UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 6-K

 

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of April 2020

 

Commission File Number: 001-34900 

 

 

 

TAL EDUCATION GROUP

 

 

 

12/F, Danling SOHO

No. 6 Danling Street, Haidian District

Beijing 100080

People’s Republic of China

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F   x            Form 40-F   ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                 

 

 

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  TAL Education Group
     
     
  By:

/s/ Rong Luo

    Name: Rong Luo
    Title: Chief Financial Officer

 

Date: April 28, 2020 

 

 

 

 

Exhibit Index

 

Exhibit 99.1 – Press Release

 

 

 

 

Exhibit 99.1

 

TAL Education Group Announces Unaudited Financial Results for the

 

Fourth Fiscal Quarter and the Fiscal Year 2020

 

Corrections to Certain Line Items of Previously Released Financial Statements for the First, Second and Third Quarters of Fiscal Year 2020

 

 

- Quarterly Results:

Net Revenues up by 18.0% Year-Over-Year

Loss from Operations was US$41.3 million, compared to Income from Operations of US$114.7 million in the Same Period of Prior Year

Non-GAAP Loss from Operations was US$8.4 million, compared to Non-GAAP Income from Operations of US$137.0 million in the Same Period of Prior Year

Total Student Enrollments of Normal Priced Long-term Course up by 56.6% Year-Over-Year

 

- Fiscal Year Results:

Net Revenues up by 27.7%

Income from Operations was US$137.4 million, compared to Income from Operations of US$341.6 million in Fiscal Year 2019

Non-GAAP Income from Operations was US$255.4 million, compared to Non-GAAP Income from Operations of US$418.9 million in Fiscal Year 2019

Quarterly Average Student Enrollments of Normal Priced Long-term Course up by 55.2% Year-Over-Year

 

(Beijing–April 28, 2020)—TAL Education Group (NYSE: TAL) (“TAL” or the “Company”), a leading K-12 after-school tutoring services provider in China, today announced its unaudited financial results for the fourth quarter and the fiscal year ended February 29, 2020.

 

Highlights for the Fourth Quarter of Fiscal Year 2020

-Net revenues increased by 18.0% year-over-year to US$857.7 million from US$726.6 million in the same period of the prior year.
-Loss from operations was US$41.3 million, compared to income from operations of US$114.7 million in the same period of the prior year.
-Non-GAAP loss from operations, which excluded share-based compensation expenses, was US$8.4 million, compared to Non-GAAP income from operations of US$137.0 million in the same period of the prior year.
-Net loss attributable to TAL was US$90.1 million, compared to net income attributable to TAL of US$99.6 million in the same period of the prior year.
-Non-GAAP net loss attributable to TAL, which excluded share-based compensation expenses, was US$57.2 million, compared to Non-GAAP net income attributable to TAL of US$121.9 million in the same period of the prior year.
-Basic and diluted net loss per American Depositary Share (“ADS”) were both US$0.15. Non-GAAP basic and diluted net loss per ADS, which excluded share-based compensation expenses, were both US$0.10. Three ADSs represent one Class A common share.

-Cash, cash equivalents and short-term investments totaled US$2,219.3 million as of February 29, 2020, compared to US$1,515.6 million as of February 28, 2019.
-Total student enrollments of normal priced long-term course increased by 56.6% year-over-year to approximately 4,646,040 from approximately 2,966,400 in the same period of the prior year.

 

 

 

 

Highlights for the Fiscal Year Ended February 29, 2020

-Net revenues increased by 27.7% year-over-year to US$3,273.3 million from US$2,563.0 million in fiscal year 2019.
-Income from operations decreased by 59.8% to US$137.4 million from US$341.6 million in fiscal year 2019.
-Non-GAAP income from operations, which excluded share-based compensation expenses, decreased by 39.0% to US$255.4 million from US$418.9 million in fiscal year 2019.
-Net loss attributable to TAL was US$110.2 million, compared to net income attributable to TAL of US$367.2 million in fiscal year 2019.
-Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, was US$7.7 million, compared to Non-GAAP net income attributable to TAL of US$444.5 million in fiscal year 2019.
-Basic and diluted net loss per ADS were both US$0.19. Non-GAAP basic and diluted net income per ADS, excluding share-based compensation expenses, were both US$0.01.
-Average student enrollments of normal priced long-term course per quarter during fiscal year 2020 increased by 55.2% year-over-year to approximately 3,023,840 from approximately 1,948,350 in fiscal year 2019.
-Total physical network increased from 676 learning centers in 56 cities as of February 28, 2019 to 871 learning centers in 70 cities as of February 29, 2020.

