Unassociated Document

ChinaCast Education Reports

Second Quarter 2010 Financial Results

Beijing, August 9, 2010 -- ChinaCast Education Corporation (the “Company” or “ChinaCast”) (Nasdaq GM:CAST), a leading for-profit, post-secondary and E-learning services provider in China, today announced its financial results for the second quarter ended June 30, 2010.

Second Quarter 2010 Highlights1:

Total revenues increased 46% to $16.3 million

Gross profit increased 25% to $8.6 million; Gross profit margin was 53%

Operating income increased 22% to $6.3 million; Operating income margin was 39%

Net income increased 26% to $4.8 million; Net income margin was 29%

Diluted EPS of $0.10

Adjusted net income (non-GAAP) increased 30% to $6.3 million; Adjusted net income (non-GAAP) margin was 39%

Adjusted diluted EPS (non-GAAP) of $0.13

Adjusted EBITDA (non-GAAP) increased 33% to $9.5 million; Adjusted EBITDA margin (non-GAAP) was 58%

Cash and bank balances together with term deposits was $156.9 million. Total equity was $262.8 million.

First Half 2010 Highlights:

Total revenues increased 44% to $32.2 million

Gross profit increased 27% to $17.4 million; Gross profit margin was 54%

Operating income increased 32% to $12.4 million; Operating income margin was 39%

Net income increased 40% to $9.4 million; Net income margin was 29%

Diluted EPS of $0.20

Adjusted net income (non-GAAP) increased 35% to $12.6 million; Adjusted net income margin (non-GAAP) was 39%

Adjusted diluted EPS of $0.27

Adjusted EBITDA (non-GAAP) increased 38% to $19.0 million; Adjusted EBITDA margin (non-GAAP) was 59%

“We are pleased to report another profitable quarter of strong performance,” commented Ron Chan, Chairman and Chief Executive Officer. “We believe our team’s performance reflects the strength of our position as a leader in the PRC for-profit, post-secondary education sector and the continued strong demand and favorable market dynamics for post-secondary education services in China. We believe our momentum going into the third quarter 2010 is strong as we expect to make additional investments to further strengthen and extend our market opportunities such as our summer and international education programs on our campuses in Chongqing and Guilin, the launching of our e-learning joint venture with China University of Petroleum and the acquisition of our third accredited university, Hubei Industrial University Business College.”

Added Antonio Sena, Chief Financial Officer, “Our operating and profit margins remained quite robust as we continue to expand our business and integrate acquisitions while exercising efficient fiscal management. We’ve now reached a major milestone in the Company where the percentage of our total revenue from our traditional university business exceeds that of our e-learning business. While we had a substantial increase in share count primarily due to our capital raise in December 2009, we were able to offset this by a 26% increase in net income. Our cash and bank balances increased to $157 million at the end of the second quarter of 2010 and we intend to deploy $66 million of capital for our third university acquisition which we anticipate to close soon.”

1 See financial tables below and the GAAP to non-GAAP reconciliation attached to this press release. The US dollar figures presented in this release are derived from the corresponding RMB figures from the Company’s Form 10-Q for the period ended June 30, 2010, and are based on the historical exchange rate of US$1.0 = 6.8 RMB at June 30, 2010.

Second Quarter 2010 Financial Results

ChinaCast is organized into two business segments: the Traditional University Group (“TUG”), offering accredited bachelor and diploma degree programs to students from the Foreign Trade and Business College (“FTBC”) campus in Chongqing, and the Lijiang College (“LJC”) campus in Guilin; and the E-Learning Group (“ELG”), encompassing the Company's E-learning education service businesses.

Total Revenues – Total revenues for the quarter increased 46% to $16.3 million from $11.1 million in the second quarter of 2009. TUG revenue for the quarter increased 120% to $9.3 million from $4.2 million in the second quarter of 2009, primarily due to the acquisition of LJC in December 2009 and an increase in the number of post-secondary students at FTBC. Thus, TUG revenue for the quarter as a percentage of total revenue increased to 57% compared to 38% in the second quarter of 2009. ELG revenue for the quarter remained flat year-over-year at $7.0 million primarily due to a decrease in equipment sales. The Company also reports revenue by service and equipment revenue. Service revenue for the quarter increased 48% to $16.3 million from $11.0 million in the second quarter of 2009, while equipment revenue decreased 100% to $0 from $0.1 million in the second quarter of 2009.

