Kroton delivers two new campuses in the quarter and records 53.3% growth in Net Revenue and

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1 Financial and Operational Highlights Kroton opened two new post-secondary education campuses: Ined Divinópolis, MG and Faculdade Pitágoras Fadom Campus, Divinópolis, MG. Kroton delivers two new campuses in the quarter and records 53.3 growth in Net Revenue and Adjusted EBITDA of R$ 5.2 million. Belo Horizonte, October 29th, 2007 Kroton Educacional S.A. (Bovespa: KROT11), Kroton or Company, today announced its third quarter 2007 results (3Q07). The operational and financial information of the Company are presented based on consolidated figures, combined and in Reais, according to Brazilian Corporate Law, except where otherwise stated. The analyses presented in this report refer to 3Q07 performance, compared to the same period in 2006 (3Q06), except where indicated otherwise.. The acquisition of Fadom, with 3,100 students on September 18, increased the number of postsecondary students to 14,863 on September 30, (The average number of students in the period was 12,832).. Net revenue increased 53.3, totaling R$ 35.5 million mainly influenced by the growth in postsecondary education, which reached R$ 18.7 million. The R$ 5.2 million adjusted EBITDA was 5.3 p.p. greater than 3Q06, and EBITDA margin grew comparing respective periods. Adjusted net profit in 3Q07 was R$ 8.9 million, including R$ 4.1 million of net financial gain. Comments by Water Luiz Diniz Braga, CEO Kroton s third quarter 2007 results demonstrate the Company s assertiveness and commitment to its growth strategy. Out of the four new campuses forecast to start up their operations by the end of 2007, two have already been delivered: Ined and Faculdade Pitágoras Fadom Campus, both located in Divinópolis, MG. These new campuses represent an average increase in the number of students in relation to the previous quarter (2Q07). Our new organic expansion has also progressed: through 9/30/2007, we received the visit of the Ministry of Education at seven campuses for the evaluation of 22 programs. Although the Ministry of Education, the organ responsible for accrediting new campuses and authorizing new programs, is working with more extended deadlines, we are maintaining the forecast schedule. This fact stimulated the Company to proceed in its strategy of selective acquisition of qualified small and medium operations with growth potential. We also achieved growth in Primary and Secondary education through new educational assessment services contracts with private schools. These results are aligned with our strategy of finding new opportunities in this segment. These facts, combined with the quarterly figures, demonstrate clear gains in scale of our operations and reaffirm our proposals and commitments to our shareholders, clients, employees and the communities in which we operate. Closing quote on 10/23/2007 Price R$40,39/unit Market Capitalization R$ billion. Conference calls 10/31/07 (Wednesday) Portuguese (BR GAAP) 11:00 AM (Brasilia) 09:00 AM (US-ET) 1:00 PM (London) Tel : +55 (11) Replay +55 (11) Pincode : Kroton English (BR GAAP) Walter Luiz Diniz Braga CEO 12:00 PM (Brasilia) 10:00 AM (US-ET) 14:00 (London) Tel : +1 ( 973) Replay +1 (973) Pincode : /17

