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New Oriental Announces Unaudited Results for the First Fiscal Quarter Ended August 31, 2012



 New Oriental Announces Unaudited Results for the First Fiscal Quarter Ended
                               August 31, 2012

Quarterly Net Revenues Increased by 25.8% Year-Over-Year

Quarterly Net Income Attributable to New Oriental Increased by 5.7%
Year-Over-Year

Quarterly Non-GAAP Net Income Attributable to New Oriental Increased by 5.2%
Year-Over-Year

PR Newswire

BEIJING, Oct. 29, 2012

BEIJING, Oct. 29, 2012 /PRNewswire/ -- New Oriental Education and Technology
Group Inc. (the "Company" or "New Oriental") (NYSE: EDU), the largest provider
of private educational services in China, today announced its unaudited
financial results for the fiscal quarter ended August 31, 2012, which is the
first quarter of New Oriental's fiscal year 2013.

Highlights for the Fiscal Quarter Ended August 31, 2012

  o Total net revenues increased by 25.8% year-over-year to US$335.8 million
    from US$266.9 million in the same period of the prior fiscal year.
  o Net income attributable to New Oriental increased by 5.7% year-over-year
    to US$95.9 million from US$90.7 million in the same period of the prior
    fiscal year.
  o Non-GAAP net income attributable to New Oriental, which excludes
    share-based compensation expenses, increased by 5.2% year-over-year to
    US$102.6 million from US$97.5 million in the same period of the prior
    fiscal year.
  o Income from operations increased by 6.7% year-over-year to US$101.6
    million from US$95.2 million in the same period of the prior fiscal year.
  o Non-GAAP income from operations, which excludes share-based compensation
    expenses, increased by 6.2% year-over-year to US$108.3 million from
    US$102.0 million in the same period of the prior fiscal year.
  o Basic and diluted net income attributable to New Oriental per ADS were
    US$0.62 and US$0.61, respectively. Non-GAAP basic and diluted net income
    per ADS, which excludes share-based compensation expenses, were US$0.66
    and US$0.65, respectively. Each ADS represents one common share of the
    Company.
  o Total student enrollments in academic subjects tutoring and test
    preparation courses increased by 11.3% year-over-year to approximately
    898,900 from approximately 807,700 in the same period of the prior fiscal
    year.
  o The total number of schools and learning centers increased to 726 in the
    quarter ended August 31, 2012, up from 664 in the previous quarter. New
    Oriental opened a net of 62 learning centers in the quarter.

 

Financial and Student Enrollments Summary – First Fiscal Quarter 2013

(in thousands of US$, except per ADS data, student enrollments and
percentages)

                                  Q1 of FY2013    Q1 of FY2012   Pct. Change
Net revenues                      335,829         266,850        25.8%
Net income attributable to New    95,852          90,709         5.7%
Oriental
Non-GAAP net income attributable  102,572         97,524         5.2%
to New Oriental^(1)
Operating income                  101,555         95,166         6.7%
Non-GAAP operating income^(1)     108,275         101,981        6.2%
Net income per ADS attributable   0.62            0.59           4.6%
to New Oriental - basic^(2)
Net income per ADS attributable   0.61            0.58           5.2%
to New Oriental - diluted^(2)
Non-GAAP net income per ADS
attributable to New Oriental -    0.66            0.63           4.1%
basic^(1)(2)(3)
Non-GAAP net income per ADS
attributable to New Oriental -    0.65            0.62           4.7%
diluted^(1)(2)(3)
Total student enrollments in
academic subjects tutoring and    898,900         807,700        11.3%
test preparation courses
 

(1) New Oriental provides non-GAAP net income attributable to New Oriental,
non-GAAP operating income and non-GAAP net income per ADS attributable to New
Oriental that excludes share-based compensation expenses to provide
supplemental information regarding its operating performance. For more
information on these non-GAAP financial measures, please see the section
captioned "About Non-GAAP Financial Measures" and the tables captioned
"Reconciliations of Non-GAAP Measures to the Most Comparable GAAP Measures"
set forth at the end of this release.
(2) Each ADS represents one common share.
(3) The non-GAAP adjusted net income per share and per ADS are computed based
on the non-GAAP adjusted net income and the same number of shares and ADSs
used in GAAP basic and diluted EPS calculation.