Cost of Sales – Cost of sales for the quarter increased 80% to $7.7 million from $4.3 million in the second quarter of 2009 due to the acquisition of LJC in the fourth quarter of 2009.

Gross Profit and Gross Margin – Gross profit for the quarter increased 25% to $8.6 million from $6.9 million in the second quarter of 2009. Gross profit margin for the quarter was 53% compared to 62% in the second quarter of 2009 primarily due to the increase in percentage of total revenue attributed to the TUG business which has a lower gross margin than the ELG business.

Share Based Compensation – Share based compensation for the quarter decreased 45% to $0.3 million from $0.5 million in the second quarter of 2009 primarily due to the stock options issued to management in 2007 which became fully vested at the end of the first quarter of 2010.

Amortization of Acquired Intangible Assets – Amortization of acquired intangible assets for the quarter increased 111% to $1.3 million from $0.6 million in the second quarter of 2009 due to the acquisition of LJC in the fourth quarter of 2009.

Operating Expenses – Operating expenses for the quarter increased 34% to $2.3 million from $1.7 million in the second quarter of 2009 primarily due to the acquisition of LJC in the fourth quarter of 2009.

Operating Income and Operating Income Margin – Operating income for the quarter increased 22% to $6.3 million from $5.2 million in the second quarter of 2009. Operating income margin for the quarter was 39% compared to 47% in the second quarter of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower operating income margin than the ELG business.

Net Income and Net Income Margin – Net income attributable to the Company for the quarter increased 26% to $4.8 million from $3.8 million in the second quarter of 2009. Net income margin for the quarter was 29% compared to 34% in the second quarter of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower net income margin than the ELG business.

Diluted EPS - Diluted earnings per share for the quarter were $0.10 compared to $0.11 in the second quarter of 2009 primarily due to a year-over-year increase in shares used in the computation. The weighted average number of shares used in the computation was 47,454,800 for the second quarter of 2010 and 35,802,327 for the second quarter of 2009. The increase in the diluted share count is primarily due to the capital raise in June 2010 related to the future acquisition of the third accredited university, Hubei Industrial University Business College (“HIUBC”).

Adjusted Net Income and Adjusted Net Income Margin - Adjusted net income excluding share based compensation and amortization of acquired intangible assets (non-GAAP) for the quarter increased 30% to $6.3 million from $4.9 million in the second quarter of 2009. Adjusted net income margin (non-GAAP) for the quarter was 39% compared to 44% in the second quarter of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower net income margin than the ELG business.

Adjusted Diluted EPS - Adjusted diluted earnings per share excluding share based compensation expenses and amortization of acquired intangible assets (non-GAAP) for the quarter were $0.13 compared to $0.14 in the second quarter of 2009 primarily due to a year-over-year increase in shares used in the computation. The increase in the diluted share count is primarily due to the capital raise in December 2009 for the acquisition of the third university.

Adjusted EBITDA and Adjusted EBITDA Margin – Adjusted EBITDA (non-GAAP) for the quarter increased 33% to $9.5 million from $7.1 million in the second quarter of 2009. Adjusted EBITDA margin (non-GAAP) for the quarter was 58% compared to 64% in the second quarter of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower adjusted EBITDA margin (non-GAAP) than the ELG business.

Cash and Bank Balances together with Term Deposits - Cash and bank balances together with term deposits was $156.9 million as of June 30, 2010. Total equity was $262.8 million.