 

Financial and Operating Data——Fourth Quarter and Fiscal Year 2020

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

 

   Three Months Ended 
   February 28/29, 
   2019   2020   Pct. Change 
Net revenues   726,561    857,682    18.0%
Operating income/(loss)   114,706    (41,256)   (136.0%)
Non-GAAP operating income/(loss)   136,981    (8,392)   (106.1%)
Net income/(loss) attributable to TAL   99,612    (90,074)   (190.4%)
Non-GAAP net income/(loss) attributable to TAL   121,887    (57,210)   (146.9%)
Net income/(loss) per ADS attributable to TAL – basic   0.17    (0.15)   (186.8%)
Net income/(loss) per ADS attributable to TAL – diluted   0.17    (0.15)   (191.1%)
Non-GAAP net income/(loss) per ADS attributable to TAL – basic   0.21    (0.10)   (145.0%)
Non-GAAP net income/(loss) per ADS attributable to TAL – diluted   0.20    (0.10)   (147.3%)
Total Student Enrollments of normal priced long-term course   2,966,400    4,646,040    56.6%

 

   Fiscal Year Ended 
   February 28/29, 
   2019   2020   Pct. Change 
Net revenues   2,562,984    3,273,308    27.7%
Operating income   341,582    137,443    (59.8%)
Non-GAAP operating income   418,859    255,386    (39.0%)
Net income/(loss) attributable to TAL   367,236    (110,195)   (130.0%)
Non-GAAP net income attributable to TAL   444,513    7,748    (98.3%)
Net income/(loss) per ADS attributable to TAL – basic   0.64    (0.19)   (128.8%)
Net income/(loss) per ADS attributable to TAL – diluted   0.61    (0.19)   (130.3%)
Non-GAAP net income per ADS attributable to TAL – basic   0.78    0.01    (98.3%)
Non-GAAP net income per ADS attributable to TAL – diluted   0.74    0.01    (98.3%)
Average Student Enrollments of normal priced long-term course   1,948,350    3,023,840    55.2%

 

 

 

 

“Our fourth fiscal quarter revenue performance was impacted by the outbreak of COVID-19 and the resulting precautionary measures with respect to our offline business. The negative impact on our offline business was partially offset by the growth in student enrollments in online courses and related revenues for the quarter,” said Rong Luo, TAL’s chief financial officer.

 

“We maintain the utmost caution for the safety and health of all our students and employees and make any short-term adjustments to our business operations when needed. For the longer term, as an established and one of the leading companies in China’s education market with many years of efforts to improve our education technology and services, we continue to have full confidence in our future development,” Mr. Luo continued.

 

Financial Results for the Fourth Quarter of Fiscal Year 2020

 

Net Revenues

In the fourth quarter of fiscal year 2020, TAL reported net revenues of US$857.7 million, representing an 18.0% increase from US$726.6 million in the fourth quarter of fiscal year 2019. The increase was mainly driven by an increase in total student enrollments of normal priced long-term course, which increased by 56.6% to approximately 4,646,040 from approximately 2,966,400 in the same period of the prior year. The increase in total student enrollments of normal priced long-term course was primarily driven by the growth of enrollments in the small class offerings and online courses.

 

Operating Costs and Expenses

In the fourth quarter of fiscal year 2020, operating costs and expenses were US$899.3 million, representing a 47.0% increase from US$611.9 million in the fourth quarter of fiscal year 2019. Non-GAAP operating costs and expenses, which excluded share-based compensation expenses, were US$866.5 million, a 46.9% increase from US$589.6 million in the fourth quarter of fiscal year 2019.

 

Cost of revenues increased by 32.6% to US$405.9 million from US$306.2 million in the fourth quarter of fiscal year 2019. The increase in cost of revenues was mainly due to an increase in teacher compensation, rental costs and learning materials. Non-GAAP cost of revenues, which excluded share-based compensation expenses, increased by 32.6% to US$405.6 million, from US$306.0 million in the fourth quarter of fiscal year 2019.

 

Selling and marketing expenses increased by 78.6% to US$243.2 million from US$136.2 million in the fourth quarter of fiscal year 2019. Non-GAAP selling and marketing expenses, which excluded share-based compensation expenses, increased by 78.2% to US$236.8 million, from US$132.9 million in the fourth quarter of fiscal year 2019. The increase of selling and marketing expenses in the fourth quarter of fiscal year 2020 was primarily a result of more marketing promotion activities to expand our customer base and brand enhancement, as well as a rise in the compensation to sales and marketing staff to support a greater number of programs and service offerings compared to the same period in the prior year.

 

General and administrative expenses increased by 30.5% to US$221.2 million from US$169.6 million in the fourth quarter of fiscal year 2019. The increase in general and administrative expenses was mainly due to an increase of the number of our general and administrative personnel compared to the same period in the prior year and a rise in compensation to our general and administrative personnel. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses, increased by 29.3% to US$195.0 million, from US$150.8 million in the fourth quarter of fiscal year 2019.

 

Total share-based compensation expenses allocated to the related operating costs and expenses increased by 47.5% to US$32.9 million in the fourth quarter of fiscal year 2020 from US$22.3 million in the same period of fiscal year 2019.

 

Impairment loss on intangible assets and goodwill was US$29.0 million for the fourth quarter of fiscal year 2020, compared to nil for the fourth quarter of fiscal year 2019. Impairment loss on intangible assets and goodwill was mainly due to the decline in a reporting unit’s fair value.

 

 

 

 

Gross Profit

Gross profit increased by 7.5% to US$451.8 million from US$420.4 million in the fourth quarter of fiscal year 2019.

