2014

China Mass Media Reports First Quarter 2011 Unaudited Financial Results

BEIJING, May 23, 2011 /PRNewswire-Asia-FirstCall/ -- China Mass Media Corp. ("China Mass Media" or the "Company") (NYSE: CMM), a leading television advertising company in China, today announced its unaudited financial results for the first quarter ended March 31, 2011.

First Quarter 2011 Highlights:

  • Total net revenues were RMB50.9 million (US$7.8 million), a decrease of 9.1% from the first quarter of 2010 and a decrease of 32.8% from the fourth quarter of 2010.
  • Operating income was RMB13.1 million (US$2.0 million), a decrease of 5.7% from the first quarter of 2010 and a decrease of 53.7% from the fourth quarter of 2010.
  • Net income was RMB8.3 million (US$1.3 million), a decrease of 17.9% from the first quarter of 2010 and a decrease of 56.3% from the fourth quarter of 2010.
  • Net cash inflows from operating activities were RMB34.8 million (US$5.3 million), a decrease of 13.7% from net cash inflows from operating activities of RMB40.3 million in the first quarter of 2010 and an increase of 34.2% from the fourth quarter of 2010.

Mr. Shengcheng Wang, Chairman and Chief Executive Officer of China Mass Media, commented, "The first quarter of 2011 was a challenging time as we entered the seasonally weak period of the year.  In our advertising agency service business, in order to secure long-term commitments from our clients in the face of intense price competition in the advertising market, we initiated a presale promotional campaign last November to attract longer-term contracts by offering sizable discounts. These contracts, which are with both advertising agencies and direct advertisers and range in term from three to six months, will serve as a solid foundation of our revenues in 2011. Due to these promotional activities, there was a significant decrease in the sales price of certain products in the first quarter 2011 compared with the first and fourth quarters of 2010. As a result, revenues from advertising agency services declined despite the increase in our utilization rate. The sequential decline was also primarily because the fourth quarter is traditionally the peak season in our business."

"In an effort to diversify our business, towards the end of 2010, we entered into the outdoor advertising business by partnering with the outdoor media company Goto Media. Goto Media operates 80 large LED advertising screens and 1,000 advertising light boxes in 17 high-speed railway stations in China, including Beijing South Station, Shanghai Hongqiao Station, Guangzhou South Station and Tianjin Station. We focus on the sale of advertisements on these LED screens. We believe outdoor LED screens allow advertisements to reach consumers with similar content at a much lower price than traditional television ads. We also believe there are synergies between the outdoor advertising business and television advertising business and many of our existing clients find our services for both appealing. We have formed a dedicated sales team to focus on the sales and marketing of such outdoor services. In the first quarter of 2011, revenues from the sales of outdoor media totaled approximately RMB230,000."

"Our production and sponsorship services business continues to show solid growth. During the first quarter of 2011, we produced a number of commercial and print advertisements for clients such as Suning Appliance, Ping An Insurance of China and Yunnan Baiyao."

"Our arrangement with CCTV for the 'Guang Er Gao Zhi' program, a 30-second daily public service announcement that is broadcast twice a day on CCTV-1 and CCTV-2, will not be renewed once it expires on June 30, 2011 due to programming changes. This will have a negative impact on our top and bottom line in subsequent periods."

"Looking forward, we believe content production will become an important component of our strategy as we attempt to reorient our business towards growth. In 2011, we plan to produce at least one TV entertainment program and one TV drama series. We are also in discussions with a satellite TV network for the production and broadcast of a TV entertainment program in exchange for advertising time slots. We believe that by providing television networks with high quality content, we will be able to gain access to such advertising resources. We will release further details in the coming months."