First Half 2009 Financial Results

Total Revenues – Total revenues for the first half increased 44% to $32.2 million from $22.4 million in the first half of 2009. TUG revenue for the first half increased 114% to $18.4 million from $8.6 million in the first half of 2009, primarily due to acquisition of LJC in the fourth quarter of 2009 and an increase in the number of students at FTBC. Thus, TUG revenue for the first half as a percentage of total revenue increased to 57% compared to 38% in the first half of 2009. ELG revenue for the first half remained flat at $13.8 million primarily due to a decrease in equipment sales. Service revenue for the first half increased 48% to $32.2 million from $21.8 million in the first half of 2009, while equipment revenue decreased 99% to $0.005 million from $0.6 million in the first half of 2009.

Cost of Sales – Cost of sales for the first half increased 70% to $14.8 million from $8.7 million in the first half of 2009 primarily due to the acquisition of LJC in the fourth quarter of 2009.

Gross Profit and Gross Margin – Gross profit for the first half increased 27% to $17.4 million from $13.7 million in the first half of 2009. Gross profit margin for the first half was 54% compared to 61% in the first half of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower gross margin than the ELG business.

Share Based Compensation – Share based compensation for the first half decreased 53% to $0.7 million from $1.4 million in the first half of 2009 primarily due to the stock options issued to management in 2007 which became fully vested at the end of the first quarter of 2010.

Amortization of Acquired Intangible Assets – Amortization of acquired intangible assets for the first half increased 111% to $2.5 million from $1.3 million in the first half of 2009 due to the acquisition of LJC in the fourth quarter of 2009.

Operating Expenses – Operating expenses for the first half increased 17% to $5.0 million from $4.3 million in the first half of 2009 primarily due to the acquisition of LJC in the fourth quarter of 2009.

Operating Income and Operating Income Margin – Operating income for the first half increased 32% to $12.4 million from $9.4 million in the first half of 2009. Operating income margin for the first half was 39% compared to 42% in the first half of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower operating income margin than the ELG business.

Net Income and Net Income Margin – Net income attributable to the Company for the first half increased 40% to $9.4 million from $6.7 million in the first half of 2009. Net income margin for the first half was 29% compared to 30% in the first half of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower net income margin than the ELG business.

Diluted EPS - Diluted earnings per share for the first half were $0.20 compared to $0.19 in the first half of 2009 primarily due to a year-over-year increase in shares used in the computation. The weighted average number of shares used in the computation was 46,880,355 for the first half of 2010 and 35,725,311 for the first half of 2009. The increase in the diluted share count is primarily due to the capital raise in December 2009 for the acquisition of HIUBC.

Adjusted Net Income and Adjusted Net Income Margin - Adjusted net income excluding share based compensation expenses and amortization of acquired intangible assets (non-GAAP) for the first half increased 35% to $12.6 million from $9.3 million in the first half of 2009. Adjusted net income margin excluding share based compensation expenses and amortization of acquired intangible assets (non-GAAP) for the first half was 39% compared to 42% in the first half of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower net income margin than the ELG business.

Adjusted Diluted EPS - Adjusted diluted earnings per share excluding share based compensation expenses and amortization of acquired intangible assets (non-GAAP) for the first half were $0.27 compared to $0.26 primarily due to a year-over-year increase in shares used in the computation. The increase in the diluted share count is primarily due to the capital raise in December 2009 for the acquisition of the third university.

Adjusted EBITDA and Adjusted EBITDA Margin – Adjusted EBITDA (non-GAAP) for the first half increased 38% to $19.0 million from $13.8 million in the first half of 2009. Adjusted EBITDA margin (non-GAAP) for the first half was 59% compared to 62% in the first half of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower adjusted EBITDA margin (non-GAAP) than the ELG business.

Financial Outlook for 2010

For the full year ending December 31, 2010, the Company reaffirmed the following previously provided guidance:

Total net revenue will be between $78 million to $80 million (a year-on-year increase of 53% to 57%)

Adjusted net income excluding share based compensation, amortization of intangibles, gain on disposal of property and equipment, and impairment expenses (non-GAAP) will be between $25 million to $27 million (a year-on-year increase of 34% to 44%)

Adjusted EBITDA excluding share based compensation (non-GAAP) will be between $45 million to $47 million (a year-on-year increase of 58% to 65%)

This is the Company’s current and preliminary view, which is subject to change.

