|
þ
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
¨
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Delaware
|
20-0178991
|
|
(State or Other Jurisdiction of
|
(I.R.S. Employer Identification Number)
|
|
Incorporation or Organization)
|
Large accelerated filer ¨
|
Accelerated filer þ
|
Non-accelerated filer ¨
|
Smaller reporting
|
|||
(Do not check if a smaller reporting
|
company ¨
|
|||||
company)
|
Page
|
||
PART I — FINANCIAL INFORMATION
|
3
|
|
Item 1. Financial Statements (Unaudited)
|
3
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
29
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
35
|
|
Item 4. Controls and Procedures
|
36
|
|
PART II — OTHER INFORMATION
|
37
|
|
Item 1. Legal Proceedings
|
37
|
|
Item 1A. Risk Factors
|
37
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
37
|
|
Item 3. Defaults Upon Senior Securities
|
37
|
|
Item 4. (Removed and Reserved)
|
37
|
|
Item 5. Other Information
|
37
|
|
Item 6. Exhibits
|
37
|
|
SIGNATURES
|
38
|
|
EXHIBIT INDEX
|
As of
|
||||||||||||
As of September 30,
|
December 31,
|
|||||||||||
2011
|
2011
|
2010
|
||||||||||
US$
|
RMB
|
RMB
|
||||||||||
(Note 1)
|
(Note 1)
|
|||||||||||
Assets
|
||||||||||||
Current assets:
|
||||||||||||
Cash and cash equivalents
|
75,359
|
482,300
|
244,403
|
|||||||||
Term deposits
|
94,531
|
605,000
|
704,000
|
|||||||||
Accounts receivable
|
8,297
|
53,098
|
59,420
|
|||||||||
Inventory
|
149
|
955
|
993
|
|||||||||
Prepaid expenses and other current assets
|
4,484
|
28,698
|
48,221
|
|||||||||
Amounts due from related parties
|
537
|
3,438
|
3,438
|
|||||||||
Deferred tax assets
|
264
|
1,688
|
2,972
|
|||||||||
Current portion of prepaid lease payments for land use rights
|
640
|
4,097
|
3,986
|
|||||||||
Total current assets
|
184,261
|
1,179,274
|
1,067,433
|
|||||||||
Non-current deposits
|
6,680
|
42,752
|
7,388
|
|||||||||
Prepayment for construction projects
|
6,797
|
43,502
|
-
|
|||||||||
Property and equipment, net
|
115,288
|
737,846
|
763,926
|
|||||||||
Prepaid lease payments for land use rights - non-current
|
27,244
|
174,361
|
177,544
|
|||||||||
Acquired intangible assets, net
|
10,142
|
64,909
|
100,816
|
|||||||||
Long-term investments
|
469
|
3,000
|
3,000
|
|||||||||
Goodwill
|
120,932
|
773,967
|
774,083
|
|||||||||
Total assets
|
471,813
|
3,019,611
|
2,894,190
|
As of
|
||||||||||||
As of September 30,
|
December 31,
|
|||||||||||
2011
|
2011
|
2010
|
||||||||||
US$
|
RMB
|
RMB
|
||||||||||
(Note 1)
|
(Note 1)
|
|||||||||||
Current liabilities:
|
||||||||||||
Accounts payable (including accounts payable of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB682 and RMB1,635 as of September 30, 2011 and December 31, 2010, respectively)
|
7,350
|
47,042
|
48,602
|
|||||||||
Accrued expenses and other current liabilities (including accrued expenses and other liabilities of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB17,209 and RMB17,462 as of September 30, 2011 and December 31, 2010, respectively)
|
30,627
|
196,023
|
270,703
|
|||||||||
Deferred revenues
|
54,876
|
351,208
|
262,824
|
|||||||||
Income taxes payable (including income taxes payable of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB4,294 and RMB4,844 as of September 30, 2011 and December 31, 2010, respectively)
|
18,000
|
115,198
|
99,461
|
|||||||||
Current portion of long-term bank borrowings (including current portion of long-term bank borrowings of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of September 30, 2011 and December 31, 2010)
|
29,813
|
190,800
|
170,000
|
|||||||||
Other borrowings(including other borrowings of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of September 30, 2011 and December 31, 2010)
|
-
|
-
|
1,500
|
|||||||||
Total current liabilities
|
140,666
|
900,271
|
853,090
|
|||||||||
Non-current liabilities: | ||||||||||||
Long-term deposit received
|
1,506
|
9,636
|
9,270
|
|||||||||
Long-term bank borrowings (including long-term bank Borrowings of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of September 30, 2011 and December 31, 2010)
|
10,938
|
70,000
|
90,000
|
|||||||||
Deferred tax liabilities – non-current (including deferred tax liabilities – non-current of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of September 30, 2011 and December 31, 2010)
|
7,264
|
46,491
|
51,503
|
|||||||||
Unrecognized tax benefits – non-current (including unrecognized tax benefits of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB6,205 and RMB5,799 as of September 30, 2011 and December 31, 2010, respectively)
|
19,241
|
123,142
|
109,933
|
|||||||||
Total non-current liabilities
|
38,949
|
249,269
|
260,706
|
|||||||||
Total liabilities
|
179,615
|
1,149,540
|
1,113,796
|
|||||||||
Commitments and contingencies
|
||||||||||||
Equity:
|
||||||||||||
Preferred stock (US$0.0001 par value; 500,000 shares authorized; none issued or outstanding)
|
-
|
-
|
-
|
|||||||||
Ordinary shares (US$0.0001 par value; 100,000,000 shares authorized; 49,020,291 and 49,778,952 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively)
|
6
|
36
|
36
|
|||||||||
Additional paid-in capital
|
232,351
|
1,487,047
|
1,510,527
|
|||||||||
Statutory reserve
|
7,443
|
47,634
|
47,671
|
|||||||||
Accumulated other comprehensive loss
|
(360
|
)
|
(2,295
|
)
|
(3,194
|
)
|
||||||
Retained earnings
|
51,632
|
330,443
|
199,862
|
|||||||||
Total ChinaCast Education Corporation shareholders’ equity
|
291,072
|
1,862,865
|
1,754,902
|
|||||||||
Noncontrolling interest
|
1,126
|
7,206
|
25,492
|
|||||||||
Total equity
|
292,198
|
1,870,071
|
1,780,394
|
|||||||||
Total liabilities and equity
|
471,813
|
3,019,611
|
2,894,190
|
For the three months ended September 30,
|
For the nine months ended September 30,
|
|||||||||||||||||||||||
2011
|
2011
|
2010
|
2011
|
2011
|
2010
|
|||||||||||||||||||
US$
|
RMB
|
RMB
|
US$
|
RMB
|
RMB
|
|||||||||||||||||||
(Note 1)
|
(Note 1)
|
(Note 1)
|
(Note 1)
|
|||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
Service
|
23,708 | 151,732 | 122,195 | 70,197 | 449,262 | 341,170 | ||||||||||||||||||
Equipment
|
1,915 | 12,256 | 2,924 | 4,555 | 29,153 | 2,955 | ||||||||||||||||||
25,623 | 163,988 | 125,119 | 74,752 | 478,415 | 344,125 | |||||||||||||||||||
Cost of revenues:
|
||||||||||||||||||||||||
Service
|
(11,645 | ) | (74,527 | ) | (61,358 | ) | (33,552 | ) | (214,731 | ) | (161,713 | ) | ||||||||||||
Equipment
|
(1,914 | ) | (12,251 | ) | (2,832 | ) | (4,535 | ) | (29,022 | ) | (2,832 | ) | ||||||||||||
(13,559 | ) | (86,778 | ) | (64,190 | ) | (38,087 | ) | (243,753 | ) | (164,545 | ) | |||||||||||||
Gross profit
|
12,064 | 77,210 | 60,929 | 36,665 | 234,662 | 179,580 | ||||||||||||||||||
Operating (expenses) income:
|
||||||||||||||||||||||||
Selling and marketing expenses (including share-based compensation of nil for the three months ended September 30 for 2011 and 2010, share-based compensation of nil and RMB410 for the nine months ended September 30 for 2011 and 2010, respectively)
|
(44 | ) | (281 | ) | (394 | ) | (156 | ) | (1,000 | ) | (1,702 | ) | ||||||||||||
General and administrative expenses (including share-based compensation of RMB1,974 and RMB1,922 for the three months ended September 30 for 2011 and 2010, respectively, share-based compensation of RMB7,289 and RMB6,114 for the nine months ended September 30 for 2011 and 2010, respectively)
|
(3,827 | ) | (24,494 | ) | (19,739 | ) | (12,266 | ) | (78,505 | ) | (52,291 | ) | ||||||||||||
Foreign exchange loss
|
(61 | ) | (393 | ) | (4 | ) | (154 | ) | (988 | ) | (557 | ) | ||||||||||||
Gain from change in contingent consideration
|
1,344 | 8,601 | 9,467 | 1,344 | 8,601 | 9,467 | ||||||||||||||||||
Other operating income
|
44 | 280 | (34 | ) | 62 | 398 | 180 | |||||||||||||||||
Total operating expenses, net
|
(2,544 | ) | (16,287 | ) | (10,704 | ) | (11,170 | ) | (71,494 | ) | (44,903 | ) |
For the three months ended September 30,
|
For the nine months ended September 30,
|
|||||||||||||||||||||||
2011
|
2011
|
2010
|
2011
|
2011
|
2010
|
|||||||||||||||||||
US$
|
RMB
|
RMB
|
US$
|
RMB
|
RMB
|
|||||||||||||||||||
(Note 1)
|
(Note 1)
|
(Note 1)
|
(Note 1)
|
|||||||||||||||||||||
Income from operations
|
9,520
|
60,923
|
50,225
|
25,495
|
163,168
|
134,677
|
||||||||||||||||||
Interest income
|
673
|
4,306
|
3,650
|
1,943
|
12,437
|
10,138
|
||||||||||||||||||
Interest expense
|
(777
|
)
|
(4,974
|
)
|
(4,058
|
)
|
(1,988
|
)
|
(12,723
|
)
|
(10,623
|
)
|
||||||||||||
Income before provision for income taxes and earnings in equity method investments
|
9,416
|
60,255
|
49,817
|
25,450
|
162,882
|
134,192
|
||||||||||||||||||
Provision for income taxes
|
(1,454
|
)
|
(9,306
|
)
|
(7,791
|
)
|
(4,950
|
)
|
(31,679
|
)
|
(27,540
|
)
|
||||||||||||
Net income before earnings in equity investments
|
7,962
|
50,949
|
42,026
|
20,500
|
131,203
|
106,652
|
||||||||||||||||||
Loss in equity investments
|
-
|
-
|
(26
|
)
|
-
|
-
|
(86
|
)
|
||||||||||||||||
Income from continuing operation, net of tax
|
7,962
|
50,949
|
42,000
|
20,500
|
131,203
|
106,566
|
||||||||||||||||||
Discontinued operations
|
||||||||||||||||||||||||
Loss from discontinued operations, net of taxes of nil for the three months and nine months ended September 30 for 2011 and 2010:
|
(110
|
)
|
(701
|
)
|
100
|
(265
|
)
|
(1,694
|
)
|
100
|
||||||||||||||
Gain from disposal of discontinued operations