 

Income/(loss) from Operations

Loss from operations was US$41.3 million in the fourth quarter of fiscal year 2020, compared to income from operations of US$114.7 million in the fourth quarter of fiscal year 2019. Non-GAAP loss from operations, which excluded share-based compensation expenses, was US$8.4 million, compared to Non-GAAP income from operations of US$137.0 million in the fourth quarter of fiscal year 2019.

 

Other Income/(Expense)

Other expense was US$4.7 million for the fourth quarter of fiscal year 2020, compared to other income of US$24.7 million in the fourth quarter of fiscal year 2019.

 

Impairment Loss on Long-term Investments

Impairment loss on long-term investments was US$2.8 million for the fourth quarter of fiscal year 2020, compared to US$7.2 million for the fourth quarter of fiscal year 2019. Impairment loss on long-term investments was mainly due to other-than temporary declines in the value of long-term investments in several investees.

 

Income Tax Expense

Income tax expense was US$63.6 million in the fourth quarter of fiscal year 2020, compared to US$33.2 million of income tax expense in the fourth quarter of fiscal year 2019.

 

Net Income/(loss) Attributable to TAL Education Group

Net loss attributable to TAL was US$90.1 million in the fourth quarter of fiscal year 2020, compared to net income attributable to TAL of US$99.6 million in the fourth quarter of fiscal year 2019. Non-GAAP net loss attributable to TAL, which excluded share-based compensation expenses was US$57.2 million in the fourth quarter of fiscal year 2020, compared to Non-GAAP net income attributable to TAL of US$121.9 million in the fourth quarter of fiscal year 2019.

 

Basic and Diluted Net Income/(loss) per ADS

Basic and diluted net loss per ADS were both US$0.15 in the fourth quarter of fiscal year 2020. Non-GAAP basic and diluted net loss per ADS, which excluded share-based compensation expenses, were both US$0.10 in the fourth quarter of fiscal year 2020.

 

Capital Expenditures

Capital expenditures for the fourth quarter of fiscal year 2020 were US$62.3 million, compared to US$209.1 million for the fourth quarter of fiscal year 2019. The capital expenditures for the fourth quarter of fiscal year 2019 was mainly due to the capital expenditures for the purchase of land use rights.

 

Cash, Cash Equivalents, and Short-Term Investments

As of February 29, 2020, the Company had US$1,873.9 million of cash and cash equivalents and US$345.4 million of short-term investments, compared to US$1,247.1 million of cash and cash equivalents and US$268.4 million of short-term investments as of February 28, 2019.

 

Deferred Revenue

As of February 29, 2020, the Company’s deferred revenue balance was US$781.0 million, compared to US$436.1 million as of February 28, 2019, representing a year-over-year increase of 79.1%. Deferred revenue primarily consisted of the tuition collected in advance of Xueersi Peiyou small classes, as well as deferred revenue related to other businesses.

  

 

 

 

Financial Results for the Fiscal Year Ended February 29, 2020

 

Net Revenues

For fiscal year 2020, TAL reported net revenues of US$3,273.3 million, representing a 27.7% increase from US$2,563.0 million in fiscal year 2019. The increase was mainly driven by the growth in average student enrollments of normal priced long-term course, which increased by 55.2% to approximately 3,023,840 from approximately 1,948,350 in the prior year. The increase in average student enrollments of normal priced long-term course was driven primarily by the growth of enrollments in the small class offerings and online courses.

 

Operating Costs and Expenses

In fiscal year 2020, operating costs and expenses were US$3,145.3 million, a 41.2% increase from US$2,228.1 million in fiscal year 2019. Non-GAAP operating costs and expenses, which excluded share-based compensation expenses, were US$3,027.4 million, a 40.8% increase from US$2,150.8 million in fiscal year 2019.

 

Cost of revenues grew by 26.1% to US$1,468.6 million from US$1,164.5 million in fiscal year 2019. The increase in cost of revenues was mainly due to increase in teacher compensation, rental costs and learning materials. Non-GAAP cost of revenues, which excluded share-based compensation expenses, increased by 26.1% to US$1,467.5 million from US$1,163.7 million in fiscal year 2019.

 

Selling and marketing expenses increased by 76.2% to US$852.8 million from US$484.0 million in fiscal year 2019. Non-GAAP selling and marketing expenses, which excluded share-based compensation expenses, increased by 76.0% to US$833.5 million from US$473.5 million in fiscal year 2019. The increase of selling and marketing expenses in fiscal year 2020 was primarily a result of more marketing promotion activities to expand our customer base and brand enhancement, as well as a rise in the compensation to sales and marketing staff to support a greater number of programs and service offerings compared to the same period in the prior year.

 

General and administrative expenses increased by 37.1% to US$795.0 million from US$579.7 million in fiscal year 2019. The increase in general and administrative expenses was mainly due to an increase of the number of our general and administrative personnel compared to the same period in the prior year and a rise in compensation to our general and administrative personnel. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses, increased by 35.8% to US$697.4 million from US$513.6 million in fiscal year 2019.