Conference Call Information

ChinaCast’s management team will host an earnings conference call at 8:30 am ET, Tuesday, August 10, 2010. The dial-in details for the earnings conference call are as follows:

Earnings Call Telephone Numbers:

US/Canada Toll Free: +1-877-303-9226

International: +1-760-666-3566

A replay of the earnings conference call will be available at the following numbers:

Replay Telephone Numbers:

US/Canada Toll Free: +1-800-642-1687

International: +1-706-645-9291

Replay Pass Code: 90627901

The replay will be available starting at 11:30 am ET, Tuesday, August 10, 2010, through 11:59 pm ET, Tuesday, August 24, 2010.

Additionally, a live and archived version of the earnings call will be available at www.chinacasteducation.com. Please access the website approximately 10 minutes prior to the start time in order to download and install any necessary software.

About ChinaCast Education Corporation

Established in 1999, ChinaCast Education Corporation is a leading for-profit, post-secondary education and e-learning services provider in China. The Company provides post-secondary degree and diploma programs through its two universities in China: The Foreign Trade and Business College of Chongqing Normal University and the Lijiang College of Guangxi Normal University. These universities offer fully accredited, career-oriented bachelor's degree and diploma programs in business, economics, law, IT/computer engineering, hospitality and tourism management, advertising, language studies, art and music. The Company provides its e-learning services to post-secondary institutions, K-12 schools, government agencies and corporate enterprises via its nationwide satellite/fiber broadband network. These services include interactive distance learning applications, multimedia education content delivery, English language training and vocational training courses. The company is listed on the NASDAQ with the ticker symbol CAST.

Safe Harbor Statement

This press release may contain statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of management's plans and objectives, future contracts, and forecasts of trends and other matters. These projections, expectations and trends are dependent on certain risks and uncertainties including such factors, among others, as growth in demand for education services, smooth and timely implementation of new training centers and other risk factors listed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as ``anticipate'', ``estimate'', ``expect'', ``believe,'' ``will likely result,'' ``outlook,'' ``project'' and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: adjusted net income, adjusted net-income margin, adjusted EPS (basic and diluted), adjusted EBITDA and adjusted EBITDA margin. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, 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 results of operations measures to the nearest comparable GAAP measures” included at the end of this release.

We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results.” These non-GAAP financial measures exclude from our operating performance not only non-cash charges, such as stock-based compensation, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

Contact:

ChinaCast Education

Michael Santos, President-International

+1-202-361-3403

mjsantos@chinacasteducation.com

HC International

Ted Haberfield, Executive Vice President

+1-760-755-2716

thaberfield@hcinternational.net

CHINACAST EDUCATION CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except share-related data)

					As of
	As of June 30,				December 31,
	2010		2010		2009
	US$		RMB		RMB
	(Note 1)				(Note 1)
Assets
Current assets:
Cash and cash equivalents		76,034		517,034		327,628
Term deposits		80,882		550,000		507,000
Accounts receivable		7,050		47,942		53,828
Inventory		212		1,440		1,386
Prepaid expenses and other current assets		3,127		21,263		19,212
Amounts due from related parties		506		3,438		6,388
Deferred tax assets		59		404		1,010
Current portion of prepaid lease payments for land use rights		477		3,246		3,246
Total current assets		168,347		1,144,767		919,698
Non-current deposits		1,929		13,115		14,550
Property and equipment, net		75,821		515,579		516,938
Prepaid lease payments for land use rights - non-current		21,058		143,191		144,818
Acquired intangible assets, net		7,949		54,051		71,286
Long-term investments		447		3,041		3,101
Non-current advances to related party		14,659		99,682		99,727
Goodwill		74,081		503,753		503,771
Total assets		364,291		2,477,179		2,273,889

