SEC Filing | TAL Education Group

View:

Download DOC

Download PDF

Download XLS

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 October 2017

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: October 27, 2017

Exhibit Index

Exhibit 99.1 – Press Release

Exhibit 99.1

TAL Education Group Announces Unaudited Financial Results for the

Second Fiscal Quarter Ended August 31, 2017

-Quarterly Net Revenues up by 68.1% Year-Over-Year

-Quarterly Income from Operations Increased by 32.6% Year-Over-Year

-Quarterly Non-GAAP Income from Operations Increased by 33.7% Year-Over-Year

-Quarterly Total Student Enrollments up by 100.6% Year-Over-Year

(Beijing–October 26, 2017)—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 second quarter of fiscal year 2018 ended August 31, 2017.

Highlights for the Second Quarter of Fiscal Year 2018

Net revenues increased by 68.1% year-over-year to US$455.7 million from US$271.1 million in the same period of the prior year.

Income from operations increased by 32.6% to US$68.3 million from US$51.5 million in the same period of the prior year.

Non-GAAP income from operations increased by 33.7% to US$79.9 million from US$59.8 million in the same period of the prior year.

Net income attributable to TAL increased by 6.7% year-over-year to US$59.5 million, from US$55.7 million in the same period of the prior year.

Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, increased by 11.0% to US$71.1 million from US$64.0 million in the same period of the prior year.

Basic and diluted net income per American Depositary Share (“ADS”) ¹ were US$0.11 and US$0.10, respectively. Non-GAAP basic and diluted net income per ADS, which excluded share-based compensation expenses, were US$0.14 and US$0.12, respectively. Three ADSs represent one Class A common share.

Cash, cash equivalents and short-term investments totaled US$946.1 million as of August 31, 2017, compared to US$699.7 million as of February 28, 2017.

Total student enrollments increased by 100.6% year-over-year to approximately 2,242,380 from approximately 1,117,650 in the same period of the prior year.

Highlights for the Six Months Ended August 31, 2017

Net revenues increased by 66.8% year-over-year to US$777.7 million from US$466.2 million in the same period of the prior year.

Income from operations increased by 40.6% to US$97.1 million from US$69.1 million in the same period of fiscal year 2017.

Non-GAAP income from operations increased by 39.2% to US$119.4 million from US$85.8 million in the same period of the prior year.

¹ Effective on August 16, 2017, the Company adjusted the ratio of its American depositary shares ("ADSs") to Class A common shares (“Shares”) from one (1) ADS representing two (2) Shares to three (3) ADSs representing one (1) Share. All earnings per ADS figures in this announcement give effect to the foregoing ADS to share ratio change.

Net income attributable to TAL increased by 27.9% year-over-year to US$88.2 million, from US$69.0 million in the same period of the prior year.

Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, increased by 29.1% to US$110.5 million from US$85.7 million in the same period of the prior year.

Basic and diluted net income per ADS were US$0.17 and US$0.16, respectively. Non-GAAP basic and diluted net income per ADS, excluding share-based compensation expenses, were US$0.22 and US$0.19, respectively.

Total student enrollments during the first six months of fiscal year 2018 increased by 86.5% year-over-year to approximately 3,290,140 from approximately 1,763,700.

Total physical network increased from 507 learning centers in 30 cities as of February 28, 2017 to 575 learning centers in 36 cities as of August 31, 2017.

Financial and Operating Data——Second Quarter and First Six Months of Fiscal Year 2018

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

	Three Months Ended
	August 31,
	2016		2017		Pct. Change
Net revenues		271,121		455,750		68.1	%
Net income attributable to TAL		55,740		59,451		6.7	%
Non-GAAP net income attributable to TAL		64,023		71,070		11.0	%
Operating income		51,526		68,326		32.6	%
Non-GAAP operating income		59,808		79,945		33.7	%
Net income per ADS attributable to TAL – basic		0.11		0.11		0.3	%
Net income per ADS attributable to TAL – diluted		0.10		0.10		1.0	%
Non-GAAP net income per ADS attributable to TAL – basic		0.13		0.14		4.4	%
Non-GAAP net income per ADS attributable to TAL – diluted		0.12		0.12		5.5	%
Total student enrollments in small class, one-on-one, and online courses		1,117,650		2,242,380		100.6	%