Michael Yu, New Oriental's Chairman and Chief Executive Officer, commented,
"We are pleased to start our 2013 fiscal year with continued steady top-line
growth, driven by our tremendous growth beyond tier-one cities. We opened 89
new learning centers, and closed 8 and disposed of 19 ELITE learning centers,
with a net increase of 62 learning centers during the quarter. The majority of
our new learning centers are located in second- and third-tier cities, as we
work to achieve critical mass and economies of scale in these fast-growing
markets.  Revenue from these cities grew an impressive 35% as we were able to
ramp up utilization quickly and efficiently. The rapid expansion of our
learning-center network, however, had a negative impact on the bottom line,
which was exacerbated by the weak performance of our Beijing and Shanghai
schools and substantial expenses and diversion of management attention as a
result of the SEC investigation and Muddy Waters' unfounded allegations
against us. 

"As we wind down our 'Occupy the Market' learning center expansion strategy
where we nearly doubled our number of learning centers from 367 at May 31,
2010 to 726 as of August 31, 2012 in order to reach economies of scale in our
49 cities and to assist in attaining our goal of being number one or number
two in every one of our 49 city markets within six years of establishment in
each respective market, we will now shift our focus to substantially improving
our profitability with our 'Harvest the Market' strategy.  Our 'Harvesting the
Market' strategy is comprised of: firstly, dramatically slowing down learning
center growth and primarily opening centers in fast growing second-tier
cities; secondly, increasing utilization rates at existing learning centers,
closing down unprofitable learning centers and eliminating associated staff;
thirdly, diligently controlling headcount, marketing and G&A expenses; and,
finally, refraining from venturing into new business lines which require
substantial upfront investments. We expect these monetization strategies to
begin to pay off in our third fiscal quarter starting December
2012."                                                              

Mr. Yu continued, "We feel exonerated and vindicated by the findings of the
Special Committee refuting and discrediting Muddy Waters' allegations. We hope
to put this matter behind us and focus on running our business and improving
the profitability of our operations through increasing learning center
utilization and strict headcount and expense controls."  

Louis T. Hsieh, New Oriental's President and Chief Financial Officer,
commented, "We are pleased to see continued strong growth across our key
business lines, with revenue from both our overseas test preparation programs
and K-12 all-subjects after-school tutoring programs growing over 30% this
quarter. Our VIP personalized classes continued their outstanding growth, with
year-over-year cash revenue increasing by 85%. Our Vision Overseas Study
Consulting business also continued to outperform, with year-over-year gross
revenue growth of approximately 55% in the quarter."

Mr. Hsieh continued, "We are pleased to announce that four of our Chinese
college entrance examination, or gaokao, students achieved the number one
score in their respective provinces this year, and three of our students
achieved the highest score in their respective cities. This exceeds last
year's stellar performance in which four New Oriental students achieved the
highest gaokao score in their respective provinces and one student achieved a
number one score in his/her city. Our students' accolades and outstanding
results demonstrate the excellent quality of New Oriental's education programs
and further cement our position as the number one K-12 after school tutoring
and gaokao test preparation school in China."

Independent Investigation and VIE Consolidation

The Company issued a press release, dated September 30, 2012 (attached hereto
as Exhibit A), announcing that the Special Committee of the Board of Directors
(the "Special Committee") had found no substantiating evidence to support the
allegations of short seller research firm Muddy Waters in its July 18, 2012
report against the Company. New Oriental was later informed by the staff of
the Division of Corporation Finance of the Security and Exchange Commission
("SEC") that, based on the Company's representations made in response to the
SEC's inquiries, the staff has no objection to the Company's consolidation of
its variable interest entity, Beijing New Oriental Education & Technology
(Group) Co., Ltd. ("New Oriental China"), into the Company's consolidated
financial statements, and also has no objection to the Company's consolidation
of its schools into New Oriental China or into the Company's wholly-owned
subsidiaries in China. The Company subsequently filed its Annual Report for
fiscal year 2012 on form 20-F on October 12, 2012, (refer to Exhibit B), with
no restatement of historical financial statements, contrary to the predictions
made in the Muddy Waters report.