|
268
|
1,716
|
-
|
268
|
1,716
|
-
|
||||||||||||||||||
Net income
|
8,120
|
51,964
|
42,100
|
20,503
|
131,225
|
106,666
|
||||||||||||||||||
Less: Net income attributable to noncontrolling interest
|
(39
|
)
|
(248
|
)
|
(559
|
)
|
(101
|
)
|
(644
|
)
|
(1,427
|
)
|
||||||||||||
Net income attributable to ChinaCast Education Corporation
|
8,081
|
51,716
|
41,541
|
20,402
|
130,581
|
105,239
|
||||||||||||||||||
Net income
|
8,120
|
51,964
|
42,100
|
20,503
|
131,225
|
106,666
|
||||||||||||||||||
Foreign currency translation adjustments
|
75
|
477
|
338
|
141
|
899
|
1,994
|
||||||||||||||||||
Comprehensive income
|
8,195
|
52,441
|
42,438
|
20,644
|
132,124
|
108,660
|
||||||||||||||||||
Comprehensive income attributable to noncontrolling interest
|
(2,792
|
)
|
(17,869
|
)
|
(510
|
)
|
(2,857
|
)
|
(18,286
|
)
|
(1,377
|
)
|
||||||||||||
Comprehensive income attributable to ChinaCast Education Corporation
|
5,403
|
34,572
|
41,928
|
17,787
|
113,838
|
107,283
|
||||||||||||||||||
Net income per share
|
||||||||||||||||||||||||
Income from continuing operations attributable to ChinaCast Education Corporation per share:
|
||||||||||||||||||||||||
Basic
|
0.16 | 1.03 | 0.83 | 0.41 | 2.63 | 2.21 | ||||||||||||||||||
Diluted
|
0.16 | 1.01 | 0.82 | 0.41 | 2.60 | 2.18 | ||||||||||||||||||
Income from discontinued operations attributable to ChinaCast Education Corporation per share:
|
||||||||||||||||||||||||
Basic
|
- | 0.03 | - | - | 0.01 | - | ||||||||||||||||||
Diluted
|
- | 0.03 | - | - | 0.01 | - | ||||||||||||||||||
Net income attributable to ChinaCast Education Corporation per share:
|
||||||||||||||||||||||||
Basic
|
0.16
|
1.06
|
0.83
|
0.41
|
2.64
|
2.21
|
||||||||||||||||||
Diluted
|
0.16
|
1.04
|
0.82
|
0.41
|
2.61
|
2.18
|
||||||||||||||||||
Weighted average shares used in computation:
|
||||||||||||||||||||||||
Basic
|
49,009,512
|
49,009,512
|
49,834,291
|
49,531,187
|
49,531,187
|
47,693,969
|
||||||||||||||||||
Diluted
|
49,504,442
|
49,504,442
|
50,370,903
|
50,057,748
|
50,057,748
|
48,176,902
|
ChinaCast Education Corporation Shareholders
|
||||||||||||||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||||||||||||||
Additional
|
other
|
|||||||||||||||||||||||||||||||||||||||
Preference
|
Ordinary
|
paid-in
|
Statutory
|
Retained
|
comprehensive
|
Noncontrolling
|
Total
|
|||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
reserve
|
earnings
|
loss
|
interest
|
equity
|
|||||||||||||||||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
||||||||||||||||||||||||||||||||||
Balance at January 1, 2010
|
— | — | 45,170,698 | 33 | 1,290,651 | 39,139 | 136,583 | (6,055 | ) | 23,167 | 1,483,518 | |||||||||||||||||||||||||||||
Issuance of shares of common stock
|
— | — | 4,428,254 | 3 | 232,967 | — | — | — | — | 232,970 | ||||||||||||||||||||||||||||||
Share-based compensation
|
— | — | — | — | 6,522 | — | — | — | — | 6,522 | ||||||||||||||||||||||||||||||
Issuance of vested shares
|
— | — | 180,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Capital contribution by a non-controlling shareholder
|
— | — | — | — | — | — | — | — |
20,000
|
20,000
|
||||||||||||||||||||||||||||||
Net income
|
— | — | — | — | — | — | 105,239 | — | 1,427 | 106,666 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustments
|
— | — | — | — | — | — | — | 2,044 | (50 | ) | 1,994 | |||||||||||||||||||||||||||||
Balance at September 30, 2010
|
— | — | 49,778,952 | 36 | 1,530,140 | 39,139 | 241,822 | (4,011 | ) | 44,544 | 1,851,670 | |||||||||||||||||||||||||||||
US$ | 5 | US$ | 228,379 | US$ | 5,842 | US$ | 36,093 | US$ | (599 | ) | US$ | 6,648 | US$ | 276,368 |
|
ChinaCast Education Corporation Shareholders
|
|||||||||||||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||||||||||||||
Additional
|
other
|
|||||||||||||||||||||||||||||||||||||||
Preference
|
Ordinary
|
paid-in
|
Statutory
|
Retained
|
comprehensive
|
Noncontrolling
|
Total
|
|||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
reserve
|
earnings
|
loss
|
interest
|
equity
|
|||||||||||||||||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
||||||||||||||||||||||||||||||||||
Balance at January 1, 2011
|
— | — | 49,778,952 | 36 | 1,510,527 | 47,671 | 199,862 | (3,194 | ) | 25,492 | 1,780,394 | |||||||||||||||||||||||||||||
Repurchase of common stock
|
— | — | (1,015,503 | ) | — | (30,769 | ) | — | — | — | — | (30,769 | ) | |||||||||||||||||||||||||||
Share-based compensation
|
— | — | 256,842 | — | 7,289 | — | — | — | — | 7,289 | ||||||||||||||||||||||||||||||
Disposal of discontinued operation
|
— | — | — | — | — | (37 | ) | — | — | (18,930 | ) | (18,967 | ) | |||||||||||||||||||||||||||
Net income
|
— | — | — | — | — | — | 130,581 | — | 644 | 131,225 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustments
|
— | — | — | — | — | — | — | 899 | - | 899 | ||||||||||||||||||||||||||||||
Balance at September 30, 2011
|
— | — | 49,020,291 | 36 | 1,487,047 | 47,634 | 330,443 | (2,295 | ) | 7,206 | 1,870,071 | |||||||||||||||||||||||||||||
US$ | 6 | US$ | 232,351 | US$ | 7,443 | US$ | 51,632 | US$ | (360 | ) | US$ | 1,126 | US$ | 292,198 |
For the nine months ended September 30,
|
||||||||||||
2011
|
2011
|
2010
|
||||||||||
US$
|
RMB
|
RMB
|
||||||||||
(Note 1)
|
(Note 1)
|
|||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
20,503
|
131,225
|
106,666
|
|||||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation
|
7,453
|
47,701
|
36,832
|
|||||||||
Amortization of acquired intangible assets
|
5,610
|
35,907
|
27,231
|
|||||||||
Amortization of land use rights
|
480
|
3,072
|
2,510
|
|||||||||
Share-based compensation
|
1,139
|
7,289
|
6,522
|
|||||||||
Loss on disposal of property, plant and equipment
|
29
|
183
|
-
|
|||||||||
Loss in equity investments
|
-
|
-
|
86
|
|||||||||
Gain on disposal of discontinued operation
|
(268
|
)
|
(1,716
|
)
|
-
|
|||||||
Change in fair value of contingent consideration-prior year
|
(1,344
|
)
|
(8,601
|
)
|
-
|
|||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts receivable
|
877
|
5,610
|
4,823
|
|||||||||
Inventory
|
3
|
21
|
(52
|
)
|
||||||||
Prepaid expenses and other current assets
|
4,534
|
29,017
|
(3,607
|
)
|
||||||||
Non-current deposits
|
(3,348
|
)
|
(21,422
|
)
|
5390
|
|||||||
Amounts due from related parties
|
-
|
-
|
2,950
|
|||||||||
Accounts payable
|
(244
|
)
|
(1,560
|
)
|
(2,657
|
)
|
||||||
Accrued expenses and other current liabilities
|
1,004
|
6,427
|
(13,158
|
)
|
||||||||
Deferred revenues
|
14,617
|
93,549
|
159,699
|
|||||||||
Income taxes payable
|
2,459
|
15,737
|
19,656
|
|||||||||
Deferred tax assets
|
167
|
1,069
|
931
|
|||||||||
Deferred tax liabilities
|
(783
|
)
|
(5,012
|
)
|
(4,765
|
)
|
||||||
Unrecognized tax benefits
|
2,134
|
13,655
|
13,320
|
|||||||||
Net cash provided by operating activities
|
55,022
|
352,151
|
362,377
|
|||||||||
Cash flows from investing activities:
|
||||||||||||
Repayment from advance to related party
|
-
|
-
|
62
|
|||||||||
Purchase of subsidiaries, net of cash acquired
|
-
|
-
|
(374,374
|
)
|
||||||||
Cash in the disposed subsidiary
|
(1,596
|
)
|
(10,214
|
)
|
-
|
|||||||
Purchase of property and equipment
|
(6,805 | ) | (43,553 | ) | (54,708 | ) | ||||||
Purchase of term deposits
|
(94,531
|
)
|
(605,000
|
)
|
(93,000
|
)
|
||||||
Proceeds from maturity of term deposits
|
110,000
|
704,000
|
-
|
|||||||||
Deposits for investments
|
(80
|
)
|
(510
|
)
|
(3,000
|
)
|
||||||
Deposit for land use rights
|
(2,022
|
)
|
(12,942
|
)
|
-
|
|||||||
Prepayment for construction projects
|
(6,797
|
)
|
(43,502
|
)
|
-
|
|||||||
Net cash used in investing activities
|
(1,831
|
)
|
(11,721
|
)
|
(525,020
|
)
|
|
For the nine months ended September 30,
|
|||||||||||
|
2011
|
2011
|
2010
|
|||||||||
|
US$
|
RMB
|
RMB
|
|||||||||
|
(Note 1)
|
(Note 1)
|
||||||||||
Cash flows from financing activities:
|
||||||||||||
Payment of deferred consideration paid for acquisition of subsidiary
|
(10,956
|
)
|
(70,120
|
)
|
-
|
|||||||
Other borrowings raised
|
5,313
|
34,000
|
93,500
|
|||||||||
Repayment of other borrowings
|
(5,547
|
)
|
(35,500
|
)
|
(92,200
|
)
|
||||||
Bank borrowings raised
|
20,281
|
129,800
|
80,000
|
|||||||||
Bank borrowings repaid
|
(20,156
|
)
|
(129,000
|
)
|
(94,400
|
)
|
||||||
Repayment of capital lease obligation
|
-
|
-
|
(10
|
)
|
||||||||
Cash received from noncontrolling interest for establishing joint venture
|
- | - | 20,000 | |||||||||
Share repurchase
|
(4,808
|
)
|
(30,769
|
)
|
-
|
|||||||
Deposit for bank borrowing guarantee
|
(781
|
)
|
(5,000
|
)
|
-
|
|||||||
Collection of deposit for bank borrowing guarantee
|
625
|
4,000
|
-
|
|||||||||
Proceeds from issuance of share, net of issuance costs
|
-
|
-
|
232,970
|
|||||||||
Net cash provided by/(used in) financing activities
|
(16,029
|
)
|
(102,589
|
)
|
239,860
|
|||||||
Effect of foreign exchange rate changes
|
9
|
56
|
308
|
|||||||||
Net increase in cash and cash equivalents
|
37,171
|
237,897
|
77,525
|
|||||||||
Cash and cash equivalents at beginning of the period
|
38,188
|
244,403
|
327,628
|
|||||||||
Cash and cash equivalents at end of the period
|
75,359
|
482,300
|
405,153
|
|||||||||
Supplemental noncash investing and financing activities:
|
||||||||||||
Consideration receivable from disposal of QPU
|
1,875
|
12,000
|
-
|
|||||||||
NCI eliminated due to disposal of QPU
|
(106)
|
(677)
|
-
|
1.