	Six Months Ended
	August 31,
	2016		2017		Pct. Change
Net revenues		466,216		777,653		66.8	%
Net income attributable to TAL		68,976		88,239		27.9	%
Non-GAAP net income attributable to TAL		85,651		110,543		29.1	%
Operating income		69,095		97,131		40.6	%
Non-GAAP operating income		85,770		119,434		39.2	%
Net income per ADS attributable to TAL – basic		0.14		0.17		22.1	%
Net income per ADS attributable to TAL – diluted		0.13		0.16		20.2	%
Non-GAAP net income per ADS attributable to TAL – basic		0.18		0.22		23.2	%
Non-GAAP net income per ADS attributable to TAL – diluted		0.16		0.19		21.9	%
Total student enrollments in small class, one-on-one, and online courses		1,763,700		3,290,140		86.5	%

“I’m pleased to see that our capacity expansion continued to drive our top-line growth in the second quarter. All our business segments performed well during the second quarter, and our revenues increased 70% year-over-year in RMB terms, backed by 101% enrollment growth year-on-year,” said Mr. Rong Luo, TAL’s Chief Financial Officer. “During the quarter, we continued to offer more classes with the classrooms and teachers that we have added year-to-date. We expect to see normalized utilization gradually in the second half of the year. As we further scale our business, we intend to explore new opportunities to strengthen the foundation for our future growth.”

Mr. Luo continued, “We continue to explore new technologies in our online and offline products and promote education progress through smart intelligence. We are confident that our investments enable us to offer students the most innovative technology-based tutoring, and that positive student outcomes will reinforce, as they always have done, our distinctive word-of-mouth based business and brand.”

Financial Results for the Second Quarter of Fiscal Year 2018

Net Revenues

In the second quarter of fiscal year 2018, TAL reported net revenues of US$455.7 million, representing a 68.1% increase from US$271.1 million in the second quarter of fiscal year 2017. The increase was mainly driven by the growth in total student enrollments, which rose by 100.6% to approximately 2,242,380 from approximately 1,117,650 in the same period of the prior year. The increase in total student enrollments was driven primarily by summer promotions in small classes and online courses.

Operating Costs and Expenses

In the second quarter of fiscal year 2018, operating costs and expenses were US$390.7 million, a 76.1% increase from US$221.8 million in the second quarter of fiscal year 2017. Non-GAAP operating costs and expenses, which excluded share-based compensation expenses, were US$379.1 million, a 77.5% increase from US$213.6 million in the second quarter of fiscal year 2017.

Cost of revenues grew by 85.7% to US$244.9 million from US$131.9 million in the second quarter of fiscal year 2017. The increase in cost of revenues was mainly due to an increase in teacher compensation and rental costs, as well as the acquisition of Beijing Shunshun Bida Information Consulting Co., Ltd (“Shunshun Bida”). Non-GAAP cost of revenues, which excluded share-based compensation expenses, increased by 85.7% to US$244.8 million, from US$131.9 million in the second quarter of fiscal year 2017.

Selling and marketing expenses increased by 104.4% to US$58.5 million from US$28.6 million in the second quarter of fiscal year 2017. Non-GAAP selling and marketing expenses, which excluded share-based compensation expenses, increased by 105.4% to US$57.2 million from US$27.9 million in the second quarter of fiscal year 2017. The increase of selling and marketing expenses in the second quarter of fiscal year 2018 was primarily a result of a rise in the compensation to sales and marketing staff to support a greater number of programs and service offerings compared to the year-ago period, as well as more marketing promotion activities both in brand enhancement and consumer experience.

General and administrative expenses increased by 42.3% to US$87.3 million from US$61.3 million in the second quarter of fiscal year 2017. 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 year-ago period and a rise in compensation to our general and administrative personnel, as well as an increase in rental cost. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses, increased by 43.1% to US$77.1 million, from US$53.8 million in the second quarter of fiscal year 2017.

Total share-based compensation expenses allocated to the related operating costs and expenses increased by 40.3% to US$11.6 million in the second quarter of fiscal year 2018 from US$8.3 million in the same period of fiscal year 2017.

Gross Profit

Gross profit grew by 51.4% to US$210.8 million from US$139.2 million in the second quarter of fiscal year 2017.

Income from Operations

Income from operations increased by 32.6% to US$68.3 million from US$51.5 million in the second quarter of fiscal year 2017. Non-GAAP income from operations, which excluded share-based compensation expenses, increased by 33.7% to US$79.9 million from US$59.8 million in the second quarter of fiscal year 2017.