2 MAIN indicators R$ Million ('000) 3Q07 3Q06 9M07 9M06 Average Number of Enrolled Students - Post-secondary education 12,832 7, ,125 6, Number of campuses Financial performance Total Gross Revenue Vertical Analysis Gross sales revenue 37,302 24, ,539 85, (-) Deductions (1,850) (1,784) 3.7 (5,871) (4,651) Net Sales revenue 35,452 23, ,668 80, (-) Cost of services/products sold (21,880) (13,051) 67.6 (54,564) (36,913) Gross profit 13,572 10, ,104 43, Net Income (loss) 3, ,156 8, Adjusted Net Income 8,911 1, , , Adjusted Net Income Margin ,1 p.p p.p. Adjusted EBITDA 5, , ,729 20, Adjusted EBITDA Margin ,3 p.p p.p. R$ Million ('000) 3Q07 3Q06 9M07 9M06 3Q07 3Q06 Gross Sales revenue 37,302 24, ,539 85, Primary and secondary education 17,610 13, ,885 55, Post-secondary education 19,296 11, ,752 29, Other services Deductions (1,850) (1,784) 3.7 (5,871) (4,651) Primary and secondary education (1,321) (1,028) 28.5 (3,744) (2,961) Post-secondary education (562) (756) (2,127) (1,690) Other services n.m. - - n.m Net Sales revenue 35,452 23, ,668 80, In 3Q07, total gross revenue was R$ 37.3 million, an increase of 49.8 compared to the R$ 24.9 million accounted in 3Q06. In the 9 months (9M07), accrued revenue reached R$ million, an increase of 40.5 compared to R$ 85.1 million in 9M06. The increase was driven mainly by the accelerated growth of post-secondary education operations, taking into account the acquisition of FADOM. The average number of students was 12,832 and was impacted by the incorporation of students from the acquisition of FADOM only as of September Gross revenue from operations of the Primary and Secondary education network reached R$ 17.6 million in 3Q07, an increase of 33.0 in relation to 3Q06. In the 9-month accrued figure of 2007 (9M07), gross revenue of the Primary and Secondary education network was R$ 66.9 million, an increase of 21.5 compared to R$55.0 million accounted in 9M06. The increase in the quarter of R$ 3.6 million refers to the integration of contracts for school operations and of the Colégio Pitágoras São Luiz unit to the Sistema Pitágoras de Educação Superior Soc. Ltda as of June 2007 and R$ 1.1 million referring to new educational assessment services for Primary and Secondary schools. This result is aligned with our strategy of capturing new opportunities in the Primary and Secondary education. Seasonal Effect - Gross Revenue - Primary and Secondary Educacion (R$ million) 3Q07 3Q Q 2 Q 3 Q 4 Q 2/17

3 Historically, the Company has shown strong a seasonal effect in the first nine months of each year in the composition of its Primary and Secondary education network revenue, since approximately 75 of its annual revenue mainly originates from the sale of teaching material and is concentrated in the first half of the year. Net operating revenue of the post-secondary education sector increased 66.2, going from R$ 11.6 million in 3Q06 to R$ 19.3 million in 3Q07. Year-to-date, this increase was 73.2, going from R$ 29.9 million in 9M06 to R$ 51.7 million in 9M07. The growth was driven by an increase of 81.4 in the average number of students, compared to the same period in the previous year, due to the maturation process of the Company s 10 operating campuses. Average Number of Enrolled Students - Post-secondary 3Q07 3Q06 9M07 9M06 education Faculdade Pitágoras 10,903 6, ,417 5, INED 1, , TOTAL 12,832 7, ,125 6, Deductions from Gross Revenue Deductions from revenue in 3Q07 represent 5.2 of net revenue, a decrease of 2.5 percentage points compared to the 7.7 recorded in the same period in In the nine-month accrued figure in 2007, deductions represented 5.2 of net revenue, a slight decrease compared to the 5.8 recorded in the same period in 2006 driven by the higher revenue. In the Primary and Secondary education network, deductions represented 3.7 of net revenue in 3Q07, compared to 4.4 in 3Q06, a reduction of 0.7 percentage point. Comparing the nine months, there was a slight decrease of 0.4 percentage point. In post-secondary education, deductions in the period represented 1.6 of net revenue in 3Q07, 1.7 percentage points lower than in 3Q06, where 3.3 was accounted. Comparing the nine months, there was a decrease of 0.2 percentage point. Total Net Revenue Total net revenue in 3Q07 increased 53.3, increasing from R$ 23.1 million in 3Q06 to R$ 35.5 million in the same period in Year-to date, the increase was 41.3, going from R$ 80.4 million in 9M06 to R$ million in 9M07. Net revenue of the Primary and Secondary education network increased 33.4, going from R$ 12.2 million in 3Q06 to R$ 16.3 million in 3Q07. In the first nine months, the increase was 21.2, going from R$ 52.1 million in 9M06 to R$ 63.1 million in 9M07. Net revenue coming from post-secondary education increased 72.6, reaching R$ 18.7 million in 3Q07 compared to R$ 10.9 million in 3Q06. In the nine months of 2007, the increase was 76.0, going from R$ 28.2 million in 9M06 to R$ 49.6 million in 9M07. 3/17