Liabilities and equity
Current liabilities:
Accounts payable (including accounts payable of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB718 and RMB719 as of June 30, 2010 and December 31, 2009, respectively)	2,926		19,898		16,061
Accrued expenses and other current liabilities (including accrued expenses and other liabilities of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB16,553 and RMB16,740 as of June 30, 2010 and December 31, 2009, respectively)	28,363		192,868		215,631
Deferred revenues	5,927		40,302		156,645
Income taxes payable (including income taxes payable of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB3,560 and RMB2,293 as of June 30, 2010 and December 31, 2009, respectively)	12,022		81,753		68,731
Current portion of long-term bank borrowings	9,706		66,000		104,400
Current portion of capital lease obligation	188		1,279		1,323
Other borrowings	2,206		15,000		200
Total current liabilities	61,338		417,100		562,991
Non-current liabilities:
Long-term bank borrowings	25,588		174,000		134,000
Deferred tax liabilities – non-current	4,157		28,270		30,923
Unrecognized tax benefits – non-current (including unrecognized tax benefits of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB5,526 and RMB5,257 as of June 30, 2010 and December 31, 2009, respectively)	10,372		70,527		62,457
Total non-current liabilities	40,117		272,797		227,380

Total liabilities	101,455		689,897		790,371
Commitments and contingencies (Note 14)
Equity:
Ordinary shares (US$0.0001 par value; 100,000,000 shares authorized; 49,778,952 and 45,170,698 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively)	5		36		33
Additional paid-in capital	224,741		1,528,238		1,290,651
Statutory reserve	5,756		39,139		39,139
Accumulated other comprehensive loss	(647	)	(4,399	)	(6,055	)
Retained earnings	29,453		200,281		136,583

Total ChinaCast Education Corporation shareholders’ equity	259,308		1,763,295		1,460,351
Noncontrolling interest	3,528		23,987		23,167

Total equity	262,836		1,787,282		1,483,518

Total liabilities and equity	364,291		2,477,179		2,273,889

See notes to unaudited condensed consolidated financial statements.

CHINACAST EDUCATION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)

(In thousands, except share-related data)

	For the three months ended June 30,									For the six months ended June 30
	2010			2010			2009			2010			2010			2009
	US$			RMB			RMB			US$			RMB			RMB
	(Note 1)						(Note 1)			(Note 1)						(Note 1)
Revenues:
Service		16,270			110,645			74,461			32,202			218,975			148,102
Equipment		-			-			1,293			5			31			4,169

		16,270			110,645			75,754			32,207			219,006			152,271

Cost of revenues:
Service		(7,667	)		(52,136	)		(27,644	)		(14,759	)		(100,355	)		(55,011	)
Equipment		-			-			(1,288	)		-			-			(4,126	)

		(7,667	)		(52,136	)		(28,932	)		(14,759	)		(100,355	)		(59,137	)

Gross profit		8,603			58,509			46,822			17,448			118,651			93,134

Operating (expenses) income:

Selling and marketing expenses (including share-based compensation of RMB nil and RMB266 for the three months ended June 30 for 2010 and 2009, respectively, share-based compensation of RMB410 and RMB1,106 for the six months ended June 30 for 2010 and 2009, respectively)		(74	)		(503	)		(793	)		(192	)		(1,308	)		(2,543	)
General and administrative expenses (including share-based compensation of RMB1,712 and RMB2,868 for the three months ended June 30 for 2010 and 2009, respectively, share-based compensation of RMB4,192 and RMB8,606 for the six months ended June 30 for 2010 and 2009, respectively)		(2,195	)		(14,925	)		(13,013	)		(4,787	)		(32,552	)		(30,639	)

Foreign exchange gain (loss)		(37	)		(250	)		(53	)		(81	)		(553	)		116
Management service fee		-			-			2,329			-			-			3,296
Other operating income		30			207			2			31			214			507

Total operating expenses, net		(2,276	)		(15,471	)		(11,528	)		(5,029	)		(34,199	)		(29,263	)

