current portion of Long-term borrowings


2,542


16,000


2,542


16,000

Deferred revenue


69,746


438,975


72,481


456,189

Accounts payable


7,632


48,034


8,245


51,896

Accrued expenses and other current liabilities


71,550


450,326


76,658


482,476

Income tax payable


21,303


134,079


21,037


132,406

Amount due to related parties


7,552


47,531


7,552


47,531

Liabilities classified as held for sale (adjustment 5)


-


-


23,065


145,169

TOTAL CURRENT LIABILITIES


199,084


1,253,015


230,339


1,449,737

Deferred tax liabilities, non-current


17,990


113,227


24,527


154,368

Long-term borrowings


7,388


46,500


7,388


46,500

Non-current portion of consideration payable for acquisitions and other liabilities


18,337


115,414


48,231


303,559

TOTAL NON-CURRENT LIABILITIES


43,715


275,141


80,146


504,427

TOTAL LIABILITIES


242,799


1,528,156


310,485


1,954,164










SHAREHOLDERS' EQUITY


445,129


2,801,594


430,827


2,711,582

TOTAL AMBOW EDUCATION HOLDING LTD'S EQUITY


445,129


2,801,594


430,827


2,711,582

Non-controlling interest


8,720


54,881


8,720


54,881

TOTAL SHAREHOLDER'S EQUITY


453,849


2,856,475


439,547


2,766,463

TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY


696,648


4,384,631


750,032


4,720,627

SOURCE Ambow Education Holding Ltd.

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