|
BASIS OF PREPARATION
|
|
·
|
Agreements that transfer economic benefits to CCT Shanghai
|
|
·
|
Agreements that provide CCT Shanghai effective control over CCLX
|
|
•
|
Levying fines and confiscating illegal income of the VIE or the Group's subsidiaries in China;
|
|
•
|
Restricting or prohibiting use of the proceeds to finance the Group's business and operations in China;
|
|
•
|
Requiring the Group to restructure the ownership structure or operations of the VIE or the Group's subsidiaries in China;
|
|
•
|
Requiring the Group to discontinue all or a portion of its business in China; and/or
|
|
•
|
Revoking the business licenses of the VIE or the Group's subsidiaries in China.
|
As of
|
||||||||||||
As of September 30,
|
December 31,
|
|||||||||||
2011
|
2011
|
2010
|
||||||||||
US$
|
RMB
|
RMB
|
||||||||||
Current assets
|
13,648
|
87,344
|
87,023
|
|||||||||
Non-current assets
|
451
|
2,889
|
3,101
|
|||||||||
Total assets
|
14,099
|
90,233
|
90,124
|
As of
|
||||||||||||
As of September 30,
|
December 31,
|
|||||||||||
2011
|
2011
|
2010
|
||||||||||
US$
|
RMB
|
RMB
|
||||||||||
Current liabilities
|
3,466
|
22,184
|
23,941
|
|||||||||
Non-current liabilities
|
969
|
6,205
|
5,799
|
|||||||||
Total liabilities
|
4,435
|
28,389
|
29,740
|
For the three months ended September 30,
|
For the nine months ended September 30,
|
|||||||||||||||||||||||
2011
|
2011
|
2010
|
2011
|
2011
|
2010
|
|||||||||||||||||||
US$
|
RMB
|
RMB
|
US$
|
RMB
|
RMB
|
|||||||||||||||||||
Revenues
|
4,834
|
30,936
|
30,961
|
14,677
|
93,933
|
93,006
|
||||||||||||||||||
Net income
|
3,953
|
25,301
|
24,988
|
11,808
|
75,574
|
75,158
|
For the nine months ended September 30,
|
||||||||||||
2011
|
2011
|
2010
|
||||||||||
US$
|
RMB
|
RMB
|
||||||||||
Net cash provided by operating activities
|
11,807
|
75,567
|
91,252
|
|||||||||
Net cash used in investing activities
|
(211
|
)
|
(1,353
|
)
|
(435)
|
|||||||
Net cash provided by/(used in) financing activities
|
-
|
-
|
-
|
2.
|
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
|
·
|
Highest-and-best-use and valuation-premise concepts for nonfinancial assets – the guidance indicates that the highest-and-best-use and valuation-premise concepts only apply to measuring the fair value of nonfinancial assets.
|
·
|
Application to financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk – the guidance permits an exception to fair value measurement principles for financial assets and financial liabilities (and derivatives) with offsetting positions in market risks or counterparty credit risk when several criteria are met. When the criteria are met, an entity can measure the fair value of the net risk position.
|
·
|
Premiums or discounts in fair value measure – the guidance states that "premiums or discounts that reflect size as a characteristic of the reporting entity's holding (specifically, a blockage factor that adjusts the quoted price of an asset or a liability because the market's normal daily trading volume is not sufficient to absorb the quantity held by the entity…) rather than as a characteristic of the asset or liability (for example, a control premium when measuring the fair value of a controlling interest) are not permitted in a fair value measurement."
|
·
|
Fair value of an instrument classified in a reporting entity's shareholders' equity – the guidance prescribes a model for measuring the fair value of an instrument classified in shareholders' equity; this model is consistent with the guidance on measuring the fair value of liabilities.
|
·
|
Disclosures about fair value measurements – the guidance expands disclosure requirements, particularly for Level 3 inputs. Required disclosures include:
|
|
o
|
For fair value measurements categorized in level 3 of the fair value hierarchy: (1) a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, (2) a description of the valuation process in place (e.g., how the entity decides its valuation policies and procedures, as well as changes in its analyses of fair value measurements, from period to period), and (3) a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs.
|
|
o
|
The level in the fair value hierarchy of items that are not measured at fair value in the statement of financial position but whose fair value must be disclosed.
|
3.
|
DISCONTINUED OPERATIONS
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2010
|
2011
|
2010
|
2011
|
|||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
|||||||||||||
Revenues
|
-
|
1,345
|
-
|
3,782
|
||||||||||||
Income/(loss) before provision of income taxes from discontinued operations
|
100
|
(694
|
) |
100
|
(1,574)
|
|||||||||||
Provision for income taxes
|
-
|
(7
|
) |
-
|
(120)
|
|||||||||||
Gain/(loss) from discontinued operations, net of tax
|
100
|
(701 | ) |
100
|
(1,694)
|
|||||||||||
Gain from disposal of discontinued operations
|
-
|
1,716
|
-
|
1,716
|
||||||||||||
Net income from discontinued operations, net of tax | 100 | 1,015 | 100 | 22 | ||||||||||||
Noncontrolling interest in discontinued operations
|
(40
|
)
|
280
|
|
(40
|
)
|
677
|
|||||||||
Net income from discontinued operations attributable to ChinaCast Education Corporation, net of tax
|
60
|
1,295
|
|
60
|
699
|
|
||||||||||
Net income on discontinued operations attributable to ChinaCast Education Corporation per share – basic
|
-
|
0.03
|
-
|
0.01
|
||||||||||||
Net income on discontinued operations attributable to ChinaCast Education Corporation per share – diluted
|
-
|
0.03
|
-
|
0.01
|
4.
|
ACQUISITION
|
The fair value of total consideration of RMB325,482 as of the acquisition date consisted of:
|
||||
Consideration paid in cash
|
295,000
|
|||
Fair value of deferred contingent consideration
|
30,482
|
|||
Total
|
325,482
|
Amortization
|
|||||
RMB
|
period
|
||||
Cash
|
73,113
|
||||
Other current assets
|
2,408
|
||||
Non-current deposits
|
6,374
|
||||
Property and equipment
|
261,543
|
3-20 years
|
|||
Prepaid lease payments for land use rights
|
28,920
|
Over the remaining lease
term of 48 years
|
|||
Intangible assets:
|
|||||
Customer relationship
|
51,000
|
Up to 47 months
|
|||
Affiliation agreement
|
14,000
|
59 months
|
|||
Goodwill (allocated to the TUG as set out in Note 14)
|
192,440
|
||||
Other current liabilities
|
(105,424
|
)
|
|||
Deferred revenues
|
(89,114
|
)
|
|||
Deferred tax liabilities
|
(12,616
|
)
|
|||
Long-term bank borrowings
|
(90,000
|
)
|
|||
Unrecognized tax benefits
|
(7,162
|
)
|
|||
Total
|
325,482
|
Consideration paid in cash
|
360,000
|
|||
Fair value of deferred contingent consideration
|
78,721
|
|||
Total
|
438,721
|
Amortization
|
|||||
RMB
|
period
|
||||
Cash
|
19,942
|
||||
Other current assets
|
7,771
|
||||
Property and equipment
|
|
3 years-remaining
|
|||
218,720
|
lease term
|
||||
Prepaid lease payments for land use rights
|
|
Over the remaining
|
|||
37,000
|
lease term
|
||||
Intangible assets:
|
|||||
Customer relationship
|
38,000
|
up to 48 months
|
|||
Affiliation Agreement
|
31,000
|
3 years
|
|||
Goodwill (allocated to the TUG as set out in Note 14)
|
270,308
|
||||
Bank borrowing
|
(54,000
|
)
|
|||
Other current liabilities
|
(70,621
|
)
|
|||
Deferred revenues
|
(2,753
|
)
|
|||
Deferred tax liabilities
|
(29,003
|
)
|
|||
Unrecognized tax benefits
|
(27,643
|
)
|
|||
Total
|
438,721
|
As of September
30, 2011
|
As of
December 31,
2010
|
|||||||
RMB
|
RMB
|
|||||||
Rental deposits
|
255
|
415
|
||||||
Utilities deposits
|
454
|
454
|
||||||
Guarantee deposit for borrowings
|
5,000
|
4,000
|
||||||
Prepayment and deposits for land use rights and construction projects
|
37,043
|
2,519
|
||||||
Total
|
42,752
|
7,388
|
7.
|
ACQUIRED INTANGIBLE ASSETS, NET
|
As of September
30,
|
As of
December 31,
|
|||||||
2011
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Customer relationships
|
||||||||
Cost
|
129,329
|
129,329
|
||||||
Less: Accumulated amortization
|
(92,531
|
)
|
(66,509
|
)
|
||||
|
36,798
|
62,820
|
||||||
|
||||||||
Affiliation agreement
|
||||||||
Cost
|
45,000
|
45,000
|
||||||
Less: Accumulated amortization
|
(16,889
|
)
|
(7,004
|
)
|
||||
|
||||||||
|
28,111
|
37,996
|
||||||
|
||||||||
Acquired intangible assets, net
|
64,909
|
100,816
|
8.