4 Net Sales Growth (R$ million) CAGR = M06 9M07 3Q06 Primary and Secondary education Post-secondary educacion Other services 3Q07 Costs of Services / Products sold R$ Million 3Q07 3Q06 9M07 9M06 3Q07 3Q06 Cost of services/products sold (21,880) (13,051) 67.6 (54,564) (36,913) Cost of products Sold (2,828) (1,771) 59.7 (9,617) (8,433) Cost of Services (19,052) (11,280) 68.9 (44,947) (28,480) Costs of Products Sold Costs of products sold are related to publishing and printing costs of didactic material sold in the Primary and Secondary education network s associated schools. Costs of products sold in 3Q07 increased 59.7, going from R$ 1.8 million in 3Q06 to R$ 2.8 million in 3Q07. In the nine-month accrued figure, the increase was 14.0, going from R$ 8.4 million in 9M06 to R$ 9.6 million in 9M07. The increase is directly related to the sales volume of teaching materials in 9M07, which was greater than in 9M06. Cost of Services Costs of services are related to the costs of operation of the basic education and post-secondary units, most of which are cost of faculty, in addition to administration personnel, facilities, materials and other operating costs. In the quarter, costs of services grew 68.9, going from R$ 11.3 million in 3Q06 to R$ 19.1 million. In the nine-month accrued period in 2007, the increase was 57.8, going from R$ 28.5 million in 9M06 to R$ 44.9 million in 9M07. The increase mainly refers to growth in the number of students in post-secondary education due to the process of maturation of existing campuses. To a lesses degree, the increase in service costs was also due to the integration of the Primary and Secundary education units of the acquired operations and of Colégio Pitágoras São Luiz, implemented as of June /17

5 Gross Profit Gross profit of the Company grew 34.8, going from R$ 10.1 million in 3Q06 to R$ 13.6 million in the same period in In the nine-month accrued figure in 2007, this increase was 35.8, going from R$ 43.5 million in 9M06 to R$ 59.1 million in 9M07. Gross margin over net revenue decreased 5.3 percentage points, from 43.6 in 3Q06 to 38.3 in the same period of In the nine-month period, there was a decrease of 2.1 percentage points, going from 54.1 in 9M06 to 52.0 in 9M07. The decrease is related to the integration of the Primary and Secondary education operations contracted and to Colégio Pitágoras São Luiz, occurred as of June R$ Million 3Q07 3Q06 9M07 9M06 3Q07 3Q06 Gross profit 13,572 10, ,104 43, Gross Margin ,3 pp ,1 pp Operating income (expenses) (14,356.0) (9,088.0) 58.0 (37,263) (31,660) Selling expenses (4,202) (4,471) -6.0 (15,137) (12,353) Personnel (2,396) (1,443) 66.0 (6,146) (3,996) General administrative (2,785) (3,160) (10,167) (9,853) Expenses with primary issuance of units (4,891) (5,815) Other , Goodwill amortization (344) (344) 0.0 (1,034) (6,102) Operating profit (loss) before financial results (784) 981 n.m. 21,841 11, Financial results 4,138 (150) n.m. 1,462 (2,667) n.m Operating profit (loss) 3, ,303 9, Non-operating results 0 (2) n.m. 2 - n.m Income tax and social contribution (expense) benefits (185) - n.m. (5,157) (875) Minority Participations 8 - n.m. 8 - n.m Net Income (loss) 3, ,156 8, Deferred Income taxes and social contribution n.m. 2,115 - n.m Goodwill amortization ,033 6, Non-operating results 0 2 n.m. (2) - n.m Expenses with primary issuance of units 4,891 - n.m. 5,815 - n.m Adjusted Net Income 8,911 1, ,117 14, Operating Expenses Operating expenses reached R$ 14.4 million in 3Q07, an increase of 58.0, compared to R$ 9.1 million in 3Q06. In the nine months accrued in 2007, the increase was 17.7, from R$ 31.7 million in 9M06 to R$ 37.3 million in 9M07. As a percentage of net revenue, such expenses increased 1.2 percentage points, going from 39.3 in 3Q06 to 40.5 in 3Q07, including non-recurring expenses from the IPO of R$ 4.9 million. If the IPO amounts are discounted, operating expenses show a gain of 12.6 percentage points in the quarter. In spite of this, in the first nine months, there was a decrease of 6.6 percentage points, going form 39.4 in 9M06 to 32.8 in 9M07. Sales Expenses Sales expenses decreased 6.0 in 3Q07, accounting R$ 4.2 million in 3Q07 compared to R$ 4.5 million recorded in 3Q06. In the first nine months accrued figure, there was an increase of 22.5, going from R$ 12.4 million in 9M06 to R$ 15.1 million in 9M07. These expenses represented 11.9 of net revenue in 3Q07 compared to 19.3 in the same period in The nine-month accrued expenses represented 13.3 in 9M07 and 15.4 in 9M06, respectively, in relation to net revenue. The reduction in accrued expense is due to gains in the scale of our operations. 5/17