First Quarter 2011 Financial Results

Revenues

Revenues from advertising agency services were RMB46.7 million (US$7.1 million) in the first quarter of 2011, a decrease of 15.8% from RMB55.5 million in the first quarter of 2010, and a decrease of 32.8% from RMB69.4 million in the fourth quarter of 2010. Given the intense price competition in the advertising market, in order to secure a full-year budget from clients and remain competitive in the market, the Company offered sizable discounts to certain clients. Due to these promotional activities, there was a significant decrease in the Company's average sales price in the first quarter 2011 compared with the first and fourth quarters of 2010. As a result, revenues from advertising agency services declined despite the increase in our the Company's utilization rate. The sequential decline was also primarily because the fourth quarter is the traditional peak season for the Company's business.

Revenues from production and sponsorship services were RMB7.2 million (US$1.1 million) in the first quarter of 2011, an increase of 127.9% from RMB3.1 million in the first quarter of 2010, and a decrease of 37.5% from RMB11.4 million in the fourth quarter of 2010. The Company's efforts to both improve production capabilities and proactively source new clients helped support momentum in the Company's production and sponsorship services business, as compared with the first quarter of 2010. During the first quarter of 2011, the Company successfully produced a number of commercial and print advertisements for clients such as Suning Appliance, Ping An Insurance of China and Yunnan Baiyao. The decrease in revenues from the fourth quarter of 2010 was mainly because of the general higher level of production activity and the payment of two advertisements produced for CCTV in 2008.

Operating costs and expenses

Cost of revenues was RMB27.1 million (US$4.1 million) in the first quarter of 2011, a decrease of 7.7% from RMB29.3 million in the first quarter of 2010 and a decrease of 19.5% from RMB33.7 million in the fourth quarter of 2010. The decrease in cost of revenues compared with the first and fourth quarters of 2010 was mainly because time slots available for sale on CCTV-4 decreased from 90 seconds to 60 seconds during the quarter.

Sales and marketing expenses were RMB4.4 million (US$0.7 million) in the first quarter of 2011, a decrease of 16.0% from RMB5.3 million in the first quarter of 2010 and an increase of 7.6% from RMB4.1 million in the fourth quarter of 2010. The decrease from the first quarter of 2010 was due to lower sales commissions paid to the sales team following the decline in sales performance during the first quarter in 2011. The increase compared with the fourth quarter of 2010 was mainly because management increased the basic salaries of the sales team in order to attract more talented people.

General and administrative expenses were RMB6.2 million (US$1.0 million) in the first quarter of 2011, a decrease of 16.0% from RMB7.4 million in the first quarter of 2010 and a decrease of 35.1% from RMB9.6 million in the fourth quarter of 2010. The decrease was mainly due to lower professional service fees in the first quarter of 2011.

Other expenses included an exchange loss of RMB2.5 million (US$0.4 million) in the first quarter of 2011, which compares with an exchange loss of RMB2.8 million (US$ 0.4 million) in the fourth quarter of 2010 and RMB0.1 million (US$0.01 million) in the first quarter of 2010. The Company's functional currency, the Renminbi, continued to appreciate against the U.S. Dollar (USD), while the Company maintained significant USD deposits.

Income tax expense was RMB4.9 million (US$0.7 million) in the first quarter of 2011, an increase of 4.1% from RMB4.7 million in the first quarter of 2010, and a decrease of 43.5% from RMB8.6 million in the fourth quarter of 2010. The Company's effective tax rate was 31.6%, 31.3% and 37.0% for the three months ended March 31, 2010, December 31, 2010 and March 31, 2011, respectively. The effective tax rate for the first quarter of 2011 was higher than the PRC statutory tax rate mainly due to the exchange losses of RMB2.5 million incurred by the offshore companies that were not deductible from PRC tax.

Operating income, as a result of the foregoing factors, was RMB13.1 million (US$2.0 million) in the first quarter of 2011, a decrease of 5.7% from RMB13.9 million in the first quarter of 2010 and a decrease of 53.7% from RMB28.4 million in the fourth quarter of 2010. The company's operating margin was 24.9%, 37.5% and 25.8% for the three months ended March 31, 2010, December 31, 2010 and March 31, 2011, respectively.