|
OTHER BORROWINGS
|
Counterparties
|
Amounts
borrowed
RMB
|
Borrowing date
|
Maturity date
|
Interest rate
|
|||||||
HU, Jiping
|
9,000
|
March 3, 2011
|
September 15, 2011
|
9
|
%
|
||||||
CHEN, Ling
|
25,000
|
March 21, 2011
|
Within 3 months
|
9
|
%
|
||||||
34,000
|
Counterparty
|
Amounts
repaid
RMB
|
Borrowing date
|
Repayment date
|
Interest rate
|
|||||||
HU, Jiping
|
9,000
|
March 3, 2011
|
September 30, 2011
|
9
|
%
|
||||||
CHEN, Ling
|
25,000
|
March 21, 2011
|
September 30, 2011
|
9
|
%
|
||||||
LI, Shaobi
|
1,500
|
July 16, 2010
|
January 20, 2011
|
7
|
%
|
||||||
35,500
|
9.
|
BANK BORROWINGS
|
As of
|
As of
|
|||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Current portion
|
(190,800 | ) | (170,000 | ) | ||||
Non-Current portion
|
(70,000 | ) | (90,000 | ) | ||||
(260,800 | ) | (260,000 | ) |
10.
|
SHARE REPURCHASE
|
11.
|
SHAREHOLDER RIGHTS PLAN
|
12.
|
STOCK COMPENSATION PLAN
|
Number of
shares
|
Weighted
average
grant-date fair
values of
shares
|
Weighted
average
intrinsic
value per share
at the grant date
|
||||||||||
US$
|
US$
|
|||||||||||
Nonvested share unvested at January 1, 2011
|
297,504
|
6.07
|
6.07
|
|||||||||
Granted
|
273,500
|
6.07
|
6.07
|
|||||||||
Vested
|
(157,668
|
)
|
6.01
|
6.01
|
||||||||
Fortfeited
|
-
|
-
|
-
|
|||||||||
Nonvested share unvested at September 30, 2011
|
413,336
|
6.09
|
6.09
|
Weighted
|
||||||||
average
|
||||||||
Number
|
exercise
|
|||||||
of options
|
price
|
|||||||
US$
|
||||||||
Options outstanding at December 31, 2010
|
1,200,000
|
6.30
|
||||||
Granted
|
—
|
—
|
||||||
Exercised
|
—
|
—
|
||||||
Cancelled
|
—
|
—
|
Weighted
|
||||||||
average
|
||||||||
Number
|
exercise
|
|||||||
of options
|
price
|
|||||||
US$
|
||||||||
Options outstanding at September 30, 2011
|
1,200,000
|
6.30
|
||||||
Options exercisable at September 30, 2011
|
1,200,000
|
6.30
|
13.
|
INCOME TAXES
|
14.
|
GOODWILL
|
December 31, 2009
|
503,771
|
|||
Addition from acquisitions
|
270,371
|
|||
Exchange rate impact
|
(59
|
)
|
||
December 31, 2010
|
774,083
|
|||
Reduction from disposal
|
(63)
|
|||
Exchange rate impact
|
(53)
|
|||
September 30, 2011
|
773,967
|
15.
|
NET INCOME PER SHARE
|
For the three months ended September 30,
|
For the nine months ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Numerator used in basic and diluted net income per share:
|
||||||||||||||||
Income from continuing operations attributable to ChinaCast Education Corporation
|
RMB | 50,421 | RMB | 41,481 | RMB | 129,882 | RMB | 105,179 | ||||||||
Income from discontinued operations attributable to ChinaCast Education Corporation
|
RMB | 1,295 | RMB | 60 | RMB | 699 | RMB | 60 | ||||||||
Net income attributable to ChinaCast Education Corporation
|
RMB | 51,716 | RMB | 41,541 | RMB | 130,581 | RMB | 105,239 | ||||||||
Shares (denominator):
|
||||||||||||||||
Weighted average ordinary shares outstanding used in computing basic net income per share
|
49,009,512 | 49,834,291 | 49,531,187 | 47,693,969 | ||||||||||||
Plus:
|
||||||||||||||||
Incremental ordinary shares from assumed conversions of stock options, vesting of restricted shares and exercises of Underwriter Warrants
|
494,930 | 536,612 | 526,561 | 482,933 | ||||||||||||
Weighted average ordinary shares outstanding used in computing diluted net income per share
|
49,504,442 | 50,370,903 | 50,057,748 | 48,176,902 | ||||||||||||
Net income per share – basic:
|
||||||||||||||||
Income from continuing operations attributable to ChinaCast Education Corporation
|
RMB | 1.03 | 0.83 | RMB | 2.63 | RMB | 2.21 | |||||||||
Income from discontinued operations attributable to ChinaCast Education Corporation
|
RMB | 0.03 | - | RMB | 0.01 | RMB | - | |||||||||
Net income attributable to ChinaCast Education Corporation
|
RMB | 1.06 | RMB | 0.83 | RMB | 2.64 | RMB | 2.21 | ||||||||
Net income per share – diluted:
|
||||||||||||||||
Income from continuing operations attributable to ChinaCast Education Corporation
|
RMB | 1.01 | RMB | 0.82 | RMB | 2.60 | RMB | 2.18 | ||||||||
Income from discontinued operations attributable to ChinaCast Education Corporation
|
RMB | 0.03 | RMB | - | RMB | 0.01 | RMB | - | ||||||||
Net income attributable to ChinaCast Education Corporation
|
RMB | 1.04 | RMB | 0.82 | RMB | 2.61 | RMB | 2.18 |
16.
|
SEGMENT INFORMATION
|
For the three months ended September 30,
|
For the nine months ended September 30,
|
||||||||||||||||||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
||||||||||||||||||||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
||||||||||||||||||||||||||||||||||
ELG
|
TUG
|
Total
|
ELG
|
TUG
|
Total
|
ELG
|
TUG
|
Total
|
ELG
|
TUG
|
Total
|
||||||||||||||||||||||||||
Revenues from external customers:
|
58,944 | 105,044 | 163,988 | 49,881 | 75,238 | 125,119 | 169,660 | 308,755 | 478,415 | 143,901 | 200,224 | 344,125 | |||||||||||||||||||||||||
Depreciation and amortization:
|
1,416 | 27,460 | 28,876 | 742 | 26,247 | 26,989 | 2,779 | 83,901 | 86,680 | 2,400 | 64,173 | 66,573 | |||||||||||||||||||||||||
Share-based compensation:
|
1,974 | - | 1,974 | 1,922 | - | 1,922 | 7,289 | - | 7,289 | 6,524 | - | 6,524 | |||||||||||||||||||||||||
Interest income:
|
4,152 | 154 | 4,306 | 3,513 | 137 | 3,650 | 11,644 | 793 | 12,437 | 9,768 | 370 | 10,138 | |||||||||||||||||||||||||
Interest expense:
|
- | 4,974 | 4,974 | - | 4,058 | 4,058 | - | 12,723 | 12,723 | - | 10,623 | 10,623 | |||||||||||||||||||||||||
Provision for income taxes:
|
6,231 | 3,075 | 9,306 | 5,390 | 2,401 | 7,791 | 19,379 | 12,300 | 31,679 | 18,946 | 8,594 | 27,540 | |||||||||||||||||||||||||
Earnings in equity investments:
|
- | - | - | 26 | - | 26 | - | - | - | 86 | - | 86 | |||||||||||||||||||||||||
Income from operation:
|
24,985 | 35,938 | 60,923 | 61,719 | (11,494 | ) | 50,225 | 73,689 | 89,479 | 163,168 | 114,554 | 20,123 | 134,677 | ||||||||||||||||||||||||
Addition to property and equipment:
|
586 | 17,333 | 17,919 | 1,798 | 10,710 | 12,508 | 2,772 | 39,659 | 42,431 | 2,795 | 29,004 | 31,799 | |||||||||||||||||||||||||
As of September 30,2011
|
As of December 31, 2010
|
|||||||||||||||||||||||
RMB
|
RMB
|
|||||||||||||||||||||||
ELG
|
TUG
|
Total
|
ELG
|
TUG
|
Total
|
|||||||||||||||||||
Segment assets
|
688,219 | 2,331,392 | 3,019,611 | 656,795 | 2,237,395 | 2,894,190 | ||||||||||||||||||
Goodwill:
|
1,502 | 772,465 | 773,967 | 1,618 | 772,465 | 774,083 | ||||||||||||||||||
17.
|
WARRANTS
|
18.
|
CONTINGENCIES
|
a) |
|
On March 21, 2006, after obtaining the approval of its shareholders, the Company amended its certificate of incorporation, the effect of which was, among other things, to eliminate the provision of the certificate of incorporation that purported to prohibit the amendment of the “business combination” provisions contained therein and to extend the date before which the Company must complete a business combination, to avoid being required to liquidate, from March 23, 2006 to December 31, 2006. Because extending the period during which the Company could consummate a business combination was not contemplated by the initial public offering (“IPO”) prospectus, shareholders may have securities law claims against the Company for rescission (under which a successful claimant would have the right to receive the total amount paid for his or her shares, plus interest and less any income earned on the shares, in exchange for surrender of the shares) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of the security). Such claims might entitle shareholders asserting them to up to US$6.00 per share of common stock, based on the initial offering price of the public units comprised of stock and warrants, less any amount received from sale of the original warrants purchased with them and plus interest from the date of the IPO. A successful claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in value of his or her shares caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining the shares. The Company believes the shareholder claims for rescission or damages are remote. As such, the Company has not recorded a liability for such possible rescission. However, the Company cannot definitively predict whether shareholders will bring such claims, how many might bring them or the extent to which they might be successful.
|
b) |
The Company may be subject to claims for rescission or other securities law claims resulting from the failure to disclose that the charter provision purporting to prohibit certain amendments was possibly inconsistent with Delaware’s General Corporation Law. The Company may also be subject to such claims as a result of inaccuracies in other disclosures, as follows: It may be argued that the IPO prospectus misstated the vote required by its charter to approve a business combination by providing that “[w]e will proceed with a business combination only if the public shareholders who own at least a majority of the shares of common stock sold in [that] offering vote in favor [of it] ...,” and that the Exchange Act reports have been inaccurate in describing ChinaCast as a leading provider of e-learning content (as opposed to being primarily a content carrier). On November 13, 2006, the Company filed a Current Report on Form 8-K with the SEC regarding this last item. The Company is unable to predict the likelihood that claims might be made with regard to the foregoing or estimate any amounts for which it might be liable if any such claim was made. As such, the Company has not recorded a liability for such possible rescission.
|
c) |
|
CCTSH injected RMB6 million, RMB6 million and RMB18 million into QPU as capital contribution in February, August and September of 2010 respectively. Subsequently, YPSH borrowed RMB18 million from QPU. The PRC law and regulations restricts capital withdrawal from established companies. It may be argued that the borrowing from QPU could potentially be assessed as a capital withdrawal and may be subject to penalty ranging from 2-10% of the withdrawn amount. The Company has recorded a RMB1.8 million provision for such possible penalty. As of September, 2011, the Company has sold its interest in QPU to its original 40% shareholder China University of Petroleum ("CUP"), and the Company offset the RMB18 million borrowing with the sales receipt from CUP concurrently. The Company believed that the RMB18 million borrowing issue has been settled without future impact.