Other Income

Other income was US$2.0 million for the second quarter of fiscal year 2018, compared to other income of US$23.8 million in the second quarter of fiscal year 2017. Other income in the second quarter of fiscal year 2017 was mainly due to a gain from remeasuring the fair value of the previously held equity interests in an acquiree at its acquisition date fair value during a business combination achieved in stages.

Impairment loss on long-term investments

Impairment loss on long-term investments was nil in this quarter, compared to impairment loss on long-term investments of US$2.2 million in the second quarter of fiscal year 2017. Impairment loss on long-term investments was due to the other-than-temporary declines in the value of long-term investments in several investees.

Income Tax Expense

Income tax expense was US$16.2 million in the second quarter of fiscal year 2018, compared to US$17.6 million in the second quarter of fiscal year 2017.

Net Income Attributable to TAL Education Group

Net income attributable to TAL increased by 6.7% to US$59.5 million from US$55.7 million in the second quarter of fiscal year 2017. Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, increased by 11.0% to US$71.1 million from US$64.0 million in the second quarter of fiscal year 2017.

Basic and Diluted Net Income per ADS

Basic and diluted net income per ADS were US$0.11 and US$0.10 respectively in the second quarter of fiscal year 2018. Non-GAAP basic and Non-GAAP diluted net income per ADS, which excluded share-based compensation expenses, were US$0.14 and US$0.12, respectively.

Capital Expenditures

Capital expenditures for the second quarter of fiscal year 2018 were US$37.6 million, representing an increase of US$18.7 million from US$18.9 million in the second quarter of fiscal year 2017. The increase was mainly due to leasehold improvements and the purchase of servers, computers, software systems and other hardware for the Company’s teaching facilities and mobile network research and development.

Cash, Cash Equivalents, and Short-Term Investments

As of August 31, 2017, the Company had US$431.4 million of cash and cash equivalents and US$514.7 million of short-term investments, compared to US$470.2 million of cash and cash equivalents and US$229.5 million of short-term investments as of February 28, 2017.

Deferred Revenue

As of August 31, 2017, the Company's deferred revenue balance was US$728.8 million, compared to US$463.4 million as of August 31, 2016, representing an increase of 57.3%. Deferred revenue primarily consisted of the tuition collected in advance for the fall semester of Xueersi Peiyou small classes, as well as the deferred revenue related to the acquired businesses.

Financial Results for the First Six Months of Fiscal Year 2018

Net Revenues

For the first six months of fiscal year 2018, TAL reported net revenues of US$777.7 million, representing a 66.8% increase from US$466.2 million in the first six months of fiscal year 2017. The increase was mainly driven by a growth in total student enrollments, which increased by 86.5% to approximately 3,290,140 from approximately 1,763,700 in the same period of the prior year. The increase in total student enrollments was driven primarily by the growth of enrollments in the small class offerings and online courses.

Operating Costs and Expenses

In the first six months of fiscal year 2018, operating costs and expenses were US$684.4 million, a 71.2% increase from US$399.9 million in the first six months of fiscal year 2017. Non-GAAP operating costs and expenses, which excluded share-based compensation expenses, were US$662.1 million, a 72.8% increase from US$383.2 million in the first six months of fiscal year 2017.

Cost of revenues grew by 78.4% to US$414.5 million from US$232.4 million in the first six months of fiscal year 2017. The increase in cost of revenues was mainly due to an increase in teacher compensation and rental costs, as well as the acquisition of Shunshun Bida. Non-GAAP cost of revenues, which excluded share-based compensation expenses, increased by 78.4% to US$414.4 million from US$232.3 million in the first six months of fiscal year 2017.

Selling and marketing expenses increased by 93.3% to US$102.0 million from US$52.7 million in the first six months of fiscal year 2017. Non-GAAP selling and marketing expenses, which excluded share-based compensation expenses, increased by 94.5% to US$99.6 million from US$51.2 million in the first six months of fiscal year 2017. The increase of selling and marketing expenses in the first six months of fiscal year 2018 was primarily a result of a rise in the compensation to sales and marketing staff to support a greater number of programs and service offerings compared to the year-ago period, as well as more marketing promotion activities both in brand enhancement and consumer experience.

General and administrative expenses increased by 46.3% to US$167.9 million from US$114.8 million in the first six months of fiscal year 2017. 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 year-ago period and a rise in compensation to our general and administrative personnel, as well as an increase in rental cost. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses, increased by 48.7% to US$148.2 million from US$99.7 million in the first six months of fiscal year 2017.