Income from operations	6,327		43,038		35,294		12,419		84,452		63,871
Interest income	521		3,534		2,476		954		6,488		4,788
Interest expense	(529	)	(3,594	)	(1,717	)	(965	)	(6,565	)	(3,170	)
Income before provision for income taxes and earnings in equity method investments	6,319		42,978		36,053		12,408		84,375		65,489
Provision for income taxes	(1,461	)	(9,938	)	(7,146	)	(2,904	)	(19,749	)	(13,471	)
Net income before earnings in equity investments	4,858		33,040		28,907		9,504		64,626		52,018
Loss in equity investments	(4	)	(30	)	(311	)	(9	)	(60	)	(577	)
Income from continuing operation, net of tax	4,854		33,010		28,596		9,495		64,566		51,441
Discontinued operations
Loss from discontinued operations, net of taxes of RMB nil for the three months and six months ended June 30 for 2010 and 2009:	-		-		(449	)	-		-		(1,053	)
Net income	4,854		33,010		28,147		9,495		64,566		50,388
Less: Net income attributable to noncontrolling interest	(64	)	(434	)	(2,350	)	(128	)	(868	)	(4,909	)
Net income attributable to ChinaCast Education Corporation	4,790		32,576		25,797		9,367		63,698		45,479
Net income	4,854		33,010		28,147		9,495		64,566		50,388
Foreign currency translation adjustments	212		1,442		62		244		1,656		(740	)
Comprehensive income	5,066		34,452		28,209		9,738		66,222		49,648
Comprehensive income attributable to noncontrolling interest	(63	)	(448	)	(2,352	)	(127	)	(868	)	(4,905	)
Comprehensive income attributable to ChinaCast Education Corporation	5,003		34,004		25,857		9,612		65,354		44,743

Net income per share
Net income attributable to ChinaCast Education Corporation per share:
Basic	0.10		0.69		0.72		0.20		1.37		1.28

Diluted	0.10		0.69		0.72		0.20		1.36		1.27

Weighted average shares used in computation:
Basic	47,250,261		47,250,261		35,656,163		46,606,070		46,606,070		35,652,229

Diluted	47,454,800		47,454,800		35,802,327		46,880,355		46,880,355		35,725,311

Amount attributable to ChinaCast Education Corporation:
Income from continuing operation, net of tax	4,790		32,576		26,246		9,367		63,698		46,532
Discontinued operations, net of tax	-		-		(449	)	-		-		(1,053	)
Net income attributable to ChinaCast Education Corporation	4,790		32,576		25,797		9,367		63,698		45,479

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	For the six months ended June 30,
	2010			2010			2009
	US$			RMB			RMB
	(Note 1)						(Note 1)
Cash flows from operating activities:
Net income		9,495			64,566			50,388
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,118			21,204			11,704
Amortization of acquired intangible assets		2,535			17,235			8,181
Amortization of land use rights		239			1,627			1,308
Share-based compensation		676			4,600			9,712
Loss on disposal of property, plant and equipment		-			1			3
Loss in equity investments		9			60			577
Changes in assets and liabilities:
Accounts receivable		842			5,722			(13,824	)
Inventory		(8	)		(54	)		10
Prepaid expenses and other current assets		(302	)		(2,054	)		1,410
Non-current deposits		652			4,434			(364	)
Amounts due from related parties		434			2,950			600
Accounts payable		566			3,852			2,308
Accrued expenses and other current liabilities		(280	)		(1,903	)		6,256
Deferred revenues		(17,109	)		(116,343	)		(61,280	)
Amount due to related party		-			-			(27	)
Income taxes payable		1,915			13,022			9,145
Deferred tax assets		89			606			-
Deferred tax liabilities		(390	)		(2,653	)		(1,252	)
Unrecognized tax benefits		1,187			8,070			3,764
Net cash provided by operating activities		3,668			24,942			28,619
Cash flows from investing activities:
Advance to related party		-			-			(20,000	)
Repayment from advance to related party		7			45			29,392
Purchase of property and equipment		(5,743	)		(39,051	)		(25,142	)
Term deposits		(6,324	)		(43,000	)		(137,700	)
Deposits for investments		(441	)		(3,000	)		-
Net cash used in investing activities		(12,501	)		(85,006	)		(153,450	)