6 Personnel expenses Personnel expenses, including remuneration of management, grew 66.0, going from R$ 1.4 million in 3Q06 to R$ 2.4 million in 3Q07. In the nine-month accrued figure, the increase was 53.8, going from R$ 4.0 million in 9M06 to R$ 6.1 million in 9M07. These variations were due to the restructuring of the corporate area to support operations growth and new facilities. General and Administrative Expenses General and administrative expenses decreased 11.9 in 3Q07 compared to the same period in the previous year, going from R$ 3.2 million in 3Q06 to R$ 2.8 million in 3Q07. In the first nine months, the increase was 3.2, going from R$ 9.9 million in 9M06 to R$ 10.2 million in 9M07. Expenses with the IPO in 3Q07 booked at EDE were R$ 4.9 million and R$ 5.8 million, respectively in 9M07, plus R$ 21 million accounted in Kroton Educacional S/A, totaling R$ 26.8 million. The main items that make up general and administrative expenses are: (1) third-party services for consulting and training; (ii) depreciation and amortization; and (iii) sundry expenses, such as: rent, maintenance and travel. It is worthwhile mentioning that these expenses occur monthly and are necessary for operation of the Company s corporate structure and operation of the Primary and Secondary education network in providing products and services to associated schools. SG&A* (R$ million) and Continuous Improbement in SG&A as a percentage of Net Sales () M06 9M07 3Q06 3Q07 (*) Selling, general and administrative expenses, excluding IPO expenses. Other Net Operating Revenues and Expenses Other net operating revenues and (expenses) remained stable at R$ 0.3 million in 3Q07. In the first nine months accrued figure, the increase was 60.9, going from R$ 0.6 million in 9M06 to R$ 1.0 million in 9M07. Other revenues and expenses were equivalent to 0.7 of net revenue in 3Q07 and to 1.4 in 3Q06. The nine-month accumulate figure remained stable at approximately 1.0 of net revenue. These revenues come from vestibular (college admissions exam) fees and other fees. 6/17