Disposal of ELITE English

In July 2012, the Company agreed to sell the assets and liabilities of ELITE
English, which operates high-end, English language training programs for
high-income working professionals and other adults in large developed cities,
to an employee, the head of ELITE English, for approximately US$5.5 million.
The net loss from ELITE English operation in the first quarter of fiscal year
2013 was US$0.4 million, compared to a similar net loss of US$0.4 million in
the same period of the prior fiscal year.

Senior Management Share Purchase

On July 20, 2012, the Company announced that members of its senior management
team, including the Company's Chairman and Chief Executive Officer Michael
Minhong Yu, board director, President and Chief Financial Officer Louis T.
Hsieh, board director and Executive Vice President Chenggang Zhou, Executive
President, Domestic Business Xiangdong Chen and Senior Vice President Yunlong
Sha, had informed the Company of their intention to use their personal funds
to purchase the Company's ADSs on the open market for an aggregate amount of
up to $50 million within the next three months.  As of October 20, 2012, these
members of the Company's senior management had bought a total of over $33
million of the Company's ADSs on the open market in accordance with Rule
10b5-1 and Rule 10b-18 of the Securities and Exchange Act of 1934, as
amended. 

Financial Results for the Fiscal Quarter Ended August 31, 2012

For the first fiscal quarter of 2013, New Oriental reported net revenues of
US$335.8 million, representing a 25.8% increase year-over-year.

Net revenues from educational programs and services for the first fiscal
quarter were US$307.9 million, representing a 24.8% increase year-over-year.
Growth was mainly driven by an increase in student enrollments in academic
subjects tutoring and test preparation courses, as well as an increase in
average selling prices resulting from price increases and an increase in the
number of students selecting more expensive, smaller class options. Total
student enrollments in academic subjects tutoring and test preparation courses
in the first quarter of fiscal year 2013 increased by 11.3% year-over-year to
approximately 898,900, from approximately 807,700 in the same period of the
prior fiscal year.

Operating costs and expenses for the quarter were US$234.3 million, a 36.5%
increase year-over-year. Non-GAAP operating costs and expenses, which exclude
share-based compensation expenses, for the quarter were US$227.6 million, a
38.0% increase year-over-year.

Cost of revenues for the quarter increased by 31.8% year-over-year to US$118.2
million, primarily due to increases in the number of courses being offered and
the number of schools and learning centers in operation.

Selling and marketing expenses for the quarter increased by 39.9%
year-over-year to US$39.5 million, primarily due to brand promotion expenses.

General and administrative expenses for the quarter increased by 42.4%
year-over-year to US$76.6 million. Non-GAAP general and administrative
expenses, which exclude share-based compensation expenses, were US$69.9
million, a 48.1% increase year-over-year, primarily due to increased headcount
as the Company expanded its network of schools and learning centers by a net
of 62 learning centers in the quarter and the investigation-related expenses
accrued in the quarter.

Total share-based compensation expenses, which were allocated to related
operating costs and expenses, decreased by 1.4% to US$6.7 million in the first
quarter of fiscal year 2013 from US$6.8 million in the same period of the
prior fiscal year.

Income from operations for the quarter was US$101.6 million, a 6.7% increase
from US$95.2 million in the same period of the prior fiscal year. Non-GAAP
income from operations for the quarter was US$108.3 million, a 6.2% increase
from US$102.0 million in the same period of the prior fiscal year.

Operating margin for the quarter was 30.2%, compared to 35.7% in the same
period of the prior fiscal year. Non-GAAP operating margin, which excludes the
impact of share-based compensation expenses, for the quarter was 32.2%,
compared to 38.2% in the same period of the prior fiscal year.

Net income attributable to New Oriental for the quarter was US$95.9 million,
representing a 5.7% increase from the same period of the prior fiscal year.
Basic and diluted earnings per ADS attributable to New Oriental were US$0.62
and US$0.61, respectively. The lower-than-expected net income figure was
largely a result of continued substantial investment in learning-center
expansion and technology infrastructure, a disappointing performance from the
Company's two largest schools, Beijing and Shanghai, and substantial expenses
and diversion of management attention and resources to respond to the SEC
investigation and other unfounded claims made by short-seller research firm
Muddy Waters.  