 

Total share-based compensation expenses allocated to the related operating costs and expenses increased by 52.6% to US$117.9 million in fiscal year 2020 from US$77.3 million in fiscal year 2019.

 

Impairment loss on intangible assets and goodwill was US$29.0 million for the fiscal year 2020, compared to nil for the fiscal year 2019. Impairment loss on intangible assets and goodwill was mainly due to the decline in a reporting unit’s fair value.

 

Gross Profit

Gross profit grew by 29.0% to US$1,804.7 million from US$1,398.5 million in fiscal year 2019.

 

Income/(loss) from Operations

Income from operations decreased by 59.8% to US$137.4 million from US$341.6 million in fiscal year 2019. Non-GAAP income from operations, which excluded share-based compensation expenses, decreased by 39.0% to US$255.4 million from US$418.9 million in fiscal year 2019.

 

 

 

 

Other Income/(Expense)

Other expense was US$95.3 million for the fiscal year 2020, compared to other income of US$131.7 million in fiscal year 2019. Other expense in fiscal year 2020 was mainly related to the fair value changes of a long-term investment.

 

Impairment Loss on Long-term Investments

Impairment loss on long-term investments was US$154.0 million for fiscal year 2020, compared to US$58.1 million for fiscal year 2019. Impairment loss on long-term investments was mainly due to other-than temporary declines in the value of long-term investments in several investees.

 

Income Tax Expense

Income tax expense was US$69.3 million in fiscal year 2020, compared to US$76.5 million of income tax expense in fiscal year 2019.

 

Net Income/(loss) Attributable to TAL Education Group

Net loss attributable to TAL was US$110.2 million in fiscal year 2020, compared to net income attributable to TAL of US$367.2 million in fiscal year 2019. Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, decreased by 98.3% to US$7.7 million from US$444.5 million in fiscal year 2019.

 

Basic and Diluted Net Income/(loss) per ADS

Basic and diluted net loss per ADS were both US$0.19 in fiscal year 2020. Non-GAAP basic and diluted net income per ADS, which excluded share-based compensation expenses, were both US$0.01 in fiscal year 2020.

 

Capital Expenditures

Capital expenditures for fiscal year 2020 were US$187.5 million, compared to US$353.3 million for fiscal year 2019. The capital expenditures for fiscal year 2019 was mainly due to the capital expenditures for the purchase of land use rights.

 

Business Outlook

Based on our current estimates, total net revenues for the first quarter of fiscal year 2021 are expected to be between US$875.4 million and US$895.6 million, representing an increase of 30% to 33% on a year-over-year basis.

 

If not taking into consideration the impact of potential change in exchange rate between Renminbi and the U.S. Dollar, the projected revenue growth rate is expected to be in the range of 35% to 38% for the first quarter of fiscal year 2021.

 

These estimates reflect the Company’s current expectation, which is subject to change.

 

Recent Developments

 

Further Investment in Online English Tutoring Service Provider

 

TAL today announced that it had recently entered into a definitive agreement to further invest US$10.4 million of cash in exchange of controlling equity interests in a distressed online provider of one-on-one English tutoring services with material deferred revenue liability. Before the completion of the foregoing transaction, the Company has minority equity interests in the investee.

 

 

 

 

Previously Released Unaudited Quarterly Financial Statements

 

As TAL previously announced on April 7, 2020, during its routine internal auditing process, the Company discovered certain employee wrongdoing in relation to the “Light Class” business. As a result of such wrongdoing, the Company would need to make corrections to certain line items of its previously released unaudited quarterly condensed consolidated financial statements as of and for the three months ended May 31, 2019, August 31, 2019, and November 30, 2019. For more detailed information, please refer to the Annex titled “Corrections to Certain Line Items of Previously Released Financial Statements for the First, Second and Third Quarters of Fiscal Year 2020” attached to this earnings release.

Adoption of Share Repurchase Plan

 

On April 28, 2020, TAL’s board of directors authorized the repurchase of up to US$500 million of the Company's common shares over the next 12 months, subject to the applicable rules under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, the Company's management, informed the Company of their intention to repurchase up to a total US$100 million of the Company's common shares, subject to the applicable rules under the Exchange Act.

 

This share repurchases may be made by the Company and/or its management from time to time in the open market at prevailing market prices, in privately negotiated transactions, in block trades and/ or through other legally permissible ways in accordance with applicable rules and regulations. The timing and extent of any purchases will depend upon market conditions, the trading price of ADSs and other factors. TAL’s board of directors will review the share repurchase plan periodically and may authorize adjustment to its terms and size accordingly. TAL plans to fund any share repurchases made under this plan from the Company’s available cash balance.

 

Conference Call

 

The Company will host a conference call and live webcast to discuss its financial results for the fourth fiscal quarter of fiscal year 2020 ended February 29, 2020 at 8:00 a.m. Eastern Time on April 28, 2020 (8:00 p.m. Beijing time on April 28, 2020).

 

Please note that you will need to pre-register for conference call participation, using the link provided below. Upon registering, you will be sent participant dial-in numbers, Direct Event passcode and unique registrant ID by email.