Total share-based compensation expenses allocated to the related operating costs and expenses increased by 33.8% to US$22.3 million in the first six months of fiscal year 2018 from US$16.7 million in the same period of fiscal year 2017.

Gross Profit

Gross profit grew by 55.3% to US$363.1 million from US$233.9 million in the first six months of fiscal year 2017.

Income from Operations

Income from operations increased by 40.6% to US$97.1 million from US$69.1 million in the first six months of fiscal year 2017. Non-GAAP income from operations, which excluded share-based compensation expenses, increased by 39.2% to US$119.4 million from US$85.8 million in the first six months of fiscal year 2017.

Other Income

Other income was US$8.8 million for the first six months of fiscal year 2018, compared to other income of US$23.8 million in the first six months of fiscal year 2017. Other income for the first six months of fiscal year 2018 was mainly due to a gain from fair value change of an investment. Other income for the first six months of fiscal year 2017 was mainly due to a gain from remeasuring the fair value of the previously held equity interests in an acquiree at its acquisition date fair value during a business combination achieved in stages.

Income Tax Expense

Income tax expense was US$24.6 million in the first six months of fiscal year 2018, compared to US$22.1 million in the first six months of fiscal year 2017.

Net Income Attributable to TAL Education Group

Net income attributable to TAL increased by 27.9% to US$88.2 million from US$69.0 million in the first six months of fiscal year 2017. Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, increased by 29.1% to US$110.5 million from US$85.7 million in the first six months of fiscal year 2017.

Basic and Diluted Net Income per ADS

Basic and diluted net income per ADS were US$0.17 and US$0.16, respectively, in the first six months of fiscal year 2018. Non-GAAP basic and Non-GAAP diluted net income per ADS, which excluded share-based compensation expenses, were US$0.22 and US$0.19, respectively.

Capital Expenditures

Capital expenditures for the first six months of fiscal year 2018 were US$67.2 million, an increase of US$35.6 million from US$31.6 million in the first six months of fiscal year 2017. The increase was mainly due to leasehold improvements and the purchase of servers, computers, software systems and other hardware for the Company’s teaching facilities and mobile network research and development.

Business Outlook

Based on the Company’s current estimates, total net revenues for the third quarter of fiscal year 2018 are expected to be between US$411.7 million and US$416.9 million, representing an increase of 58% to 60% on a year-over-year basis, assuming no material change in exchange rates.

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

Conference Call

The Company will host a conference call and live webcast to discuss its financial results for the second fiscal quarter of fiscal year 2018 ended August 31, 2017 at 8:00 a.m. Eastern Time on October 26, 2017 (8:00 p.m. Beijing time on October 26, 2017).

The dial-in details for the live conference call are as follows:

- U.S. toll free:		+1-866-519-4004
- Hong Kong toll free:		800-906-601
- International toll:		+65-6713-5090
Conference ID:		87036636

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

A telephone replay of the conference call will be available through 8:59 a.m. U.S. Eastern time, November 3, 2017 (8:59 p.m. Beijing time, November 3, 2017).

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:		87036636

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 third quarter of fiscal year 2018, 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 including mathematics, English, Chinese, physics, chemistry, and biology. The Company's learning center network includes 575 physical learning centers as of August 31, 2017, located in 36 key cities in China: Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Wuhan, Xi’an, Chengdu, Nanjing, Hangzhou, Taiyuan, Zhengzhou, Chongqing, Suzhou, Shenyang, Jinan, Shijiazhuang, Qingdao, Changsha, Luoyang, Nanchang, Ningbo, Wuxi, Fuzhou , Hefei, Xiamen, Lanzhou, Dalian, Changchun, Guiyang, Dongguan, Changzhou, Xuzhou, Nantong, Foshan and Zhenjiang. 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 U.S. Securities and Exchange Commission 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 from 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:

Mei Li

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 U.S. dollars)

	As of February 28, 2017		As of August 31, 2017
ASSETS

Current assets
Cash and cash equivalents	$	470,217,004	$	431,397,021
Restricted cash-current		2,732,559		1,684,933
Short-term investments		229,456,397		514,673,149
Inventory		2,823,039		5,444,085
Amounts due from related parties-current		3,424,285		3,462,788
Income tax receivables		2,244,898		6,921,943
Prepaid expenses and other current assets		160,222,823		150,018,132
Total current assets		871,121,005		1,113,602,051
Restricted cash-non-current		5,660,713		8,367,682
Property and equipment, net		154,306,718		216,265,791
Deferred tax assets-non-current		16,188,301		20,570,237
Rental deposits		32,659,360		42,813,425
Intangible assets, net		37,966,808		41,661,385
Goodwill		267,162,685		286,450,694
Long-term investments		347,732,444		375,237,956
Long-term prepayments and other non-current assets		96,107,917		109,672,343
Total assets	$	1,828,905,951	$	2,214,641,564