Non-GAAP net income attributable to New Oriental for the quarter was US$102.6
million, representing a 5.2% increase from the same period of the prior fiscal
year. Non-GAAP basic and diluted earnings per ADS attributable to New Oriental
were US$0.66 and US$0.65, respectively.

Capital expenditures for the quarter were US$21.3 million, which was primarily
attributable to the addition of learning centers.

As of August 31, 2012, New Oriental had cash and cash equivalents of US$512.5
million, as compared to US$428.3 million as of May 31, 2012. In addition, the
Company had US$74.2 million in term deposits and US$303.9 million in
short-term investment as of August 31, 2012. Net operating cash flow for the
first quarter of fiscal year 2013 was approximately US$107.4 million.

New Oriental's deferred revenue balance, which is cash collected from
registered students for courses, and recognized proportionally as revenue as
the instructions are delivered, as of August 31, 2012, was US$243.6 million,
an increase of 39.5% as compared to US$174.7 million as of August 31, 2011.

Outlook for Second quarter of Fiscal Year 2013

New Oriental expects its total net revenues in the second quarter of fiscal
year 2013 (September 1, 2012, to November 30, 2012) to be in the range of
US$165.0 million to US$171.6 million, representing year-over-year growth in
the range of 25% to 30%. This forecast reflects New Oriental's current and
preliminary view, which is subject to change.

Conference Call Information

New Oriental's management will host an earnings conference call at 8 AM on
October 29, 2012, U.S. Eastern Time (8 PM on October 29, 2012, Beijing/Hong
Kong Time).

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

U.S.:             +1-718-354-1231
Hong Kong:    +852-2475-0994
U.K.:              +44-20-3059-8139

Please dial-in 10 minutes before the call is scheduled to begin and provide
the passcode to join the call. The passcode is "New Oriental Earnings Call."

A replay of the conference call may be accessed by phone at the following
number until November 5, 2012:

International: +61-2-8235-5000
Passcode:     44081564

Additionally, a live and archived webcast of the conference call will be
available at http://investor.neworiental.org.

About New Oriental

New Oriental is the largest provider of private educational services in China
based on the number of program offerings, total student enrollments and
geographic presence. New Oriental offers a wide range of educational programs,
services and products consisting primarily of English and other foreign
language training, test preparation courses for major admissions and
assessment tests in the United States, the PRC and Commonwealth countries,
primary and secondary school education, development and distribution of
educational content, software and other technology, and online education. New
Oriental's ADSs, each of which represents one common share, currently trade on
the New York Stock Exchange under the symbol ''EDU.''

For more information about New Oriental, please visit
http://english.neworiental.org.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are
made under the "safe harbor" provisions of the U.S. 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. Among
other things, the outlook for the second quarter of fiscal year 2013 and
quotations from management in this announcement, as well as New Oriental's
strategic and operational plans, contain forward-looking statements. New
Oriental may also make written or oral forward-looking statements in its
reports filed or furnished to the U.S. Securities and Exchange Commission, in
its annual reports to shareholders, 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 New Oriental's beliefs and expectations, are forward-looking
statements. Forward-looking statements involve inherent risks and
uncertainties. A number of factors could cause actual results to differ
materially from those contained in any forward-looking statement, including
but not limited to the following: our ability to attract students without a
significant decrease in course fees; our ability to continue to hire, train
and retain qualified teachers; our ability to maintain and enhance our "New
Oriental" brand; our ability to effectively and efficiently manage the
expansion of our school network and successfully execute our growth strategy;
the outcome of ongoing, or any future, litigation or arbitration, including
those relating to copyright and other intellectual property rights;
competition in the private education sector in China; changes in our revenues
and certain cost or expense items as a percentage of our revenues; the
expected growth of the Chinese private education market; Chinese governmental
policies relating to private educational services and providers of such
services; health epidemics and other outbreaks in China; and general economic
conditions in China. Further information regarding these and other risks is
included in our annual report on Form 20-F and other documents filed with the
Securities and Exchange Commission. New Oriental does not undertake any
obligation to update any forward-looking statement, except as required under
applicable law. All information provided in this press release and in the
attachments is as of the date of this press release, and New Oriental
undertakes no duty to update such information, except as required under
applicable law.