Cash flows from financing activities:
Other borrowings raised	12,059		82,000		10,350
Other borrowings raised from related party	-		-		500
Repayment of other borrowings	(9,882	)	(67,200	)	(517	)
Bank borrowings raised	11,764		80,000		30,000
Bank borrowings repaid	(11,530	)	(78,400	)	(3,000	)
Repayment of capital lease obligation	(6	)	(44	)	20
Proceeds from issuance of shares, net of issuance costs	34,263		232,990		-
Net cash provided by financing activities	36,668		249,346		37,353
Effect of foreign exchange rate changes	18		124		(1	)
Net increase(decrease) in cash and cash equivalents	27,853		189,406		(87,479	)
Cash and cash equivalents at beginning of the period	48,181		327,628		220,131

Cash and cash equivalents at end of the period	76,034		517,034		132,652

ChinaCast Education Second Quarter and First Half FY2010

Reconciliations of Non-GAAP Results of Operations Measures to the Nearest Comparable GAAP Measures

							YoY
	3 months ended			3 months ended			%change
	30/6/2010			30/6/2009				+/	(-)
	US$'000			US$'000
Adjusted Net Income (Non-GAAP)
Net income attributable to ChinaCast Education Corporation		4,790			3,793			26.29
Share-based Compensation		251			461			(45.55	)
Amortization of Acquired Intangible Assets		1,268			601			110.98
Adjusted Net Income (non-GAAP)		6,309			4,855			29.95
Adjusted Net Margin (non-GAAP)		38.8	%		43.6	%
Adjusted Diluted EPS (Non-GAAP)		0.13			0.14			(7.14	)


Adjusted EBITDA (Non-GAAP)
Net income attributable to ChinaCast Education Corporation		4,790			3,793			26.29
Depreciation		1,508			836			80.38
Amortization of Acquired Intangible Assets		1,268			601			110.98
Amortization of Land Use Rights		119			97			22.68
Share-based Compensation		251			461			(45.55	)
Interest Income		(521	)		(364	)		42.86
Interest Expense		529			252			109.92
Provision for income taxes		1,461			1,051			39.01
Earnings in equity investments		4			46			(91.30	)
Net income attributable to noncontrolling interest		64			347			(81.50	)
Adjusted EBITDA(non-GAAP)		9,473			7,120			33.05
Adjusted EBITDA Margin (non-GAAP)		58.2	%		63.9	%

							YoY
	6 months ended			6 months ended			%change
	30/6/2010			30/6/2009				+/	(-)
	US$'000			US$'000
Adjusted Net Income (Non-GAAP)
Net income attributable to ChinaCast Education Corporation		9,367			6,688			40.06
Share-based Compensation		676			1,428			(52.66	)
Amortization of Acquired Intangible Assets		2,535			1,203			110.72
Adjusted Net Income (non-GAAP)		12,578			9,319			34.97
Adjusted Net Margin (non-GAAP)		39.1	%		41.6	%
Adjusted Diluted EPS (Non-GAAP)		0.27			0.26			1.88


Adjusted EBITDA (Non-GAAP)
Net income attributable to ChinaCast Education Corporation		9,367			6,688			40.06
Depreciation		3,118			1,721			81.17
Amortization of Acquired Intangible Assets		2,535			1,203			110.72
Amortization of Land Use Rights		239			192			24.48
Share-based Compensation		676			1,428			(52.66	)
Interest Income		(954	)		(704	)		35.51
Interest Expense		965			466			107.08
Provision for income taxes		2,904			1,981			46.59
Earnings in equity investments		9			85			(89.41	)
Net income attributable to noncontrolling interest		127			722			(82.41	)
Adjusted EBITDA(non-GAAP)		18,986			13,782			37.76
Adjusted EBITDA Margin (non-GAAP)		59.0	%		61.5	%