LIABILITIES AND EQUITY

Current liabilities
Accounts payable (including accounts payable of the consolidated VIEs without recourse to TAL Education Group of 20,905,226 and 46,398,744 as of February 28, 2017, and August 31, 2017, respectively)	$	22,637,199	$	48,943,530
Deferred revenue-current (including deferred revenue-current of the consolidated VIEs without recourse to TAL Education Group of 465,944,822 and 682,785,276 as of February 28, 2017, and August 31, 2017, respectively)		504,147,032		720,182,698
Amounts due to related parties-current (including amounts due to related parties-current of the consolidated VIEs without recourse to TAL Education Group of 192,785 and 3,006,711 as of February 28, 2017, and August 31, 2017, respectively)		3,042,785		5,856,711
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs without recourse to TAL Education Group of 90,834,954 and 145,038,484 as of February 28, 2017, and August 31, 2017, respectively)		116,830,290		172,623,012
Income tax payable (including income tax payable of the consolidated VIEs without recourse to TAL Education Group of 15,204,900 and 17,947,819 as of February 28, 2017, and August 31, 2017, respectively)		20,483,037		27,573,585
Total current liabilities		667,140,343		975,179,536
Deferred revenue-non-current (including deferred revenue-non-current of the consolidated VIEs without recourse to TAL Education Group of 14,726,473 and 8,648,404 as of February 28, 2017, and August 31, 2017, respectively)		14,726,473		8,648,404
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 nil and nil as of February 28, 2017, and August 31, 2017, respectively)		2,840,000		2,840,000
Deferred tax liabilities-non-current (including deferred tax liabilities-non-current of the consolidated VIEs without recourse to TAL Education Group of 13,063,488 and 16,277,272 as of February 28, 2017, and August 31, 2017, respectively)		13,185,886		16,480,428
Bond payable (including bond payable of the consolidated VIEs without recourse to TAL Education Group of nil and nil as of February 28, 2017, and August 31,2017, respectively)		225,148,918		72,008,000
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, 2017, and August 31, 2017, respectively)		225,000,000		225,000,000
Total liabilities		1,148,041,620		1,300,156,368

TAL Education Group Shareholders' Equity
Class A common shares		93,131		106,588
Class B common shares		71,456		70,556
Additional paid-in capital		141,968,264		298,062,275
Statutory reserve		28,407,421		28,407,421
Retained earnings		417,835,502		464,909,105
Accumulated other comprehensive income		55,869,132		87,168,364
Total TAL Education Group's equity		644,244,906		878,724,309
Non-controlling interest		36,619,425		35,760,887
Total equity		680,864,331		914,485,196
Total liabilities and equity	$	1,828,905,951	$	2,214,641,564

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

	For the Three Months Ended August 31,						For the Six Months Ended August 31,
	2016			2017			2016			2017
Net revenues	$	271,121,287		$	455,749,893		$	466,216,375		$	777,653,115
Cost of revenues		131,879,033			244,929,963			232,366,242			414,534,386
Gross profit		139,242,254			210,819,930			233,850,133			363,118,729
Operating expenses (note 1)
Selling and marketing		28,620,113			58,490,896			52,743,743			101,952,975
General and administrative		61,343,393			87,311,774			114,773,223			167,943,064
Total operating expenses		89,963,506			145,802,670			167,516,966			269,896,039
Government subsidies		2,246,800			3,309,031			2,761,607			3,907,997
Income from operations		51,525,548			68,326,291			69,094,774			97,130,687
Interest income		4,449,108			10,534,422			7,837,460			18,235,679
Interest expense		(2,667,238	)		(3,869,794	)		(4,555,211	)		(9,094,878	)
Other income		23,802,211			2,017,878			23,787,119			8,806,037
Impairment loss on long-term investments		(2,211,642	)		-			(2,211,642	)		(699,748	)
Income before provision for income tax and loss from equity method investments		74,897,987			77,008,797			93,952,500			114,377,777
Provision for income tax		(17,597,079	)		(16,158,324	)		(22,075,286	)		(24,553,778	)
Loss from equity method investments		(2,168,346	)		(1,964,530	)		(3,840,133	)		(3,247,334	)
Net income		55,132,562			58,885,943			68,037,081			86,576,665
Add: Net loss attributable to noncontrolling interest		607,705			565,061			939,332			1,662,772
Total net income attributable to TAL Education Group	$	55,740,267		$	59,451,004		$	68,976,413		$	88,239,437
Net income per common share
Basic	$	0.34		$	0.34		$	0.43		$	0.52
Diluted		0.31			0.31			0.39			0.47
Net income per ADS (note 2)
Basic	$	0.11		$	0.11		$	0.14		$	0.17
Diluted		0.10			0.10			0.13			0.16
Weighted average shares used in calculating net income per common share
Basic		162,158,462			172,388,942			161,961,997			169,669,402
Diluted		188,197,500			193,131,866			187,541,900			193,585,695