About Non-GAAP Financial Measures

To supplement New Oriental's consolidated financial results presented in
accordance with GAAP, New Oriental uses the following measures defined as
non-GAAP financial measures by the SEC: net income excluding share-based
compensation expenses, operating income excluding share-based compensation
expenses, operating costs and expenses excluding share-based compensation
expenses, general and administrative expenses excluding share-based
compensation expenses, operating margin excluding share-based compensation
expenses, and basic and diluted net income per ADS and per share excluding
share-based compensation expenses. 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.

New Oriental believes that these non-GAAP financial measures provide
meaningful supplemental information regarding its performance and liquidity by
excluding share-based compensation expenses that may not be indicative of its
operating performance from a cash perspective. New Oriental 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 New Oriental's historical performance and liquidity.
New Oriental computes its non-GAAP financial measures using the same
consistent method from quarter to quarter. New Oriental believes 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. A limitation of using these
non-GAAP measures is that they exclude share-based compensation charge that
has been and will continue to be for the foreseeable future a significant
recurring expense in our business. 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 between GAAP financial measures that are most directly
comparable to non-GAAP financial measures.

Contacts

For investor and media inquiries, please contact:

In China:

Ms. Sisi Zhao
New Oriental Education and Technology Group Inc.
Tel:         +86-10-6260-5568
Email:     zhaosisi@xdf.cn

Mr. Nick Beswick
Beijing Brunswick Consultancy Ltd.
Tel:         +86-10-5960-8600
Email:     edu@brunswickgroup.com

In the U.S.:

Ms. Patricia Grau
Brunswick Group LLC
Tel:  +1-415-671-7676
Email:     edu@brunswickgroup.com

 

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                                                                                               As of August 31  As of May 31
                                                                                                                               2012             2012
                                                                                                                               (Unaudited)      (Unaudited)
                                                                                                                               USD              USD
ASSETS:
Current assets:
Cash and cash equivalents                                                                                                      512,460          428,261
Restricted cash                                                                                                                4,135            3,591
Term deposits                                                                                                                  74,222           50,612
Short term investment                                                                                                          303,862          321,182
Accounts receivable, net                                                                                                       4,183            3,794
Inventory                                                                                                                      20,734           20,074
Deferred tax assets-Current                                                                                                    5,662            7,316
Prepaid expenses and other current assets                                                                                      59,685           60,546
Total current assets                                                                                                           984,943          895,376
Property, plant and equipment, net                                                                                             217,608          204,342
Land use right, net                                                                                                            3,465            3,476
Amounts due from related parties                                                                                               1,195            1,449
Deferred tax assets                                                                                                            1,858            1,238
Long term deposit                                                                                                              14,111           12,819
Long term prepaid rent                                                                                                         1,903            2,205
Prepayment for an acquisition                                                                                                  3,735            3,279
Intangible assets                                                                                                              821              833
Goodwill                                                                                                                       1,804            1,798
Long term investment                                                                                                           3,002            2,002
Total assets                                                                                                                   1,234,445        1,128,817
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable (including accounts payable of the consolidated VIEs without
        recourse to New Oriental of US$ 8,943 and US$9,606 as of  May 31, 2012 and                                             9,758            8,943
        August 31,2012, respectively)
Accrued expenses and other current liabilities (including accrued expenses and
        other current liabilities of the consolidated VIEs without recourse to New                                             113,730          99,773
        Oriental of US$ 88,681 and US$101,041  as of  May 31, 2012 and August
        31, 2012, respectively)
Dividend payable (including dividend payable of the consolidated VIEs without
        recourse to New Oriental of nil and nil as of  May 31, 2012 and August                                                 50,000           50,000
        31,2012, respectively)
Income tax payable (including income tax payable of the consolidated VIEs
        without recourse to New Oriental of US$ 8,979 and US$ 19,460 as of  May 31,                                            22,533           10,012
        2012 and Auguest 31,2012, respectively)
Amounts due to related parties (including amounts due to related parties of the
        consolidated VIEs without recourse to New Oriental of  US$ 164 and US$ 88 as                                           88               164
        of  May 31, 2012 and Auguest 31,2012, respectively)
Deferred revenue (including deferred revenue of the consolidated VIEs without
        recourse to New Oriental of US$ 266,814 and US$ 241,070 as of  May 31, 2012                                            243,621          269,411
        and August 31, 2012, respectively)
Total current liabilities                                                                                                      439,730          438,303
Deferred tax liabilities (including deferred tax liablitities of the consolidated VIEs
        without recourse to New Oriental of US$ 112 and US$ 47 as of  May 31, 2012                                             101              112
        and August 31, 2012, respectively)
Total long-term liabilities                                                                                                    101              112
Total liabilities                                                                                                              439,831          438,415
Total shareholder's equity                                                                                                     794,614          690,402
Total liabilities and shareholder's equity                                                                                     1,234,445        1,128,817