Conference call registration link: http://apac.directeventreg.com/registration/event/1398186. It will automatically direct you to the registration page of "TAL Education Group Fourth Quarter and Fiscal Year 2020 Earnings Conference Call", where you may fill in your details for RSVP. When you are requested to submit a participant conference ID, please enter the number "1398186".

In the 10 minutes prior to the call start time, you may use the conference access information (including dial-in number(s), Direct Event passcode and unique registrant ID) provided in the confirmation email that you have received following your pre-registration.

 

A live and archived webcast of the conference call will be available on the Investor Relations section of TAL’s website at https://ir.100tal.com/.

 

A telephone replay of the conference call will be available through 9:59 a.m. on May 6, 2020, U.S. Eastern time (9:59 p.m. on May 6, 2020, Beijing time, 2020).

 

The dial-in details for the replay are as follows:

- U.S. toll free: +1-855-452-5696

- Hong Kong toll free: 800-963-117

- International toll: +61-2-8199-0299

Conference ID: 1398186

 

 

 

 

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the outlook for the first quarter of fiscal year 2021, quotations from management in this announcement, as well as TAL Education Group’s strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company’s ability to continue to attract students to enroll in its courses; the Company’s ability to continue to recruit, train and retain qualified teachers; the Company’s ability to improve the content of its existing course offerings and to develop new courses; the Company’s ability to maintain and enhance its brand; the Company’s ability to maintain and continue to improve its teaching results; and the Company’s ability to compete effectively against its competitors. Further information regarding these and other risks is included in the Company’s reports filed with, or furnished to the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and TAL Education Group undertakes no duty to update such information or any forward-looking statement, except as required under applicable law.

 

About TAL Education Group

TAL Education Group is a leading K-12 after-school tutoring services provider in China. The acronym “TAL” stands for “Tomorrow Advancing Life”, which reflects our vision to promote top learning opportunities for Chinese students through both high-quality teaching and content, as well as leading edge application of technology in the education experience. TAL Education Group offers comprehensive tutoring services to students from pre-school to the twelfth grade through three flexible class formats: small classes, personalized premium services, and online courses. Our tutoring services cover the core academic subjects in China’s school curriculum as well as competence oriented programs. The Company's learning center network currently covers 70 cities.

We also operate www.jzb.com, a leading online education platform in China. Our ADSs trade on the New York Stock Exchange under the symbol “TAL”.

 

 

 

 

About Non-GAAP Financial Measures

In evaluating its business, TAL considers and uses the following measures defined as non-GAAP financial measures by the SEC as supplemental metrics to review and assess its operating performance: non-GAAP operating costs and expenses, non-GAAP cost of revenues, non-GAAP selling and marketing expenses, non-GAAP general and administrative expenses, non-GAAP income from operations, non-GAAP net income attributable to TAL, non-GAAP basic and non-GAAP diluted net income per ADS. To present each of these non-GAAP measures, the Company excludes share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of non-GAAP measures to the most comparable GAAP measures” set forth at the end of this release.

 

TAL believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective. TAL believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to TAL’s historical performance and liquidity. TAL computes its non-GAAP financial measures using the same consistent method from quarter to quarter and from period to period. TAL believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation charges that have been and will continue to be for the foreseeable future a significant recurring expense in the Company’s business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

 

For further information, please contact:

 

Echo Yan

Investor Relations

TAL Education Group

Tel: +86 10 5292 6658

Email: ir@100tal.com

 

Caroline Straathof

IR Inside

Tel: +31 6 5462 4301

Email: info@irinside.com

 

 

 

 

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

 

  

As of

February 28,
2019

  

As of

February 29,
2020

 
ASSETS          
           
Current assets          
Cash and cash equivalents  $1,247,140   $1,873,866 
Restricted cash-current   9,227    28,084 
Short-term investments   268,424    345,457 
Inventory   7,750    25,832 
Amounts due from related parties-current   3,341    3,642 
Income tax receivables   7,204    11,548 
Prepaid expenses and other current assets   202,630    207,352 
Total current assets   1,745,716    2,495,781 
Restricted cash-non-current   7,334    13,235 
Amounts due from related parties-non-current   1,747    - 
Property and equipment, net   287,877    366,656 
Deferred tax assets-non-current   29,179    79,534 
Rental deposits   56,135    72,721 
Intangible assets, net   74,776    58,985 
Land use right, net   -    204,853 
Goodwill   414,228    378,913 
Long-term investments   850,695    571,601 
Long-term prepayments and other non-current assets   267,404    85,275 
Operating lease right-of-use assets   -    1,243,692 
Total assets  $3,735,091   $5,571,246 
           