|
19.
|
RELATED PARTY TRANSACTION
|
Amounts due from a related party
|
||||||
As of September 30
|
||||||
Note
|
2011
|
2010
|
||||
RMB
|
RMB
|
|||||
Current amounts
|
||||||
CUP
|
i
|
12,000
|
-
|
|
i)
|
The balance arose from the disposal of 60% stake in QPU, which is expected to be received by the end of 2011.
|
Three Months ended
|
||||||||||||
September 30, 2011
|
September 30, 2010
|
|||||||||||
(millions)
|
(millions)
|
|||||||||||
US$
|
RMB
|
RMB
|
||||||||||
Post secondary education distance learning
|
4.6 | 29.2 | 28.6 | |||||||||
K-12 and content delivery
|
2.4 | 15.8 | 16.0 | |||||||||
Vocational training, enterprise / government training and networking
|
2.2 | 13.9 | 5.3 | |||||||||
Total ELG revenue
|
9.2 | 58.9 | 49.9 |
Nine Months ended
|
||||||||||||
September 30, 2011
|
September 30, 2010
|
|||||||||||
(millions)
|
(millions)
|
|||||||||||
US$
|
RMB
|
RMB
|
||||||||||
Post secondary education distance learning
|
13.6 | 87.3 | 85.0 | |||||||||
K-12 and content delivery
|
7.4 | 47.3 | 48.0 | |||||||||
Vocational training, enterprise / government training and networking
|
5.5 | 35.0 | 10.9 | |||||||||
Total ELG revenue
|
26.5 | 169.7 | 143.9 |
As of
|
||||||||||||
As of
|
December 31,
|
|||||||||||
September 30, 2011
|
2010
|
|||||||||||
(millions)
|
(millions)
|
|||||||||||
RMB
|
US$
|
RMB
|
||||||||||
Cash and cash equivalents
|
482.3 | 75.4 | 244.4 | |||||||||
Term deposits
|
605.0 | 94.5 | 704.0 | |||||||||
Subtotal
|
1,087.3 | 169.9 | 948.4 | |||||||||
Accounts receivable
|
53.1 | 8.3 | 59.4 | |||||||||
Inventory
|
1.0 | 0.2 | 1.0 | |||||||||
Prepaid expenses and other current assets
|
28.7 | 4.5 | 48.2 | |||||||||
Total current assets
|
1,179.3 | 184.3 | 1,067.4 | |||||||||
Total assets
|
3,019.6 | 471.8 | 2,894.2 |
|
a.
|
We have employed an additional senior qualified accountant who is well experienced in preparing financial statements for listed companies and in internal control reviews.
|
|
b.
|
We have strengthened our financial teams at the operation level by adding resources as well as provided staff trainings so that the teams are fully aware and supportive of the Company’s commitment to the quality of its financial reporting.
|
|
c.
|
We have engaged external contractors who are experienced in US GAAP conversion to assist the financial teams at the universities starting from the first quarter of 2011 to ensure the timely availability of accurate US GAAP conversion information for review by the auditor.
|
|
d.
|
We have established training objectives for senior and corporate financial staff members to (i) update them on new developments in US GAAP reporting requirements, (ii) provide additional training through structured professional programs including programs in the US and (iii) encourage and sponsor staff members to pursue US accounting qualifications including obtaining a CPA license.
|
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
CHINACAST EDUCATION CORPORATION
|
|||
(Registrant)
|
|||
Date: November 9, 2011
|
By:
|
/s/ Ron Chan Tze Ngon
|
|
Name:
|
Ron Chan Tze Ngon
|
||
Title:
|
Chairman of the Board,
|
||
Chief Executive Officer (Principal Executive Officer)
|
|||
By:
|
/s/ Antonio Sena
|
||
Name:
|
Antonio Sena
|
||
Title:
|
Chief Financial Officer and
|
||
Secretary (Principal Accounting and Financial Officer)
|
Exhibit
No.
|
Description
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Dated: November 9, 2011
|
/s/ Ron Chan Tze Ngon
|
|
Ron Chan Tze Ngon
|
||
Chairman of the Board and Chief Executive Officer
|
||
(Principal Executive Officer)
|
Dated: November 9, 2011
|
/s/ Antonio Sena
|
|
Antonio Sena
|
||
Chief Financial Officer
|
||
(Principal Accounting and Financial Officer)
|
Dated: November 9, 2011
|
/s/ Ron Chan Tze Ngon
|
|
Ron Chan Tze Ngon
|
||
Chairman of the Board and Chief Executive Officer
|
||
(Principal Executive Officer)
|
Dated: November 9, 2011
|
/s/ Antonio Sena
|
|
Antonio Sena
|
||
Chief Financial Officer (Principal
|
||
Accounting and Financial Officer)
|
CONTINGENCIES | 9 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||
CONTINGENCIES |
|
Document and Entity Information | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Nov. 06, 2011 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2011 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | CAST | |
Entity Registrant Name | CHINACAST EDUCATION CORP | |
Entity Central Index Key | 0001261888 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 49,020,291 |
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PREPAYMENT FOR CONSTRUCTION PROJECTS | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
PREPAYMENT FOR CONSTRUCTION PROJECTS |
The
balance of RMB43,502 represents prepayment to Chongqing Vocational
College of Media and its investor Chongqing Bainian Guangcai
Company ("CVCM" collectively). Beginning July 2011, CVCM
helped Foreign Trade Business College of Chongqing Normal
University (“FTBC”) construct a new campus and
FTBC paid for the construction. The construction is still in
process as of September 30, 2011. Prior to the completion of the
work, CVCM has allowed students of FTBC to use resources of CVCM,
including canteen, teaching buildings, and dormitory, etc. and FTBC
needs to pay 15% of its total revenue from students as
compensation. As of September 30, 2011, FTBC has prepaid RMB1,500
service
fee to CVCM, and RMB309 was recognized as the operating
expense for September 2011.
|
SHAREHOLDER RIGHTS OR WARRANTS | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
Shareholder rights plan | |||
SHAREHOLDER RIGHTS OR WARRANTS |
On
September 25, 2011, the Board of Directors of the Company declared
a dividend of one preferred share purchase right for each
outstanding share of common stock, par value US$0.0001 per share,
of the Company (the “Rights”). The dividend was
paid on October 7, 2011 to the stockholders of record on that
date. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Junior Participating
Preferred Stock of the Company, par value US$0.0001 per share, at a
price of US$20.00 per Unit, subject to adjustment. The description
and terms of the Rights are set forth in the Rights Agreement,
dated September 26, 2011, between the Company and Continental Stock
Transfer & Trust Company, LLC as Rights
Agent.
One
Right will automatically attach to each share of Common Stock
issued between the record date and the earlier of the Distribution
Date (defined below) or the expiration date. Initially, the Rights
are not exercisable and are attached to and trade with all shares
of Common Stock outstanding as of, and issued subsequent to, the
record date and no separate certificates evidencing the Rights will
be issued. The Rights will separate from the Common Stock and
will become exercisable upon the earlier of (i) the close of
business on the tenth calendar day following the first public
announcement that a person or group of affiliated or associated
persons has acquired or has the right to acquire beneficial
ownership of 15% or more of the outstanding shares of Common Stock,
other than as a result of repurchases of stock by the Company or
the grant of any equity compensation awards or Board approved
unilateral grants of any security to the person, or
(ii) the close of business on the tenth business day (or such
later day as the Board of Directors may determine) following the
commencement of a tender offer or exchange offer that could result,
upon its consummation, in a person or group becoming the beneficial
owner of 15% or more of the outstanding shares of Common Stock (the
earlier of such dates being herein referred to as the “
Distribution Date”).
In
the event of a Distribution Date, the Rights will become
exercisable and will entitle the holder hereof (other than the
acquiring person or group) the right to purchase, either
1/100 of a share of Junior Participating Preferred Stock (which has
terms substantially equivalent to one share of common stock) or one
share of Common Stock
at a purchase price equal to 50% of the then current market price
per share of common stock. The exercise price per Right is $20.
Therefore, following the occurrence of a triggering event, each
stockholder who is not a member of the acquiring person or group
would have the ability to purchase upon payment of the $20 exercise
price, such number of 1/100 share of Junior Participating Preferred
Stock or such number of shares of common stock worth $40.
The
Board may, however, at any time after a 15% or more acquisition of
beneficial ownership and prior to the acquisition of 50% beneficial
ownership of the Company’s common stock to authorize an
exchange with no cash payment of each Right (other than Rights held
by the acquiring person or group) for one share of common stock or
1/100 of a share of Junior Participating Preferred
Stock. The Right is redeemable, for USD$0.01 per
Right, at any time prior to the occurrence of a Distribution
Date.
| ||
Warrants | |||
SHAREHOLDER RIGHTS OR WARRANTS |
In
connection with the share offering which was consummated in October
2008, the Company sold to the underwriter in December 2008, for
nominal consideration, an aggregate of 255,000 warrants with an
excercise price of US$3.15 per share. The warrants will be
exercisable for five years from the closing date of the share
offering and are classified as Equity in the accompanying
consolidated financial statements. As of September 30, 2011, there
were 255,000 warrants outstanding.
|
BASIS OF PREPARATION | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PREPARATION |
The
accompanying unaudited condensed consolidated financial statements
of ChinaCast Education Corporation (“CEC”) have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”) regarding interim
financial reporting. Accordingly, they do not include all of the
information and notes required by accounting principles generally
accepted in the United States of America (“US GAAP”)
for complete financial statements and should be read in conjunction
with the audited financial statements included in CEC’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2010.
In
the opinion of the management of CEC, the accompanying unaudited
condensed consolidated financial statements are prepared on the
same basis as the audited financial statements and these unaudited
condensed consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments that
are, in the opinion of management, necessary for a fair
presentation of the results of the interim periods presented. The
results of operations for the interim periods presented are not
necessarily indicative of the operating results expected for any
subsequent interim period or for CEC’s fiscal year ending
December 31, 2011.
The
accompanying unaudited condensed consolidated financial statements
include the accounts of CEC, its subsidiaries, and variable
interest entities("VIE") (collectively, the “Company”).
All significant intercompany balances and transactions have been
eliminated in consolidation.
The VIE arrangements
PRC
laws and regulations currently restrict direct foreign ownership of
business entities providing telecommunications services, Internet
access and the distribution of news and information in the PRC
where certain licenses are required. As a Delaware company, the
Company is deemed a foreign legal person under the PRC laws. To
comply with the PRC laws and regulations, the Company provides
substantially all of its satellite broadband business activities in
the PRC through its VIE, ChinaCast Li Xiang Co. Ltd. ( “ CCLX
” ).