 

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for per share and per ADS amounts)
                                                For the Three  Ended August 31
                                                2012             2011
                                                (Unaudited)      (Unaudited)
                                                USD              USD
Net Revenues:
Educational Programs and services               307,855          246,765
Books and others                                27,974           20,085
Total net revenues                              335,829          266,850
Operating costs and expenses (note 1):
Cost of revenues                                118,216          89,684
Selling and marketing                           39,470           28,223
General and administrative                      76,588           53,777
Total operating costs and expenses              234,274          171,684
Operating income                                101,555          95,166
Other income, net                               7,739            5,168
Provision for income taxes                      (13,035)         (9,228)
Income from continuing operations               96,259           91,106
Loss on discontinued operations, net of tax     (407)            (397)
Net income attributable to New Oriental         95,852           90,709
Education & Technology Group Inc.
Net income per share attributable to New
Oriental-Basic
Income from continuing operations               0.62             0.59
Loss on discontinued operations                 (0.00)           (0.00)
Net income per share attributable to New
Oriental-Diluted
Income from continuing operations               0.61             0.58
Loss on discontinued operations                 (0.00)           (0.00)
Net income per ADS attributable to New
Oriental-Basic (note 2)
Income from continuing operations               0.62             0.59
Loss on discontinued operations                 (0.00)           (0.00)
Net income per ADS attributable to New
Oriental-Diluted (note 2)
Income from continuing operations               0.61             0.58
Loss on discontinued operations                 (0.00)           (0.00)
Other comprehensive income, net of tax          243              8,508
Comprehensive income                            96,095           99,217
Comprehensive income attributable to New        96,095           99,217
Oriental Education & Technology Group Inc.

 

Notes:
Note 1: Share-based compensation expenses (in thousands) are included in the
operating costs and expenses as follows:
                                For the Three Months Ended Auguest 31
                                2012                        2011
                                (Unaudited)                 (Unaudited)
                                USD                         USD
Cost of revenues                -                           216
Selling and marketing           -                           -
General and administrative      6,720                       6,599
Total                           6,720                       6,815
Note 2: Each ADS represents one common shares.

 

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES
(In thousands except for per share and per ADS amounts)
                                                                                                                        For the Three Months Ended August 31
                                                                                                                        2012                 2011
                                                                                                                        (Unaudited)          (Unaudited)
                                                                                                                        USD                  USD
General and administrative expenses                                                                                     76,588               53,777
Share-based compensation expense in general and administrative expenses                                                 6,720                6,599
Non-GAAP general and administrative expenses                                                                            69,868               47,178
Total operating costs and expenses                                                                                      234,274              171,684
Share-based compensation expenses                                                                                       6,720                6,815
Disposal loss
Non-GAAP operating costs and expenses                                                                                   227,554              164,869
Operating income                                                                                                        101,555              95,166
Share-based compensation expenses                                                                                       6,720                6,815
Disposal loss
Non-GAAP operating income                                                                                               108,275              101,981
Operating margin                                                                                                        30.2%                35.7%
Non-GAAP operating margin                                                                                               32.2%                38.2%
Net income attributable to New Oriental                                                                                 95,852               90,709
Share-based compensation expense                                                                                        6,720                6,815
Disposal loss
Non-GAAP net income                                                                                                     102,572              97,524
Net income per ADS attributable to New Oriental- Basic (note 1)                                                         0.62                 0.59
Net income per ADS attributable to New Oriental- Diluted (note 1)                                                       0.61                 0.58
Non-GAAP net income per ADS attributable to New Oriental - Basic (note 1)                                               0.66                 0.63
Non-GAAP net income per ADS attributable to New Oriental - Diluted (note 1)                                             0.65                 0.62
Weighted average shares used in calculating basic net income per ADS (note 1)                                           155,577,054          154,051,990
Weighted average shares used in calculating diluted net income per ADS (note 1)                                         157,249,683          156,497,963
Non-GAAP Income per share - basic                                                                                       0.66                 0.63
Non-GAAP Income per share - diluted                                                                                     0.65                 0.62
Note 1: Each ADS represents one common shares.