7 Amortization of Goodwill Goodwill amortization in 3Q07 was R$ 0.3 million, equal to the amount in 3Q06. The amortization is related to the acquisition of Colégio Pitágoras (Cidade Jardim unit), which has been amortized since 2004 on a monthly basis at a rate of 10 per annum. The nine-month accrued figure decreased 83.1, going from R$ 6.1 million in 9M06 to R$ 1.0 million in 9M07. R$ 4.8 million are related to the write off non-recurring goodwill from the shareholder restructuring occurred in April Adjusted EBITDA and Adjusted EBITDA Margin R$ Million 3Q07 3Q06 9M07 9M06 3Q07 3Q06 Net Income (loss) 3, , , (-) Income Tax and Social Contribution n.m. 5, (-) Financial Results (4,138.0) n.m. (1,462.0) 2,667.0 n.m (+) Expenses with primary issuance of units 4, n.m. 5, n.m (+) Goodwill amortization , , (+) Depreciation and Amortization , , Adjusted EBITDA 5, , , , Adjusted EBITDA margin p.p p.p. Adjusted EBITDA reached R$ 5.2 million in 3Q07, an increase of compared to R$ 2.2 million in the same period of the previous year. The nine-month accrued figure was 47.4, reaching R$ 30.7 million in 9M07, compared to R$ 20.9 million in 9M06. Adjusted EBITDA margin in relation to net revenue in 3Q07 was 14.7, 5.3 percentage points above the 9.4 recorded in 3Q06. In the first nine months, the increase was 1.1p.p. comparing the 25.9 in 9M06 to 27.0 in 9M07. Like previous quarters, these results reflect the improved operational performance of the Company, which showed strong organic growth, especially in the post-secondary operations and further improved margins by means of gains in scale, synergies among operations and greater management efficiency. It is worthwhile mentioning that the EBITDA result is and will be impacted by seasonality of sales of teaching material for associated schools in the Primary and Secondary network. Net Financial Result Total Capitalization ** 441,712.0 Net Debt (**) The total capitalization is the sum of Shareholders' Equity and Total Loans and Financing 51, ,644.0 (340,588.0) 25, Net financial income in 3Q07 was R$ 4.1 million, showing improvement from the net financial expense of R$ 0.2 million posted in 3Q06. In the nine month accrued figure, the financial result was also a positive R$ 1.5 million. The result is due to the balance of financial investments. Financial expenses increased 223.7, going from R$ 1.1 million in 3Q06 to R$ 3.6 million in 3Q07. In the first nine months, the increase was 96.4, going from R$ 4.1 million in 9M06 to R$ 8.0 million in 9M07. The increase refers to higher indebtedness in the first half of 2007 and CPMF tax on financial investments. 7/17

8 Income Tax and Social Contribution on Net Profit In May 2006, due to the shareholder restructuring, there was a change in the tax accounting regime at Editora e Distribuidora Educacional from the presumed profit to the taxable income regime. In 9M07, income tax and social contribution was R$ 5.2 million, being that R$ 2.9 million was collected under the estimated regime and R$ 2.3 million provisioned. In 9M06, the amounted collected was 1.5 million. By December 2007, a significant parcel of this provision will have been reversed due to adjustment in the results of the Primary and Secondary education network, which will be impacted by seasonal sales of teaching material. In December 2006, the Company constituted a provision for deferred tax credit in the amount of R$ 13.7 million, based on the expectation of expected future income generation. These tax credits were forthcoming from goodwill due to shareholder incorporations occurred in 2006, to tax loss and negative base accrued through The tax credit will be deferred up to ten years. In June 2007, with the incorporation of Apollo Brasil Partners in the Editora and Distribuidora Educacional, a deferred tax credit was constituted in the amount of R$ 3. 7 million, which will be deferred as of June 2007 up to five years. Adjusted Net Profit Adjusted net profit reached R$ 8.9 million in 3Q07, significantly greater than in the same period in the previous year (R$ 1.2 million). In the first nine months, 9M07, the increase was 88.1, going from R$ 14.4 million in 9M06 to R$ 27.1 million in 9M07. Adjusted net margin reached 25.1 in 3Q07 and 23.9 in 9M07. Growing Adjusted Net Income (R$ million) and Net Income Margin () (5.4) M06 9M07 3Q06 3Q07 8/17