LIABILITIES AND EQUITY          
           
Current liabilities          
Accounts payable (including accounts payable of the consolidated VIEs without recourse to TAL Education Group of 98,436 and 104,231 as of February 28, 2019 and February 29, 2020, respectively)  $106,493   $117,770 
Deferred revenue-current (including deferred revenue-current of the consolidated VIEs without recourse to TAL Education Group of 401,027 and 733,253 as of February 28, 2019 and February 29, 2020, respectively)   433,610    780,167 
Amounts due to related parties-current (including amounts due to related parties-current of the consolidated VIEs without recourse to TAL Education Group of 18,504 and 4,264 as of February 28, 2019 and February 29, 2020, respectively)   24,375    4,361 
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs without recourse to TAL Education Group of 291,728 and 470,519 as of February 28, 2019 and February 29, 2020, respectively)   365,195    552,650 
Income tax payable (including income tax payable of the consolidated VIEs without recourse to TAL Education Group of 36,670 and 43,233 as of February 28, 2019 and February 29, 2020, respectively)   38,743    46,650 
Short-term debt and current portion of long-term debt (including short-term debt and current portion of long-term debt of the consolidated VIEs without recourse to TAL Education Group of nil and nil as of February 28, 2019 and February 29, 2020, respectively)   210,027    - 
Bond payable, current portion (including bond payable, current portion of the consolidated VIEs without recourse to TAL Education Group of nil and nil as of February 28, 2019 and February 29, 2020, respectively)   5,275    - 
Operating lease liabilities, current portion (including  operating lease liabilities, current portion of the consolidated VIEs without recourse to TAL Education Group of nil and 276,712 as of February 28, 2019 and February 29, 2020, respectively)   -    304,960 
Total current liabilities   1,183,718    1,806,558 
Deferred revenue-non-current (including deferred revenue-non-current of the consolidated VIEs without recourse to TAL Education Group of 2,497 and 833 as of February 28, 2019 and February 29, 2020, respectively)   2,497    833 
Amounts due to related parties-non-current (including amounts due to related parties-non-current of the consolidated VIEs without recourse to TAL Education Group of 106 and nil as of February 28, 2019 and February 29, 2020, respectively)   196    - 
Deferred tax liabilities-non-current (including deferred tax liabilities-non-current of the consolidated VIEs without recourse to TAL Education Group of 16,951 and 7,197 as of February 28, 2019 and February 29, 2020, respectively)   17,738    7,789 
Other non-current liabilities (including other non-current liabilities of the consolidated VIEs without recourse to TAL Education Group of 465 and nil as of February 28, 2019 and February 29, 2020, respectively)   465    - 
Long-term debt (including long-term debt of the consolidated VIEs without recourse to TAL Education Group of nil and nil as of February 28, 2019 and February 29, 2020, respectively)   -    261,950 
Operating lease liabilities, non-current portion (including operating lease liabilities, non-current portion of the consolidated VIEs without recourse to TAL Education Group of nil and 883,603 as of February 28, 2019 and February 29, 2020, respectively)   -    949,919 
Total liabilities   1,204,614    3,027,049 
           
           
Equity          
Class A common shares   127    133 
Class B common shares   71    67 
Class A common shares issuable   1,977    - 
Additional paid-in capital   1,485,521    1,675,640 
Statutory reserve   58,690    82,712 
Retained earnings   920,314    786,097 
Accumulated other comprehensive income/(loss)   17,047    (28,913)
Total TAL Education Group's equity   2,483,747    2,515,736 
Noncontrolling interest   46,730    28,461 
Total equity   2,530,477    2,544,197 
Total liabilities and equity  $3,735,091   $5,571,246 

 

 

 

 

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except share, ADS, per share and per ADS data)

 

   For the Three Months Ended
February 28/29,
  

For the Fiscal Year Ended

February 28/29,

 
   2019   2020   2019   2020 
Net revenues  $726,561   $857,682   $2,562,984   $3,273,308 
Cost of revenues (note 1)   306,174    405,882    1,164,454    1,468,569 
Gross profit   420,387    451,800    1,398,530    1,804,739 
Operating expenses (note 1)                    
Selling and marketing   136,196    243,204    484,000    852,808 
General and administrative   169,553    221,245    579,672    794,957 
Impairment loss on intangible assets and goodwill   -    28,998    -    28,998 
Total operating expenses   305,749    493,447    1,063,672    1,676,763 
Government subsidies   68    391    6,724    9,467 
Income/(loss) from operations   114,706    (41,256)   341,582    137,443 
Interest income   10,285    19,430    59,614    72,991 
Interest expense   (5,747)   (3,857)   (17,628)   (11,820)
Other income/(expense)   24,706    (4,679)   131,727    (95,297)
Impairment loss on long-term investments   (7,247)   (2,774)   (58,091)   (153,970)
Income/(loss) before income tax and loss from equity method investments   136,703    (33,136)   457,204    (50,653)
Income tax expense   (33,236)   (63,592)   (76,504)   (69,328)
Loss from equity method investments   (5,114)   (1,775)   (16,186)   (7,670)
Net income/(loss)  $98,353   $(98,503)  $364,514   $(127,651)
Add: Net loss attributable to noncontrolling interest   1,259    8,429    2,722    17,456 
Total net income/(loss) attributable to TAL Education Group  $99,612   $(90,074)  $367,236   $(110,195)
Net income/(loss) per common share                    
Basic  $0.52   $(0.45)  $1.93   $(0.56)
Diluted   0.50    (0.45)   1.83    (0.56)
Net income/(loss) per ADS (note 2)                    
Basic  $0.17   $(0.15)  $0.64   $(0.19)
Diluted   0.17    (0.15)   0.61    (0.19)
                     