 

Exhibit A
New Oriental Announces Results of Independent Investigation

BEIJING, Sept. 30, 2012 /PRNewswire/ -- New Oriental Education and Technology
Group Inc. (the "Company" or "New Oriental") (NYSE: EDU), the largest provider
of private educational services in China, today announced that the Special
Committee of the Board of Directors of the Company (the "Special Committee")
has completed its review of certain allegations raised in a report issued by
Muddy Waters on July 18, 2012 and has found no significant evidence to support
these allegations.  As previously announced, the Special Committee was formed
on July 20, 2012, and is comprised of the three independent Directors of the
Company, Mr. Denny Lee, Mr. Robin Yanhong Li, and Dr. John Zhuang Yang.  The
Special Committee retained Simpson Thacher & Bartlett LLP ("Simpson Thacher")
to assist it in conducting an independent review of certain allegations
contained in the Muddy Waters report; Simpson Thacher, in turn, has been
assisted in its efforts by Ernst & Young (China) Advisory Limited and Commerce
& Finance Law Offices.

Together with Simpson Thacher, the Special Committee focused its investigation
on the three core allegations articulated in the Muddy Waters report,
summarized as follows: (1) the allegation that some or all of the Company's
schools are actually franchises-in-disguise and thus inaccurately inflate the
Company's count of its own schools and its revenue said to be derived
therefrom; (2) the allegation that the Company's financial statements do not
accurately reflect enterprise income tax paid by the Beijing Haidian school;
and (3) the allegation that the Company's consolidation of the financial
results of the variable interest entity and its subsidiaries (collectively,
the "VIE") into its own financials is improper because the Company does not
have sufficient control over the VIE necessary for consolidation under U.S.
GAAP.  The scope of the Special Committee's investigation did not extend to
examination of various general and un-particularized allegations for which the
Muddy Waters report provided no specific detail.

‪The Special Committee's work on the "franchise" issue uncovered no
significant evidence that supports the Muddy Waters allegation mentioned
above.  The evidence collected indicates that the Company does have ownership
interests in its 55 schools and associated learning centers.  The activity
related to the 21 third parties with whom New Oriental has entered into brand
"cooperation agreements" is entirely separate, is immaterial, and in any event
is properly accounted for in the Company's financial statements.

‪The Special Committee's work on the tax issue uncovered no significant
evidence that supports the Muddy Waters allegation mentioned above.

‪The Special Committee understands that the SEC's Division of Corporation
Finance is engaged in a review of the Company's consolidation of the financial
results of the VIE into the Company's consolidated financial statements.
Accordingly, the Special Committee's work on that issue is likewise
continuing.

The Company will continue to fully cooperate with the SEC on the issue
concerning consolidation of the VIE. The Company will file a Form 12b-25 with
the SEC to request an automatic extension for the filing of the Company's
annual report on Form 20-F covering its fiscal year ended May 31, 2012, as
permitted under Rule 12b-25 under the Securities Exchange Act of 1934, as
amended. 

About New Oriental

New Oriental is the largest provider of private educational services in China
based on the number of program offerings, total student enrollments and
geographic presence. New Oriental offers a wide range of educational programs,
services and products consisting primarily of English and other foreign
language training, test preparation courses for major admissions and
assessment tests in the United States, the PRC and Commonwealth countries,
primary and secondary school education, development and distribution of
educational content, software and other technology, and online education. New
Oriental's ADSs, each of which represents one common share, currently trade on
the New York Stock Exchange under the symbol ''EDU.''