9 Capitalization and Cash Position On September 30, 2007, gross debt was R$ 16.9 million, a decrease of 49.6 in relation to 2Q07, thus improving the Company s debt structure. 6 R$ Million 9/30/07 6/30/07 Cash and banks 357, , Loans and financing 16, , Short-term Debt 1, , Long-term Debt 15, , Shareholders' Equity 424, , Total Capitalization ** 441, , Net Debt (340,588.0) 25, (**) The total capitalization is the sum of Shareholders' Equity and Total Loans and Financing Investments In 3Q07, the Company invested R$ 11.0 million in the implementation of new postsecondary education campuses, new programs in the existing campuses, distance learning and educational technology and R$ 10.7 million referring to goodwill in the acquisition of Fadom. Investments (R$ million) as a pecentage of Net Sales () Q07 2Q07 3Q07 Cash Flow On September 30, 2007, cash totaled R$ million, 4,278.8 above the amount accounted on June 30, 2007 in function of the capitalization. In 3Q07, the Company generated cash in operational activities of R$ 15.2 million, which reflects the continuous maturation of our campuses, cost and operating expense dilution, in spite of the increase in our working capital needs with the opening of new facilities. 9/17

10 Kroton accumulated cash in financing activities of R$ million due to: (i) sale of shares issued in the amount of R$ million; (ii) payment of loans and interest in the amount of R$ 16.2 million. The company used cash resulting from investments of R$ 21.7 million, being R$ 7.3 million related to the purchase of assets and investments of R$ 3.7 million in deferred assets tied to the conception and development of academic and operational methodology of Post Secondary education, and R$ 10.7 million related to the goodwill from Fadom s acquisition. Cash Flow (R$ million) 2Q07-3Q (11.0) (10.7) (16.2) 4.1 (4.9) Capitalization Ended Cash in 2Q07 Operating Activities Investments Acquisition Amortization Financial Result IPO Expenses Ended Cash in 3Q07 Capital Markets Since its inclusion in Level 2 of Bovespa, on July , until October , Kroton units presented a 3.56 appreciation compared to 8.03 depreciation of Ibovespa. 10/17

11 Price (R$) KROT11 +3,56 KROT11 X IBOVESPA Volume (R$ million) KROT IBOVESPA The price of the 10,675,000 Units offered in the IPO was R$ per Unit. The 0.00 total gross amount of the operation was R$ million, being R$ million from the primary offering and R$ 59.7 million from the secondary offering. 23-Jul 27-Jul 2-Aug The greenshoe was exercised on 8/3/2007 in the total of 1,601,650 Units at the same price as the IPO. The total gross amount of the operation was R$ 62.5 million, being R$ 39.1 million from the primary offering and R$ 23.4 million from the secondary offering. Outlook 8-Aug 14-Aug 20-Aug 24-Aug 30-Aug 5-Sep Kroton reaffirms its organic growth strategy and growth through selective acquisition, maintaining a schedule of 16 new campuses until the end of 2008, fulfilling its agenda according to plans. Of the four campuses scheduled for the end of 2007: 2 new campuses were delivered in 3Q07; 1 new campus already in operation since 4Q07 (Ined/Venda Nova, MG, inaugurated on October 8); 3 new campuses 2 in Minas Gerais and one in Maranhão state, already visited by the Ministry of Education (MEC). Additionally seven new campuses visited by the Ministry of Education drive organic growth of the Company s facilities. 12-Sep 18-Sep 24-Sep 28-Sep 4-Oct 10-Oct 17-Oct 23-Oct Shareholder composition Kroton Units (KROT11) traded on the São Paulo Stock Exchange are made up of one ordinary share and six preferred shares. The total number of Units of the Company is 31,450,377. Free Float Fouding Shareholders Kroton Educacional S.A. Administration UNITS = UNITS = UNITS = Editora Distribuidora Educacional *100 tag along for all shareholders 11/17