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

	For the Three Months				For the Six Months
	Ended August 31,				Ended August 31,
	2016		2017		2016		2017
Cost of revenues	$	15,598	$	108,633	$	23,338	$	141,537
Selling and marketing		762,661		1,257,967		1,538,626		2,375,599
General and administrative		7,504,515		10,252,433		15,113,099		19,786,118
Total	$	8,282,774	$	11,619,033	$	16,675,063	$	22,303,254

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

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF Comprehensive Income

(In U.S. dollars)

	For the Three Months Ended					For the Six Months Ended
	August 31,					August 31,
	2016			2017		2016		2017
Net income	$	55,132,562		$	58,885,943	$	68,037,081	$	86,576,665
Other comprehensive (loss)/income, net of tax		(30,496,590	)		24,005,053		64,347,466		31,299,232
Comprehensive income		24,635,972			82,890,996		132,384,547		117,875,897
Add: Comprehensive loss attributable to noncontrolling interest		659,981			565,061		1,004,756		1,662,772
Comprehensive income attributable to TAL Education Group	$	25,295,953		$	83,456,057	$	133,389,303	$	119,538,669

TAL EDUCATION GROUP

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

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

	For the Three Months Ended August 31,				For the Six Months Ended August 31,
	2016		2017		2016		2017

Cost of revenues	$	131,879,033	$	244,929,963	$	232,366,242	$	414,534,386
Share-based compensation expense in cost of revenues		15,598		108,633		23,338		141,537
Non-GAAP cost of revenues		131,863,435		244,821,330		232,342,904		414,392,849

Selling and marketing expenses		28,620,113		58,490,896		52,743,743		101,952,975
Share-based compensation expense in selling and marketing expenses		762,661		1,257,967		1,538,626		2,375,599
Non-GAAP selling and marketing expenses		27,857,452		57,232,929		51,205,117		99,577,376
General and administrative expenses		61,343,393		87,311,774		114,773,223		167,943,064
Share-based compensation expense in general and administrative expenses		7,504,515		10,252,433		15,113,099		19,786,118
Non-GAAP general and administrative expenses		53,838,878		77,059,341		99,660,124		148,156,946

Operating costs and expenses		221,842,539		390,732,633		399,883,208		684,430,425
Share-based compensation expense in operating costs and expenses		8,282,774		11,619,033		16,675,063		22,303,254
Non-GAAP operating costs and expenses		213,559,765		379,113,600		383,208,145		662,127,171

Income from operations		51,525,548		68,326,291		69,094,774		97,130,687
Share based compensation expenses		8,282,774		11,619,033		16,675,063		22,303,254
Non-GAAP income from operations		59,808,322		79,945,324		85,769,837		119,433,941

Net income attributable to TAL Education Group		55,740,267		59,451,005		68,976,413		88,239,438
Share based compensation expenses		8,282,774		11,619,033		16,675,063		22,303,254
Non-GAAP net income attributable to TAL Education Group	$	64,023,041	$	71,070,038	$	85,651,476	$	110,542,692
Net income per ADS
Basic	$	0.11	$	0.11	$	0.14	$	0.17
Diluted		0.10		0.10		0.13		0.16
Non-GAAP Net income per ADS (note 3)
Basic	$	0.13	$	0.14	$	0.18	$	0.22
Diluted		0.12		0.12		0.16		0.19
ADSs used in calculating net income per ADS
Basic		486,475,386		517,166,827		485,885,991		509,008,205
Diluted		564,592,500		579,395,597		562,625,701		580,757,085

Note 3: The Non-GAAP adjusted net income per ADS is computed using Non-GAAP adjusted net income and the same number of ADSs used in GAAP basic and diluted EPS calculation.