For more information about New Oriental, please visit
http://english.neworiental.org.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are
made under the "safe harbor" provisions of the U.S. 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," "confidence" and similar
statements. New Oriental may also make written or oral forward-looking
statements in its reports filed or furnished to the U.S. Securities and
Exchange Commission, in its annual reports to shareholders, 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 New Oriental's beliefs and expectations, are
forward-looking statements. Forward-looking statements involve inherent risks
and uncertainties. A number of factors could cause actual results to differ
materially from those contained in any forward-looking statement. Further
information regarding these and other risks is included in New Oriental's
annual report on Form 20-F and other documents filed with the Securities and
Exchange Commission. All information provided in this press release is as of
the date of this press release, and New Oriental undertakes no duty to update
such information, except as required under applicable law.

Contacts

For investor and media inquiries, please contact:

In China:

Ms. Sisi Zhao
New Oriental Education and Technology Group Inc.
Tel:       +86-10-6260-5568
Email:   zhaosisi@xdf.cn

Mr. Nick Beswick
Beijing Brunswick Consultancy Ltd.
Tel:       +86-10-5960 8600
Email:   edu@brunswickgroup.com

In the U.S.:

Ms. Carly Westerman
Brunswick Group LLC
Tel:       +1-212 333 3810
Email:   edu@brunswickgroup.com

SOURCE New Oriental Education and Technology Group Inc.

RELATED LINKS
http://english.neworiental.org

 

Exhibit B
New Oriental Announces Filing of Annual Report on Form 20-F for Fiscal Year
2012

BEIJING, Oct. 12, 2012 /PRNewswire/ -- New Oriental Education and Technology
Group Inc. (the "Company" or "New Oriental") (NYSE: EDU), the largest provider
of private educational services in China, today announced that it has filed
its annual report on Form 20-F for the fiscal year ended May 31, 2012 (the
"2012 Form 20-F") with the Securities and Exchange Commission (the "SEC"). The
annual report can be accessed on New Oriental's investor relations website at
investor.neworiental.org or the SEC's website at www.sec.gov. New Oriental
will provide a hard copy of the annual report containing its audited
consolidated financial statements, free of charge, to its shareholders and ADS
holders upon request.

Prior to the filing of the 2012 Form 20-F, New Oriental was informed by the
staff of the SEC's Division of Corporation Finance that, based on the
Company's representations made in response to the SEC's inquiries, the staff
has no objection to the Company's consolidation of its variable interest
entity, Beijing New Oriental Education & Technology (Group) Co., Ltd. ("New
Oriental China"), into the Company's consolidated financial statements, and
also has no objection to the Company's consolidation of its schools into New
Oriental China or into the Company's wholly-owned subsidiaries in China. The
SEC staff has indicated that it will continue to review New Oriental's
disclosure documents, including the 2012 Form 20-F.

About New Oriental

New Oriental is the largest provider of private educational services in China
based on the number of program offerings, total student enrollments and
geographic presence. New Oriental offers a wide range of educational programs,
services and products consisting primarily of English and other foreign
language training, test preparation courses for major admissions and
assessment tests in the United States, the PRC and Commonwealth countries,
primary and secondary school education, development and distribution of
educational content, software and other technology, and online education. New
Oriental's ADSs, each of which represents one common share, currently trade on
the New York Stock Exchange under the symbol ''EDU.''

For more information about New Oriental, please visit
http://english.neworiental.org.

Contacts

For investor and media inquiries, please contact:

In China:

Ms. Sisi Zhao
New Oriental Education and Technology Group Inc.
Tel:      +86-10-6260-5568
Email: zhaosisi@xdf.cn

Mr. Nick Beswick
Beijing Brunswick Consultancy Ltd.
Tel:      +86-10-5960 8600
Email: edu@brunswickgroup.com

In the U.S.:

Ms. Patricia Graue
Brunswick Group LLC
Tel:      +1-415-671-7676
Email: edu@brunswickgroup.com

SOURCE  New Oriental Education and Technology Group Inc.

RELATED LINKS
http://english.neworiental.org

SOURCE New Oriental Education and Technology Group Inc.

Website: http://english.neworiental.org
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