Net income was RMB8.3 million (US$1.3 million) in the first quarter of 2011, a decrease of 17.9% from net income of RMB10.1 million in the first quarter of 2010 and a decrease of 56.3% from RMB19.0 million in net income in the fourth quarter of 2010. The Company's net margin was 18.1%, 25.1% and 16.3% for the three months ended March 31, 2010, December 31, 2010 and March 31, 2011, respectively.

Basic and diluted earnings per ADS for the first quarter of 2011 were RMB0.32 (US$0.05), compared with basic earnings per ADS of RMB0.38 for the first quarter of 2010 and RMB0.72 for the fourth quarter of 2010.

Each ADS represents 30 ordinary shares.

Business Outlook

The Company currently expects to generate total net revenues of between RMB48 million ($7.3 million) to RMB53 million ($8.1 million) for the second quarter of 2011, which represents a potential decrease of 7.0% to 15.8% compared with the second quarter of 2010 due to continued pricing competition in the market. This forecast reflects the Company's current and preliminary estimate, which is subject to change.

Conference Call

China Mass Media will host a conference call and live webcast at 8:00 a.m. Eastern Time (EDT) on Monday, May 23, 2011(8:00 p.m. Beijing time on May 23, 2011).

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

- U.S. Toll Number:

+1 617 597 5346

- U.S. Toll Free Number:

+1 866 362 4829

- HK. Toll Free Number:

800 96 3844

- South China Toll Free Number/ China Telecom:

10 800 130 0399

- North China Toll Free Number/ China Telecom:                      

10 800 152 1490

- South China Toll Free Number/ China Netcom:

10 800 852 1490

Passcode: CMM




A live webcast of the conference call will be available on the investor relations section of the Company's website at: http://www.chinammia.com.

A telephone replay of the call will be available after the conclusion of the conference call. The dial-in details for the replay are as follows:

- U.S. Toll Free Number:

+1 888 286 8010

- International dial-in number:                                                  

+1 617 801 6888

Passcode: 56565421




Non-GAAP Disclosure

In addition to the unaudited consolidated financial information presented in accordance with US GAAP, management uses a non-GAAP measure of net income excluding non-cash share-based compensation. Company management believes excluding the share-based compensation expenses from non-GAAP financial measures is useful for the investors' understanding of overall current financial performance. Nevertheless, the limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been and will continue to be a significant recurring expense in the Company's business.

The presentation of the 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 US GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth below, which shall be read in conjunction with the preceding financial information presented in accordance with US GAAP.

Safe Harbor Statement

This document contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about the Company's plans, objectives, expectations, strategies, intentions, or other characterizations of future events or circumstances and are generally identified by the words anticipates, believes, could, estimates, expects, intends, may, plans, seeks, would, and similar expressions.

A number of factors could cause the Company's actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Securities and Exchange Commission filings of the Company. China Mass Media does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

About China Mass Media Corp.

As a leading television advertising company in China, the Company provides a full range of advertising services, including advertising agency services, creative production services, public service announcement sponsorship services, and other value added services. The Company currently offers approximately 474 minutes of advertising time slots per day on CCTV Channels 1, 2, 4, E and F. CCTV is the largest television network in China. The Company has produced over 500 advertisements and has won a number of prestigious awards in China and across the world, including the "Gold World Medal" at The New York Festivals® International Television & Film Awards.

For more information, please visit http://www.chinammia.com.

For further information, contact:


China Mass Media Corp.