12 Glossary of Terms Used by the Company Company or Kroton: Refers to Kroton Educacional S.A. (Bovespa: KROT11) Adjusted EBITDA: Adjusted EBITDA is equivalent to the Net Adjusted Income before income tax and social contribution, from net financial expenses, depreciation and amortization expenses. Adjusted EBITDA is used as a performance measure by the Company s management. It is not a measure adopted by the Brazilian Accounting Practices or U.S. Accounting Practices and does not represent the cash flow for the periods presented and should neither be considered as a substitute for net income, as an operating performance indicator of Kroton or as a substitute for cash flow, nor as a liquidity indicator. Primary and secondary education: Primary and secondary education, which comprises children education, elementary and secondary school are aimed at developing the students capacity and knowledge, ensuring them a regular education background that is indispensable to the exercise of citizenship, in addition to providing them with professional development means and later studies. Post-Secondary education: Post-secondary education comprises the following programs and degrees:(i) sequential courses, aimed at acquiring or updating technical, professional, academic or intellectual development qualifications in the fields of sciences, humanities and arts;(ii) associated programs, structured to meet the needs of all economic sectors, teaching vocational training, comprising specialized areas and leading to the acquisition of a associate degree; (iii) undergraduate courses, for professional development and training in several areas, in full attendance, semi-attendance or distance learning modes; (iv) postgraduate courses or programs, open to candidates holding graduate degrees who meet the requirements of the teaching institutions, consisting of latu sensu post-graduate (specialization and professionalizing masters degree) and latu sensu post-graduation (academic masters degree and doctors degree); and (v) extension courses, consisting of an articulated set of pedagogic actions, of a theoretical and/or practical nature, either with class attendance or on a distance learning basis, planned and organized in a systematic way. Associated Schools: Elementary and Secondary (Basic Education) Schools, associated with its network, through the adoption of its educational technology, with the execution of an adhesion contract with an undetermined term. Adjusted Net Income: Adjusted Net Income is equivalent to the net income after deferred income tax and social contribution, goodwill amortization, nonoperating income and IPO expenses. Primary and Secondary education network: Comprises the proprietary primary and secondary education operations, Associated Schools and rendering of teaching services in the facilities of private companies. SETI: Technologist Education System INED. SUP: Pitágoras University System. Unit or Units: registered book entry share deposit certificates with no par value, each representing one Common Share and six (6) Preferred Shares, to be issued by the depositary institution, under the terms of the Deposit Contract. 12/17

13 About Kroton Educacional: Kroton is one of the largest private educational organizations in Brazil, operating in the primary and secondary teaching segment for more than 36 years and post-secondary education area since The Company acts on an integrated and diversified basis, operating proprietary schools and colleges and providing education, teaching technology and didactic material for a primary and secondary education network of 595 associated schools. In the post-secondary area, Kroton has ten campuses in operation and 14 campuses in the implementation phase, in five Brazilian states, all scheduled to start activities between October 2007 and the year of IR Contact: Alicia Maria Gross Figueiró Pinheiro Vice Chief Executive Officer and IRO Phone: +55 (31) dri@kroton.com.br Thiago Ribas Investor Relations Analyst Phone: + 55 (31) thiagorb@kroton.com.br This release contains forward-looking statements related to the prospects of the business, estimates of operating and financial results, and those related to the growth prospects of Kroton. These are merely projections and, as such, are based exclusively on the expectations of Kroton s management concerning the future of the business and its continuous access to capital to finance the Company s business plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian and international economies and the industry, among other factors, besides the risks presented in the documents filed by Company and are, therefore, subject to change without prior notice. 13/17

14 Consolidated Statements of Operations - Consolidated and Combined (BR GAAP) 9M06 V.A. 9M07 V.A. 2007/2006 (In R$ million) Gross sales revenue: 85, , Primary and secondary education 55, Post-secondary education 29, Other Deductions: (4.651) -5.8 (5.871) Primary and secondary education (2.961) -3.7 (3.744) Post-secondary education (1.690) -2.1 (2.127) Other n.m. Net Sales revenue 80, Primary and secondary education 52, Post-secondary education 28, Other Cost of services / products sold (36.913) (54.564) Cost of products sold (8.433) (9.617) Cost of services (28.480) (44.947) Gross profit 43, Operating revenues ( expenses) (31.660) (37.263) Selling (12.353) (15.137) Personnel (3.996) -5.0 (6.146) General and Administrative (9.853) (15.982) Other Goodwill amortization (6.102) -7.6 (1.034) Operating profit (loss) before financial results Net financial expense (2.667) n.m. Financial expenses (4.063) -5.1 (7.980) Financial income Operanting profit (loss) Non-operating results n.m. Profit (loss) before income tax and social contribution Income Tax and social contribution (875) -1.1 (5.157) Current (875) -1.1 (3.042) Deferred (2.115) -1.9 n.m. Minority Participations n.m. Net Income (loss) for the period /17