Arrangement with
CCLX
CCLX
is a variable interest entity established on May 7, 2003. ChinaCast
and its majority-owned subsidiaries do not have legal ownership of
CCLX, which is licensed to provide value-added satellite broadband
services in the PRC. CCLX is legally owned by three employees of
ChinaCast. To provide the Company the ability to receive the
majority of the expected residual returns of the VIE, the Company's
98.5% owned subsidiary, ChinaCast Technology (Shanghai) Limited (
“ CCT Shanghai ” ) entered into a series of contractual
arrangements with CCLX and CCLX subsequently updated these
contractual arrangements on December 31, 2010.
Technology services agreement: Pursuant to an Exclusive
Technical Services Agreement with a 10 year term, CCT Shanghai
assists CCLX in implementing CCLX's businesses relating to the
provision of exclusive technical, consulting, financial support and
other services, including but not limited to the provision of
technical services, business consultations, equipment or property
leasing, marketing consultancy, system integration, product
research and development and system maintenance. As consideration
for these services, CCT Shanghai is entitled to charge CCLX monthly
service fees equal to the total revenue earned by CCLX, less
operating expenses reasonably incurred in the course of conducting
the business for which CEC and its subsidiaries provide technical
services. During the term of the agreement, unless CCT Shanghai
commits gross negligence, or a fraudulent act against CCLX, CCLX
may not terminate the agreement prior to its expiration date. CCT
Shanghai can terminate the agreement upon 30 days’
prior written notice to CCLX at anytime.
Call option agreement: Pursuant to a call option agreement,
the shareholders of CCLX unconditionally and irrevocably granted
CCT Shanghai or its designated party an exclusive option to
purchase from CCLX's shareholders, to the extent permitted under
PRC law, 100% of the equity interests in CCLX, as the case maybe,
for RMB1 or the minimum amount of consideration permitted by the
applicable law without any other conditions. CCT Shanghai has sole
discretion to decide when to exercise the option, whether in part
or in full, during the 10 year term of the agreement.
Equity pledge agreement: Pursuant to the equity pledge
agreement, as a collateral security for the prompt and complete
execution of the Exclusive Technical Services Agreement , CCLX's
shareholders pledged to CCT Shanghai all of their rights, title and
interest in the CCLX's shares, including ownership rights and
rights to dividends and other distributions. In the event CCLX
fails to pay the service fee in accordance with the New Technical
Service Agreement, CCT Shanghai has the right, but not the
obligation, to dispose of the equity interest pledged by the CCLX
shareholders in accordance with the provisions in the
agreement.
Power of
attorney: The shareholders of CCLX have executed an
irrevocable power of attorney appointing CCT Shanghai, or any
designated parties by CCT Shanghai as their attorney-in-fact to
vote on their behalf on all matters of CCLX requiring shareholder
approval under PRC laws and regulations and the article of
association of CCLX. The power of attorney remains effective during
the periods of their shareholding.
The
article of association of CCLX states that the major rights of the
shareholders in shareholders' meeting include the power to approve
the operating strategy and investment plan, elect the members of
board of directors and approve their compensation and review and
approve annual budget and earning distribution plan. Therefore,
through the irrevocable power of attorney arrangement, CCT Shanghai
has the ability to exercise effective control over CCLX through
shareholder votes and through such votes to also control the
composition of the board of directors. In addition, the senior
management team of CCLX is the same as that of CCT Shanghai. As a
result of the contractual rights, the Company has the power to
direct the activities of CCLX that most significantly impact CCLX's
economic performance.
In
June 2009, the FASB issued an authoritative pronouncement to amend
the accounting rules for variable interest entities. The amendments
effectively replace the quantitative-based risks-and-rewards
calculation for determining which reporting entity, if any, has a
controlling financial interest in a variable interest entity with
an approach focused on identifying which reporting entity has (1)
the power to direct the activities of a variable interest entity
that most significantly affect the entity's economic performance
and (2) the obligation to absorb losses of, or the right to receive
benefits from, the entity. Additionally, an enterprise is required
to assess whether it has an implicit financial responsibility to
ensure that a variable interest entity operates as designed when
determining whether it has the power to direct the activities of
the variable interest entity that most significantly impact the
entity's economic performance. The new guidance also requires
additional disclosures about a reporting entity's involvement with
variable interest entities and about any significant changes in
risk exposure as a result of that involvement.
The
new guidance is effective at the start of a reporting entity's
first fiscal year beginning after November 15, 2009, and all
interim and annual periods thereafter. CEC and its consolidated
entities adopted the new guidance on January 1, 2010.
The
Company has had one consolidated variable interest entity under the
authoritative literature prior to the amendment discussed above
because it was the primary beneficiary of the entity. Because the
Company, through its wholly owned subsidiary, has (1) the power to
direct the activities of the variable interest entity that most
significantly affect the entity's economic performance and (2) the
right to receive benefits from the variable interest entity. The
Company continues to consolidate the variable interest entity upon
the adoption of the new guidance which therefore has no impact on
the Company's financial condition or results of operations, except
for the additional disclosures on the face of and in the notes to
the consolidated financial statements.
Risks in
relation to the consolidation of VIE and acquired
schools
The
Company, believes that CCT Shanghai’s contractual
arrangements with the VIE are in compliance with PRC law and are
legally enforceable. The shareholders of the VIE are current
employees of the Company and therefore have no current interest in
seeking to act contrary to the contractual arrangements. However,
uncertainties in the PRC legal system could limit the
Company’s ability to enforce these contractual arrangements
and if the shareholders of the VIE were to reduce their interest in
the Company, their interests may diverge from that of the Company
and that may potentially increase the risk that they would seek to
act contrary to the contractual terms, for example by influencing
the VIE not to pay the service fees when required to do
so.
The
Company’s ability to control the VIE also depends on the
power of attorney CCT Shanghai has to vote on all matters requiring
shareholder approval in the VIE, including but not limited to
appointment of directors, significant operating, investing, and
investing decisions. As noted above, the Company believes this
power of attorney is legally enforceable but may not be as
efficient as direct equity ownership. However, it provides an
effective legal remedy under PRC law for the Company to control the
VIE assets, cash flows, and operating performance.
The
Company, believes that the current ownership with the acquired
schools is in compliance with PRC law and is legally enforceable.
The current ownership structure provides an effective means for the
Company to involve in and control the acquired schools' assets,
cash flows, and operating performance.
If
the contractual arrangements with the VIE or the ownership with the
acquired schools are found to be in violation of any existing or
future PRC laws or regulations or fail to obtain or maintain any of
the required permits or approvals, the relevant PRC regulatory
authorities would have broad discretion in dealing with such
violations, including:
The imposition of any of these penalties may cause significant
disruption to the Group's business operations and may result in a
material and adverse effect on the Group’s business,
financial condition and results of operations. In addition, if the
imposition of any of these penalties causes the Group to lose
control over the acquired schools, or to lose the rights to direct
the activities of the VIE, or the right to receive its economic
benefits, the Group would no longer be able to consolidate the VIE
and acquired schools. The Group does not believe that any penalties
imposed or actions taken by the PRC Government would result in the
liquidation of the Company, CCT Shanghai, the VIE, or the acquired
schools.
CCT
Shanghai is the primary beneficiary and absorbs 100% of the
economic benefits of CCLX. The following unaudited financial
statement amounts and balances of CCLX was included in the
accompanying unaudited condensed consolidated financial statements
as of and for the nine months ended September 30, 2011 after
elimination of the intercompany transactions and
balances:
There
are no consolidated CCLX assets that are collateral for the CCLX's
obligations and can only be used to settle the CCLX's
obligations.
There
are no assets of the CEC and its majority-owned subsidiaries that
serve as collateral for CCLX and the creditors of CCLX have no
recourse to the general credit of CEC and its majority-owned
subsidiaries.
Significant Accounting Policies
The
accompanying unaudited condensed consolidated financial statements
used the same accounting policies used in the preparation of the
audited financial statements included in CEC’s Annual Report
on Form 10-K for the fiscal year ended December 31,
2010.
Convenience Translation
Amounts
in United States dollars (“US$”) are presented solely
for the convenience of readers and an exchange rate of RMB6.4 to
US$1 was applied as of September 30, 2011. Such translation should
not be construed to be the amounts that would have been reported
under US GAAP.
|
ACQUIRED INTANGIBLE ASSETS, NET | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUIRED INTANGIBLE ASSETS, NET |
Acquired
intangible assets, net consisted of the following:
For the three months and nine months ended September 30, 2011, the
Company recorded amortization expense in respect of the customer
relationships amounting to RMB7,877 and RMB26,021, respectively.
The Company will record further amortization expenses in respect of
the customer relationships of RMB5,488, RMB18,926, RMB9,851, and
RMB2,533 in 2011, 2012, 2013 and 2014,
respectively.
For
the three months and nine months ended September 30, 2011, the
Company recorded amortization expense in respect of the affiliation
agreement amounting to RMB3,295 and RMB9,886, respectively.
The Company will record amortization expenses in respect of the
affiliation agreement of RMB3,295, RMB13,181, RMB9,736 and RMB1,899
in 2011, 2012, 2013 and 2014, respectively.
|
INCOME TAXES | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
INCOME TAXES |
On
March 16, 2007, the National People’s Congress enacted a
new enterprise income tax law, which took effect on January 1,
2008. The new law applies a uniform 25% enterprise income tax rate
to both foreign invested enterprises and domestic enterprises. The
new law provides a five-year transition period from its effective
date for the entitled enterprises which were established before the
promulgation date of the new tax law and which were entitled to a
preferential tax treatment such as a reduced tax rate or a tax
holiday. All the PRC entities of the Company are subject to 25%
income tax rate, except for the following entities, which enjoy
preferential tax rate.
According
to transitional rules published after the new income tax law, one
of the Company’s major operating subsidiaries, ChinaCast
Technology (Shanghai) Limited (“CCT Shanghai”), which
was subject to the preferential tax rate of 15%, is now eligible to
the phased-in rates: 18% in 2008, 20% in 2009, 22% in 2010, 24% in
2011, 25% in 2012 and thereafter.
Foreign
Trade and Business College of Chongqing Normal University
(“FTBC”) and Hai Yuen Company Limited (“Hai
Yuen”) were incorporated in Chongqing of the PRC and are
subject to the preferential tax rate of 15% until 2010 in
accordance with the western development preferential
policy.
Lijiang
College was incorporated in Guilin of the PRC and is subject to the
preferential tax rate of 15% until 2010 in accordance with the
western development preferential policy.
Provision
for income taxes mainly represents the PRC income taxes calculated
at the applicable rate on ChinaCast Technology (BVI) Limited (
“ CCT BVI ” ) ’ s deemed profit generated in the
PRC, the profit of CCT Shanghai, CCLX, Hai Lai, Hai Yuen, FTBC,
Lijiang College and HIUBC.
The
Company considers its undistributed earnings to be permanently
reinvested with respect to its investment in its foreign
subsidiaries. Accordingly, no deferred income tax liability related
to the unremitted earnings of its foreign subsidiaries has been
included in the Company’s provision for income taxes. Upon
distribution of subsidiaries earnings in the form of dividends or
otherwise, the Company would be subject to a withholding tax
calculated based on 10% of the gross amount of
distribution.