                     
Weighted average shares used in calculating net income/(loss) per common share                    
Basic   191,020,638    199,095,944    189,951,643    198,184,370 
Diluted   200,670,945    199,095,944    200,224,934    198,184,370 

 

Note1: Share-based compensation expenses are included in the operating costs and expenses as follows: 

 

   For the Three Months   For the Fiscal Year 
   Ended February 28/29,   Ended February 28/29, 
   2019   2020   2019   2020 
Cost of revenues  $200   $242   $706   $1,074 
Selling and marketing expenses   3,331    6,405    10,454    19,356 
General and administrative expenses   18,744    26,217    66,117    97,513 
Total  $22,275   $32,864   $77,277   $117,943 

 

Note 2: Three ADSs represent one Class A common Share.

 

 

 

 

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF Comprehensive Income/(LOSS)

(In thousands of U.S. dollars)

 

  

For the Three Months Ended

February 28/29,

  

For the Fiscal Year Ended

February 28/29,

 
   2019   2020   2019   2020 
Net income/(loss)  $98,353   $(98,503)  $364,514   $(127,651)
Other comprehensive income/(loss), net of tax   53,507    5,703    (116,237)   (47,825)
Comprehensive income/(loss)   151,860    (92,800)   248,277    (175,476)
Add: Comprehensive loss attributable to noncontrolling interest   694    8,236    3,681    19,321 
Comprehensive income/(loss) attributable to TAL Education Group  $152,554   $(84,564)  $251,958   $(156,155)

 

 

 

 

TAL EDUCATION GROUP

Reconciliation of Non-GAAP Measures to the Most Comparable GAAP Measures

(In thousands of U.S. dollars, except share, ADS, per share and per ADS data)

 

  

For the Three Months

Ended February 28/29,

   For the Fiscal Year
Ended February 28/29,
 
   2019   2020   2019   2020 
Cost of revenues  $306,174   $405,882   $1,164,454   $1,468,569 
Share-based compensation expense in cost of revenues   200    242    706    1,074 
Non-GAAP cost of revenues   305,974    405,640    1,163,748    1,467,495 
                     
Selling and marketing expenses   136,196    243,204    484,000    852,808 
Share-based compensation expense in selling and marketing expenses   3,331    6,405    10,454    19,356 
Non-GAAP selling and marketing expenses   132,865    236,799    473,546    833,452 
                     
General and administrative expenses   169,553    221,245    579,672    794,957 
Share-based compensation expense in general and administrative expenses   18,744    26,217    66,117    97,513 
Non-GAAP general and administrative expenses   150,809    195,028    513,555    697,444 
                     
Operating costs and expenses   611,923    899,329    2,228,126    3,145,332 
Share-based compensation expense in operating costs and expenses   22,275    32,864    77,277    117,943 
Non-GAAP operating costs and expenses   589,648    866,465    2,150,849    3,027,389 
                     
Income/(loss) from operations   114,706    (41,256)   341,582    137,443 
Share based compensation expenses   22,275    32,864    77,277    117,943 
Non-GAAP income/(loss) from operations   136,981    (8,392)   418,859    255,386 
                     
Net income/(loss) attributable to TAL Education Group   99,612    (90,074)   367,236    (110,195)
Share based compensation expenses   22,275    32,864    77,277    117,943 
Non-GAAP net income/(loss) attributable to TAL Education Group  $121,887   $(57,210)  $444,513   $7,748 
                     
Net income/(loss) per ADS                    
Basic  $0.17   $(0.15)  $0.64   $(0.19)
Diluted   0.17    (0.15)   0.61    (0.19)
Non-GAAP Net income/(loss) per ADS                    
Basic  $0.21   $(0.10)  $0.78   $0.01 
Diluted   0.20    (0.10)   0.74    0.01 
ADSs used in calculating net income/(loss) per ADS                    
Basic   573,061,914    597,287,832    569,854,929    594,553,110 
Diluted   602,012,835    597,287,832    600,674,802    594,553,110 
ADSs used in calculating Non-GAAP net income/(loss) per ADS                    
Basic   573,061,914    597,287,832    569,854,929    594,553,110 
Diluted   602,012,835    597,287,832    600,674,802    620,891,562 

 

 

 

 

Annex

 

Corrections to Certain Line Items of Previously Released Financial Statements for the First, Second and Third Quarters of Fiscal Year 2020

 

As TAL Education Group (NYSE: TAL) (“TAL” or the “Company”) previously announced on April 7, 2020, during its routine internal auditing process, the Company discovered certain employee wrongdoing in relation to the “Light Class” business. The wrongdoing inflated “Light Class” transactions. As a result, the Company’s unaudited quarterly condensed consolidated financial statements as of and for the three months ended May 31, 2019, August 31, 2019, and November 30, 2019 were impacted.