15 Consolidated Statements of Operations - Consolidated and Combined (BR GAAP) 3Q06 V.A. 3Q07 V.A. 2006/2007 (In R$ million) Gross sales revenue: Primary and secondary education Post-secondary education Other Deductions: (1.784) -7.7 (1.850) Primary and secondary education (1.028) -4.4 (1.321) Post-secondary education (756) -3.3 (562) Other n.m. Net Sales revenue Primary and secondary education Post-secondary education Other Cost of services / products sold (13.051) (21.880) Cost of products sold (1.771) -7.7 (2.828) Cost of services (11.280) (19.052) Gross profit Operating revenues ( expenses) (9.087) (14.356) Selling (4.471) (4.202) Personnel (1.443) -6.2 (2.396) General and Administrative (3.160) (7.676) Other Goodwill amortization (344) -1.5 (344) Operating profit (loss) before financial results (784) -2.2 n.m. Net financial expense (150) n.m. Financial expenses (1.126) -4.9 (3.645) Financial income Operanting profit (loss) Non-operating results (2) n.m. Profit (loss) before income tax and social contribution Income Tax and social contribution (185) -0.5 n.m. Current n.m. Deferred (499) -1.4 n.m. Minority Participations n.m. Net Income (loss) for the period /17

16 Consolidated Balance Sheet - Consolidated and Combined (BR GAAP) 6/30/07 V.A. 9/30/07 V.A. Jun-07 / Sep-07 (In R$ million) Current assets Cash and banks Accounts receivable Inventories Taxes recoverable Prepaid expenses Other Long-term receivables Deferred charges Credit with subsidiaries n.m. Other Permanent Assets Goodwill on investment n.m. Property and equipment Intangible assets Deferred charges Total Assets Liabilities and shareholder Equity Current liabilities Suppliers Loans and Financing Salaries and social charges Income Tax and social charges n.m. Taxes and contributions payable Advances from customers Long-term liabilities Loans and Financing Debits with subsidiaries Other Minority quotaholders Shareholders' equity Capital Capital Reserve Retained earnings (accumulated deficit) Total liabilities and shareholders' equity /17

17 Consolidated Statements of Cash Flow - Consolidated and Combined (BR GAAP) Consolidated September/2007 Combined June/2007 Net Income in the period (3,775) 1,960 Adjustments to reconcile result of cash generated by operational activities Equity income - - Depreciation and amortization 1, Result in the sale of permanent assets 4 26 Deferred income tax and social contribution 1, Interest from financial applications 6891 Increase/decrease of assets (Increase) reduction in accounts receivable 1,965 11,311 (Increase) reduction in inventories (1,220) (348) (Increase) reduction in other accounts receivable 1,029 (1,034) Increase (reduction) in suppliers 223 (874) Increase (reduction) in customer advances 360 (9,401) Increase (reduction) in other accounts payable 6,404 2,495 Net funds coming from operational activities 18,249 3,265 Cash flow used in investment activities Asset purchases (7,300) (3,074) Additions to deferred (3,681) (2,351) Goodwill account in the purchase of Fadom (10,695) Net funds used in investment activities (21,676) (5,424) Cash flow used in financial activities Sale of shares issued 372, Loans and financing obtained 6,000 Payments of loans and financing (15,570) (4,892) Interest paid on financing (724) 457 Loans from affiliated companies Net funds used in financing activities 356,564 1,805 Increase (decrease) in Cash Balance Cash balance at the beginning of the period 8, Cash balance at the end of the period 357, Increase (decrease) of cash 349,362 1,606 17/17