Julie Sun

CFO

6/F, Tower B, Corporate Square,

35 Finance Street Xicheng District

Beijing, 100033

P. R. China

Phone: +86-10-8809-1050

Email: juliesun@chinammia.com


Christensen

Tip Fleming

Phone: +852-2117-0861

Email: tfleming@christensenir.com


Teal Willingham

Phone: +852-9827-3632

Email: twillingham@christensenir.com



CHINA MASS MEDIA CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



THREE MONTHS ENDED,


Mar 31,
2010


Dec 31,
2010


Mar 31,
2011


Mar 31,
2011


RMB


RMB


RMB


US$









Revenues:








   Advertising agency services

55,466,324


69,441,672


46,699,856


7,131,600

   Advertisement production and
     sponsorship services

3,141,023


11,445,226


7,157,528


1,093,036

Total Revenue

58,607,347


80,886,898


53,857,384


8,224,636

Less: Business tax

(2,626,585)


(5,102,111)


(2,955,722)


(451,372)









Total net revenues

55,980,762


75,784,787


50,901,662


7,773,264









Operating costs and expenses:








   Cost of revenues

(29,340,334)


(33,652,251)


(27,085,297)


(4,136,233)

   Sales and marketing expenses

(5,293,944)


(4,131,716)


(4,446,447)


(679,023)

   General and administrative expense

(7,409,378)


(9,588,120)


(6,225,352)


(950,682)

Total operating costs and expenses

(42,043,656)


(47,372,087)


(37,757,096)


(5,765,938)









Operating income

13,937,106


28,412,700


13,144,566


2,007,326









Interest and investment income

858,166


1,646,857


2,481,784


378,997

Other income/(expense), net

6,246


(2,413,292)


(2,443,265)


(373,114)









Income before tax

14,801,518


27,646,265


13,183,085


2,013,209

Income tax expense

(4,690,509)


(8,641,741)


(4,883,735)


(745,802)

Net income

10,111,009


19,004,524


8,299,350


1,267,407









Net income available to ordinary shareholders

10,111,009


19,004,524


8,299,350


1,267,407









Earnings per ordinary shares, basic

0.013


0.024


0.0108


0.0016

Earnings per ordinary share, diluted

0.013


0.024


0.0107


0.0016

Earnings per ADS, basic

0.38


0.73


0.3234


0.0494

Earnings per ADS, diluted

0.38


0.72


0.3220


0.0492









Shares used in calculating
 earnings per ordinary share,
 basic

788,012,500


784,690,106


769,992,300


769,992,300

Shares used in calculating
 earnings per ordinary shares,
 diluted

789,873,237


788,060,137


773,240,405


773,240,405

Shares used in calculating
 earnings per ADS, basic

26,267,083


26,156,337


25,666,410


25,666,410

Shares used in calculating
 earnings per ADS, diluted

26,329,108


26,268,671


25,774,680


25,774,680












CHINA MASS MEDIA CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS




Dec 31,
2010


Mar 31,
2011


Mar 31,
2011



RMB


RMB


US$

Assets







Current assets







  Cash and cash equivalents


544,427,828


321,951,677


49,165,688

  Restricted cash


10,000,000


10,000,000


1,527,114

  Short-term investments


150,000,000


400,000,000


61,084,556

  Notes receivable


5,892,690


8,626,094


1,317,303

  Accounts receivable, net


991,024


5,092,876


777,740

  Prepaid expenses and other current assets


41,794,343


54,330,775


8,296,928

Total current assets


753,105,885


800,001,422


122,169,329

Non-current assets







  Property and equipment, net


58,602,500


57,680,835


8,808,521

Total non-current assets


58,602,500


57,680,835


8,808,521

Total assets


811,708,385


857,682,257


130,977,850








Liabilities and Shareholder's Equity







Current liabilities:







  Accounts payable


156,494,604


200,646,464


30,641,001

  Customer advances


39,311,493


39,328,017


6,005,836

  Accrued expenses and other current liabilities


23,848,004


20,945,273


3,198,581

  Taxes payable


30,194,919


31,594,619


4,824,858

  Amount due to related parties


53,237,048


53,237,048


8,129,904

Total current liabilities


303,086,068


345,751,421


52,800,180

Total Liabilities


303,086,068


345,751,421


52,800,180






















Shareholders' equity







  Ordinary shares ($0.001 par value;
    3,000,000,000 shares authorized; 788,332,360
    shares issued and outstanding as of December
    31, 2010; 775,388,020 shares issued and
    outstanding as of March 31, 2011)