 

The Company is setting forth hereby corrections for the transactions at issue, which mainly include a reversal of net revenues, cost of revenues, general and administrative, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities. The accumulated negative impact for the first three quarters of fiscal year 2020 on net revenues and net income attributable to TAL Education Group was US$86.1 million and US$26.6 million, respectively. The decrease of basic net income per American Depositary Share for the nine months ended November 30, 2019 was US$0.04. The table below illustrates the impact of the aforementioned corrections on the Company’s condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of comprehensive income/(loss) for the relevant periods.

 

 

 

 

TAL EDUCATION GROUP

CORRECTED LINE ITEMS OF UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

 

   As of May 31, 2019   As of August 31, 2019   As of November 30, 2019 
   As previously reported  

As revised

(note 1)

   As previously reported   As revised   As previously reported   As revised 
ASSETS                              
                               
Current assets                              
Inventory   10,880    10,880    12,456    12,456    21,288    22,006 
Prepaid expenses and other current assets   199,730    169,161    213,904    162,221    244,873    161,165 
Total current assets   2,146,075    2,115,506    1,788,436    1,736,753    3,007,136    2,924,146 
Total assets  $5,101,410   $5,070,841   $4,726,173   $4,674,490   $5,938,695   $5,855,705 
                               
LIABILITIES AND EQUITY                              
                               
Current liabilities                              
Accounts payable  $76,759   $56,237   $112,246   $77,408   $148,393   $90,947 
Accrued expenses and other current liabilities   361,707    360,520    401,359    402,509    503,781    504,854 
Total current liabilities   1,684,275    1,662,566    1,338,162    1,304,474    2,187,891    2,131,518 
Total liabilities   2,518,258    2,496,549    2,171,588    2,137,900    3,307,872    3,251,499 
                               
Equity                              
Retained earnings   913,010    904,158    898,610    880,631    926,787    900,193 
Accumulated other comprehensive loss   (16,635)   (16,643)   (55,997)   (56,013)   (34,400)   (34,423)
Total TAL Education Group's equity   2,540,600    2,531,740    2,513,596    2,495,601    2,594,126    2,567,509 
Total equity   2,583,152    2,574,292    2,554,585    2,536,590    2,630,823    2,604,206 
Total liabilities and equity  $5,101,410   $5,070,841   $4,726,173   $4,674,490   $5,938,695   $5,855,705 

 

 

 

 

TAL EDUCATION GROUP

CORRECTED LINE ITEMS OF UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except share, ADS, per share and per ADS data)

 

  

For the Three Months Ended

May 31, 2019

  

For the Three Months Ended

August 31, 2019

  

For the Three Months Ended

November 30, 2019

 
   As previously reported  

As revised

(note 1)

   As previously reported   As revised   As previously reported   As revised 
Net revenues  $702,770   $673,414   $936,626   $913,195   $862,357   $829,017 
Cost of revenues   316,875    296,371    418,803    404,499    385,122    361,817 
Gross profit   385,895    377,043    517,823    508,696    477,235    467,200 
Operating expenses                              
General and administrative   175,585    175,585    190,056    190,056    209,491    208,071 
Total operating expenses   330,984    330,984    453,314    453,314    400,438    399,018 
Income from operations   57,318    48,466    69,939    60,812    78,036    69,421 
(Loss)/income before income tax and loss from equity method investments   (11,644)   (20,496)   (24,131)   (33,258)   44,852    36,237 
Net (loss)/income   (10,216)   (19,068)   (17,373)   (26,500)   25,035    16,420 
Total net (loss)/income attributable to TAL Education Group  $(7,304)  $(16,156)  $(14,400)  $(23,527)  $28,177   $19,562 
                               
Net (loss)/income per common share                              
Basic  $(0.04)  $(0.08)  $(0.07)  $(0.12)  $0.14   $0.10 
Diluted   (0.04)   (0.08)   (0.07)   (0.12)   0.14    0.09 
Net (loss)/income per ADS                              
Basic  $(0.01)  $(0.03)  $(0.02)  $(0.04)  $0.05   $0.03 
Diluted   (0.01)   (0.03)   (0.02)   (0.04)   0.05    0.03 

  

 

 

 

TAL EDUCATION GROUP

CORRECTED LINE ITEMS OF UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF Comprehensive Income/(LOSS)

(In thousands of U.S. dollars)

 

  

For the Three Months Ended

May 31, 2019

  

For the Three Months Ended

August 31, 2019

  

For the Three Months Ended

November 30, 2019

 
   As previously reported  

As revised

(note 1)

   As previously reported   As revised   As previously reported   As revised 
Net (loss)/income  $(10,216)  $(19,068)  $(17,373)  $(26,500)  $25,035   $16,420 
Other comprehensive (loss)/income, net of tax   (34,948)   (34,956)   (40,759)   (40,767)   22,202    22,195 
Comprehensive (loss)/income   (45,164)   (54,024)   (58,132)   (67,267)   47,237    38,615 
Comprehensive (loss)/income attributable to TAL Education Group  $(40,986)  $(49,846)  $(53,762)  $(62,897)  $49,774   $41,152 

 

Note 1: The transaction at issue has immaterial impact to fiscal year 2019. The impact is included in the condensed consolidated financial statements as of and for the three months ended May 31, 2019, as revised.