CCT
BVI constituted a Permanent Establishment ("PE") in the PRC and the
income generated from the PE is subject to the PRC income taxes,
which are calculated at 25% tax rate.
Uncertainties
exist with respect to the application of the Enterprise Income Tax
Law and its implementation rules to our operations, specifically
with respect to our tax residency status. The enterprise Income Tax
Law specifies that legal entities organized outside of the PRC will
be considered residents for PRC income tax purposes if their "de
facto management bodies" as establishment that carry out
substantial and overall management and control over the
manufacturing and business operations personnel, accounting,
properties, etc. of an enterprise. The Company has evaluated the
uncertain tax position related to the non-PRC tax residency of its
offshore holding entities. Taking all the relevant facts, technical
merits and current practice into consideration, the Company has
determined that the position does not meet the FIN48 recognition
threshold, which means it is more likely than not that the
positions will be sustained upon examination by tax authorities
with full knowledge of relevant facts and information, therefore,
no unrecognized tax benefit is recorded.
The
three acquired universities have so far not paid any income tax.
The Company provided provisions of unrecognized tax benefits for
the three acquired universities since significant judgments are
required in determining whether such universities are qualified for
income tax exemption. During the nine months ended September 30,
2011, the unrecognized tax benefits increased from RMB109,933 to
RMB123,142.
|
BORROWINGS | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other borrowings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BORROWINGS |
During
the nine months ended September 30, 2011, an aggregate amount of
other borrowings amounting to RMB34,000 was raised and RMB35,500
was repaid. The other borrowings carried interest at 9% per annum
and had been fully repaid in 2011 and there was no other borrowing
outstanding as of September 30, 2011.
The Company
raised other borrowings of RMB34,000 in the nine months ended
September 30, 2011 from two individuals. The terms and
counterparties for the borrowings are as follows:
The
Company repaid other borrowings of RMB35,500 in the nine months
ended September 30, 2011 to three individuals as
follows:
The
ending balance of other borrowings was nil as of September 30,
2011.
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Bank borrowings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BORROWINGS |
As
of December 31, 2010, bank borrowings were raised by FTBC, LJC and
HIUBC. The bank borrowings carried interest at the benchmark
interest rate announced by the People's Bank of China plus 10% to
20% per annum. The bank borrowings of FTBC were secured by pledge
of certain land use rights and buildings in Hai Lai with a carrying
amount of RMB 39,960, the entitlement to accommodation income of
the student apartments of FTBC and guarantees given by certain
individuals. The bank borrowing of LJC was secured by a guarantee
from a former owner of Lianhe, which was subsequently covered
by a guarantee given by Xijiu, and the bank borrowing of HIUBC was
guaranteed by Jiyang.
An
aggregate amount of bank borrowings amounting to RMB129,000 was
repaid.
During
January to September, 2011, an aggregate amount of bank
borrowings of RMB 129,800 was raised. Bank borrowings of
RMB 15,000, RMB 45,000 and RMB 20,000 have a weighted average
interest rate of 7.7% and are secured by Chongqing Culture
Media Guarantee Co., Ltd (“CQCMG”), Chongqing Education
Guarantee Co., Ltd (“CQEG”) and certain individuals
with the guarantee deposit of RMB 4,000 paid. The bank
borrowing of RMB 4,800 has an annual interest rate
at 6.56%, and secured by RMB 5,000 term deposit of Hai
Lai.
The
bank borrowing of RMB45,000 has an annual interest
rate at 6.06% and is secured by the entitlement to
accommodation income of the student apartments of LJC and also
guaranteed by ChinaCast Technology (Shanghai) Limited.
|
NON-CURRENT DEPOSITS | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NON-CURRENT DEPOSITS |
6. NON-CURRENT DEPOSITS
Non-current
deposits consisted of the following:
Rental
deposits represented office rental deposits for the Company’s
daily operations.
Guarantee
deposit for borrowings represented deposits placed with
Chongqing Education Guarantee Co., Ltd., a long-term investment of
the Company, which in turn provided guarantee in favor of the
relevant bank for the Company’s bank borrowings of
RMB70,000.
Prepayment
and deposits for land use rights and construction projects
represented deposit paid to get land use right and as deposit for
construction works.
These
deposits are classified into non-current deposits since they will
not be refunded within one year.
|
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY In Thousands, except Share data | Total
USD ($) | Total
CNY | Ordinary Shares
USD ($) | Ordinary Shares
CNY | Additional paid-in capital
USD ($) | Additional paid-in capital
CNY | Statutory Reserve
USD ($) | Statutory Reserve
CNY | Retained earnings
USD ($) | Retained earnings
CNY | Accumulated other comprehensive loss
USD ($) | Accumulated other comprehensive loss
CNY | Noncontrolling interest
USD ($) | Noncontrolling interest
CNY |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning Balance at Jan. 01, 2010 | 1,483,518 | 33 | 1,290,651 | 39,139 | 136,583 | (6,055) | 23,167 | |||||||
Beginning Balance (in shares) at Jan. 01, 2010 | 45,170,698 | |||||||||||||
Issuance of shares of common stock (in shares) | 4,428,254 | |||||||||||||
Issuance of shares of common stock | 232,970 | 3 | 232,967 | |||||||||||
Share-based compensation | 6,522 | 6,522 | ||||||||||||
Issuance of vested shares | 180,000 | |||||||||||||
Capital contribution by a non-controlling shareholder | 20,000 | 20,000 | ||||||||||||
Net income | 106,666 | 105,239 | 1,427 | |||||||||||
Foreign currency translation adjustments | 1,994 | 2,044 | (50) | |||||||||||
Ending Balance at Sep. 30, 2010 | 276,368 | 1,851,670 | 5 | 36 | 228,379 | 1,530,140 | 5,842 | 39,139 | 36,093 | 241,822 | (599) | (4,011) | 6,648 | 44,544 |
Ending Balance (in shares) at Sep. 30, 2010 | 49,778,952 | |||||||||||||
Beginning Balance at Dec. 31, 2010 | 1,780,394 | 36 | 1,510,527 | 47,671 | 199,862 | (3,194) | 25,492 | |||||||
Beginning Balance (in shares) at Dec. 31, 2010 | 49,778,952 | |||||||||||||
Repurchase of common stock (in shares) | (1,015,503) | (1,015,503) | ||||||||||||
Repurchase of common stock | (30,769) | (30,769) | ||||||||||||
Share-based compensation (in shares) | 256,842 | 256,842 | ||||||||||||
Share-based compensation | 7,289 | 7,289 | ||||||||||||
Disposal of discontinued operation | (18,967) | (37) | (18,930) | |||||||||||
Net income | 20,503 | 131,225 | 130,581 | 644 | ||||||||||
Foreign currency translation adjustments | 899 | 899 | ||||||||||||
Ending Balance at Sep. 30, 2011 | $ 292,198 | 1,870,071 | $ 6 | 36 | $ 232,351 | 1,487,047 | $ 7,443 | 47,634 | $ 51,632 | 330,443 | $ (360) | (2,295) | $ 1,126 | 7,206 |
Ending Balance (in shares) at Sep. 30, 2011 | 49,020,291 |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED | 9 Months Ended | |||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED |
In
April, 2011, the FASB issued an authoritative pronouncement on a
creditor's determination of whether a restructuring is a troubled
debt restructuring, which clarifies which loan modifications
constitute troubled debt restructurings. It is intended to assist
creditors in determining whether a modification of the terms of a
receivable meets the criteria to be considered a troubled debt
restructuring, both for purposes of recording an impairment loss
and for disclosure of troubled debt restructurings. In evaluating
whether a restructuring constitutes a troubled debt restructuring,
a creditor must separately conclude that both of the following
exist: (a) the restructuring constitutes a concession; and (b) the
debtor is experiencing financial difficulties. The amendment
clarify the guidance on a creditor’s evaluation of whether it
has granted a concession and whether a debtor is experiencing
financial difficulties. For public companies, the new guidance is
effective for interim and annual periods beginning on or after June
15, 2011, and applies retrospectively to restructurings occurring
on or after the beginning of the fiscal year of adoption. For
nonpublic entities, the amendments to the Codification in the ASU
are effective for annual periods ending on or after December 15,
2012, including interim periods within those annual periods. Early
adoption is permitted. The Company does not expect the adoption of
this pronouncement to have a significant impact on its financial
condition or results of operations.
In
May 2011, the FASB issued an authoritative pronouncement on fair
value measurement. The guidance is the result of joint efforts by
the FASB and IASB to develop a single, converged fair value
framework. The guidance is largely consistent with existing fair
value measurement principles in U.S. GAAP. The guidance expands the
existing disclosure requirements for fair value measurements and
makes other amendments, mainly including:
The
guidance is to be applied prospective and effective for interim and
annual periods beginning after December 15, 2011, for public
entities. Early application by public entities is not permitted.
The Company does not expect the adoption of this pronouncement to
have a significant impact on its financial condition or results of
operations.
In June 2011, the FASB issued an authoritative pronouncement to
allow an entity the option to present the total of comprehensive
income, the components of net income, and the components of other
comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements.
In both choices, an entity is required to present each component of
net income along with total net income, each component of other
comprehensive income along with a total for other comprehensive
income, and a total amount for comprehensive income. The guidance
eliminates the option to present the components of other
comprehensive income as part of the statement of changes in
shareholders' equity. These amendments do not change the items that
must be reported in other comprehensive income or when an item of
other comprehensive income must be reclassified to net income. The
guidance should be applied retrospectively. For public entities,
the amendments are effective for fiscal years and interim periods
within those years, beginning after December 15, 2011. Early
adoption is permitted.
The Company does not expect the adoption of this pronouncement to
have a significant impact on its financial condition or results of
operations.
In
September 2011, the FASB has issued an authoritative pronouncement
related to testing goodwill for impairment. The guidance is
intended to simplify how entities, both public and nonpublic, test
goodwill for impairment. The pronouncement permits an
entity to first assess qualitative factors to determine whether it
is "more likely than not" that the fair value of a reporting unit
is less than its carrying amount as a basis for determining whether
it is necessary to perform the two-step goodwill impairment test.
The guidance is effective for annual and interim goodwill
impairment tests performed for fiscal years beginning after
December 15, 2011. Early adoption is permitted, including for
annual and interim goodwill impairment tests performed as of a date
before September 15, 2011, if an entity’s financial
statements for the most recent annual or interim period have not
yet been issued or, for nonpublic entities, have not yet been made
available for issuance. The Company does not expect the adoption of
this pronouncement to have a significant impact on its financial
condition or results of operations.
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DISCONTINUED OPERATIONS | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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DISCONTINUED OPERATIONS |
In
October 2009, one of the Company’s major operating
subsidiaries, ChinaCast Technology (Shanghai) Limited (“CCT
Shanghai”), entered into an agreement with Qingdao China
University of Petroleum Holding Limited ("CUP") to establish
Qingdao Petroleum University Education Development Limited
(“QPU”). The total registered capital is RMB50,000,
with 60% owned by CCT Shanghai, and CUP to hold the rest of the
equity interest. In September 2010, the Company completed its
capital injection of RMB30,000. Since CCT Shanghai has a majority
voting power after the completion of all the capital injection, QPU
has been consolidated by the Company since September 2010. On
September 30, 2011, the Company completed the transaction under a
Transfer Agreement with CUP to dispose of its 60% stake in QPU with
a total consideration of RMB30,000. Net of RMB18 million owed to
QPU, the Company expects to receive RMB12 million by December 31,
2011, amount is currently reflected as other current receivables.
The control over QPU was transferred to CUP in September 2011, and
the Company has de-consolidated QPU and its subsidiary as of
September 30, 2011, and a gain amounting to RMB1,716 was reported
for the nine months ended September, 2011.
Summarized
operating results from the discontinued operations included in the
Company's condensed consolidated statements of operations were as
follows for the three months and nine months ended September 30,
2010 and 2011, respectively:
All
notes to the accompanying unaudited condensed consolidated
financial statements have been retroactively adjusted to reflect
the effect of the discontinued operations, where
applicable.
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STOCK COMPENSATION PLAN | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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STOCK COMPENSATION PLAN |
Under
the 2007 Omnibus Securities and Incentive Plan (“2007
Plan”) adopted in May 2007, CEC may grant any awards to
eligible participants, including employees, directors or
consultants, to purchase up to 2,500,000 ordinary
shares.
Nonvested shares
On
January 11, 2008, CEC agreed to grant, under the 2007
Plan, nonvested shares to its three independent directors at
no consideration. Each of the three directors were granted 100,000
nonvested shares of the Company's common stock. All of the shares
of nonvested stock to be granted to the directors were issued at
fair market value based on the closing price on January 11, 2008 of
US$6.25 (RMB45.38). For each of the three directors of CEC, 10,000,
30,000 and 60,000 of the nonvested shares vested on February 9,
2008, February 9, 2009 and February 9, 2010, respectively. In
December 2009, Mr. Richard Xue decided not to stand for
re-election to the board of directors of CEC. CEC's board of
directors accelerated the date of the vesting of his final grant of
60,000 nonvested shares from February 9, 2010 to the date of his
resignation.
On June 22, 2010, CEC granted, under the 2007 Plan, 396,678
nonvested shares to six employees at no consideration. All of the
shares of nonvested stock to the employees were granted at fair
market value based on the closing price of June 22, 2010 of US$6.07
(RMB41.26). 33,062 of the nonvested shares vested on the date of
grant. 33,056 of the nonvested shares vested on July 31, 2010
and an equal number of nonvested shares vest at the end of every
three months thereafter until January 31, 2013.
On
April 30, 2011, CEC granted, under the 2007 Plan, 250,000 nonvested
shares to three independent directors at no consideration. All of
the shares of nonvested stock to the independent directors were
granted at fair market value based on the closing price of April
30, 2011 of US$6.11 (RMB39.72). 35,000 of the nonvested shares
vested on the date of grant. 55,000 of the nonvested
shares vest on February 9, 2012 and the balance of 160,000 of
nonvested shares vest on February 9, 2013.
On
May 31, 2011, CEC granted, under the 2007 Plan, 23,500 nonvested
shares to 47 employees at no consideration. All of the shares of
nonvested stock to the employees were granted at fair market value
based on the closing price of May 31, 2011 of US$5.63
(RMB36.60).
The
total unrecognized compensation expense related to the stock
compensation arrangements for the share options as of
September 30, 2011 is US$2,203(RMB14,051).
Share options
On
January 11, 2008, CEC granted, under the 2007 Plan, 1,200,000
options to purchase the Company's common stock to selected
employees at no consideration. The per share exercise price
of the options is US$6.30(RMB42,84) and the expiry date is January
11, 2018. A total of 401,000, 401,000 and 398,000 share
options vested on March 31, 2008, March 31, 2009 and March 31,
2010, respectively. Upon exercise of these options, a total
of 1,200,000 common stock will be issued. As of September 30,
2011, no such options have been forfeited.
A
summary of the option activity under 2007 Plan is as
follows:
The
per share fair value of options as of January 11, 2008, the grant
date, was US$2.67 (RMB19.33).
The
aggregate intrinsic value of share options outstanding and
exercisable as of September 30, 2011 was nil.
The
weighted average remaining contractual life is 6.25 years as of
September 30, 2011.
Total
share-based compensation expenses amounting to RMB1,974 and
RMB1,922 were recognized for the three months ended September 30,
2011 and 2010, respectively. Total share-based compensation
expenses amounting to RMB7,289 and RMB6,114 were recognized for the
nine months ended September 30, 2011 and 2010,
respectively.
As
of September 30, 2011, no other awards have been granted under the
2007 Plan.
|
ACQUISITION | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITION |
Acquisition of East Achieve
On
October 5, 2009, ChinaCast Communication Holdings Limited ( “
CCH ” ), the Company's subsidiary in Bermuda, consummated the
acquisition of the entire interest in East Achieve Limited
(“East Achieve”) from the former sole owner of East
Achieve. East Achieve holds the entire interest in Shanghai
Xijui Information Technology Co., Ltd. (“Xijiu”).
Xijiu holds the entire interest in China Lianhe Biotechnology Co.,
Ltd. (“Lianhe”) which in turns holds the entire
interest in Lijiang College of Guangxi Normal University
(“Lijiang College”). Lijiang College is a private
college affiliated with Guangxi Normal University. The total
consideration for the acquisition is up to RMB365,000, of which
RMB295,000 was paid during 2009. The remaining amount of the
consideration is to be calculated as below.
For
the academic year of 2009 (i.e. from September 1, 2009 to August
31, 2010), if the net profit as determined under the relevant sale
and purchase agreement of the Lijiang College is less than
RMB55,000, CCH is entitled to deduct an amount equal to 6.6 times
of the difference between the net profit and RMB55,000 from the
remaining payment.
The
remaining consideration was recorded as a liability at fair value
of RMB30,482 as of December 31, 2009 and was subsequently settled
at RMB20,540 in September 2010. As a result, a gain of RMB9,417
from change in contingent consideration was recognized and included
in the operating income of the third quarter of 2010.
The
acquisition was recorded using the purchase method of accounting
and, accordingly, the acquired assets and liabilities were recorded
at their fair market value at the date of acquisition. The
purchase price allocation was as follows:
The Company allocated the purchase price for the
acquisition. The valuation analyses utilized and considered
generally accepted valuation methodologies such as income, market
and cost approach.
The
Company believes that the acquisition furthers its strategy of
expanding into the post-secondary bricks and mortar education
market. The combination of these factors is the rationale for
the excess of purchase price over the value of the assets acquired
and liabilities assumed.
Acquisition of Wintown
On
August 23, 2010, ChinaCast Education Holdings Limited ( “ CEH
” ), the Company's subsidiary in the British Virgin Islands,
consummated the acquisition of the entire interest in Wintown from
the former sole owner of Wintown. Wintown ultimately holds the
entire interest in HIUBC. HIUBC is a private college affiliated
with Hubei Industrial University. The total consideration for the
acquisition is up to RMB450,000 of which RMB360,000 was paid during
2010. The remaining amount of the consideration is to be calculated
as below:
For
the academic year of 2010 (i.e., from September 1, 2010 to August
31, 2011), if the net profit as determined under the relevant sale
and purchase agreement of HIUBC is less than RMB50,000, CEH is
entitled to deduct an amount equal to 9 times of the difference
between the net profit and RMB50,000 from the remaining payment of
RMB90,000.
The
remaining consideration was recorded as a liability at fair value
of RMB78,721 as of December 31, 2010 and was subsequently settled
at RMB70,120 in September 2011. As a result, a gain of RMB8,601
from change in contingent consideration was recognized and included
in the operating income of the third quarter of 2011.
The
fair value of total consideration of RMB438,721 as of the
acquisition date consisted of:
The
acquisition was recorded using the purchase method of accounting
and, accordingly, the acquired assets and liabilities were recorded
at their fair market value at the date of acquisition. The purchase
price allocation was as follows:
The
Company allocated the purchase price for the acquisition. The
valuation analyses utilized and considered generally accepted
valuation methodologies such as income, market and cost
approach.
The
Company believes that the acquisition furthers its strategy of
expanding into the post-secondary bricks and mortar education
market. The combination of these factors is the rationale for the
excess of purchase price over the value of the assets acquired and
liabilities assumed.
|
NET INCOME PER SHARE | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME PER SHARE |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Parenthetical) In Thousands | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011
USD ($) | Sep. 30, 2010
CNY | Sep. 30, 2011
USD ($) | Sep. 30, 2010
CNY | Sep. 30, 2011
Selling and Marketing Expense
CNY | Sep. 30, 2010
Selling and Marketing Expense
CNY | Sep. 30, 2011
Selling and Marketing Expense
CNY | Sep. 30, 2010
Selling and Marketing Expense
CNY | Sep. 30, 2011
General and Administrative Expense
CNY | Sep. 30, 2010
General and Administrative Expense
CNY | Sep. 30, 2011
General and Administrative Expense
CNY | Sep. 30, 2010
General and Administrative Expense
CNY | |
Share-based compensation | 0 | 0 | 0 | 410 | 1,974 | 1,922 | 7,289 | 6,114 | ||||
Loss from discontinued operations, taxes | $ 0 | 0 | $ 0 | 0 |
SEGMENT INFORMATION | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION |
The
Company’s revenues and net income are substantially derived
from the PRC. Most of the assets and capital expenditure of the
Company are employed in the PRC.
There
were no customers accounting for 10% or more of total net revenues
for the three months and nine months ended September 30,
2011.
Three
customers as of September 30, 2011 and two customers as of December
31, 2010 each accounted for 10% or more of the Company’s
accounts receivable balances, representing an aggregate of 34.2%
and 20.9% of the Company’s accounts receivable balances at
September 30, 2011 and December 31, 2010,
respectively.
|
RELATED PARTY TRANSACTION | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||
RELATED PARTY TRANSACTION |
(a). Transaction
On
September 30, 2011, the Company completed the transaction under a
Transfer Agreement with CUP, the original 40% minority shareholder
of QPU, to dispose of its 60% stake in QPU with a total
consideration of RMB30, 000. The control over QPU was transferred
to CUP in September 2011, and a gain amounting to RMB1,716 was
reported for the nine months ended September, 2011. (See note
3)
(b) Balances
|
SHARE REPURCHASE | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
SHARE REPURCHASE |
From
May 12, 2011 to September 30, 2011, the Company repurchased a total
of 1,015,503 shares of common stock. The average repurchase price
per share was US$4.688 and the total principal paid for the common
stock was US$4,760.
|
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