5,381,321


5,296,452


808,829

  Additional paid-in capital


361,736,018


353,021,804


53,910,451

  Statutory reserves


25,000,000


25,000,000


3,817,785

  Retained earnings


126,034,102


134,333,452


20,514,248

  Repurchased shares to be cancelled, at cost
    (13,860,000 ordinary shares as of December
    31, 2010 and 9,723,000 ordinary shares as of
    March 31, 2011)


(9,529,124)


(5,720,872)


(873,643)

Total Shareholders' Equity


508,622,317


511,930,836


78,177,670








Total Liabilities and Shareholder's Equity


811,708,385


857,682,257


130,977,850











CHINA MASS MEDIA CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



THREE MONTHS ENDED


Mar 31,
2010


Dec 31,
2010


Mar 31,
2011


Mar 31,
2011


RMB


RMB


RMB


US$









Cash flows from operating activities:








Net income

10,111,009


19,004,524


8,299,351


1,267,405

Adjustments to reconcile net income to net cash provided by operating activities








  Depreciation expense

809,997


998,519


1,000,185


152,740

  Interest income

(426,230)


(1,352,712)


(2,102,411)


(321,062)

  Exchange (gain)/ loss

84,690


2,828,718


2,485,718


379,597

  Share-based compensation

519,777


185,129


361,253


55,167

  Disposal of property and equipment

12,263


(294,175)


(46,406)


(7,087)

  Changes in assets and liabilities:








  Notes receivable

(2,327,289)


(5,892,690)


(2,733,405)


(417,422)

  Accounts receivable, net

(9,421,011)


3,616,518


(4,101,852)


(626,400)

  Prepaid expense and other current assets

6,978,143


10,821,091


(6,298,388)


(961,836)

  Accounts payable

32,393,192


30,821,414


44,151,860


6,742,492

  Customer advances

4,681,626


1,820,668


16,524


2,523

  Accrued expenses and other current liabilities

(944,176)


3,971,639


(2,902,731)


(443,277)

  Taxes payable

(2,085,359)


6,490,390


(3,379,180)


(516,039)

  Amount due to related parties

(123,360)


(47,129,920)


-


-

Net cash provided by operating activities

40,263,272


25,889,113


34,750,518


5,306,801









Cash flows from investing activities:








Net proceeds from redemption / (purchase) of short-term investments

(120,000,000)


140,000,000


(250,000,000)


(38,177,848)

Increase in restricted cash

-


(10,000,000)


-


-

Purchase / (disposal) of property and equipment

(26,330,276)


245,812


(1,752,423)


(267,615)

Gain on sales of investment

233,162


1,027,233


2,218,027


338,718

Net cash provided by / (used in) investing activities

(146,097,114)


131,273,045


(249,534,396)


(38,106,745)









Cash flows from financing activities:
Repurchase stocks on open market

(84,692)


(9,529,124)


(5,895,960)




(900,380)

Proceeds from exercise of share options

-


-


687,751


105,027

Net cash used in financing activities

(84,692)


(9,529,124)


(5,208,209)


(795,353)









Effect of foreign currency exchange

-


(2,828,718)


(2,484,064)


(379,345)

Net increase / (decrease) in cash and cash equivalents

(105,918,534)


144,804,316


(222,476,151)


(33,974,642)

Cash and cash equivalents at beginning of the period

508,778,014


399,623,512


544,427,828


83,140,330

Cash and cash equivalents at end of the period

402,859,480


544,427,828


321,951,677


49,165,688




CHINA MASS MEDIA CORP.

SELECTED OPERATING DATA




THREE MONTHS ENDED



Mar 31,
2010


Dec 31,
2010


Mar 31,
2011








Number of programs secured during the period


35


35


35

Total advertising time obtained (seconds)


2,595,780


2,676,240


2,552,220(1)

Total advertising time sold (seconds)


118,355


212,040


127,745(2)








(1) Represents the total amount of time during regular television programs secured through our contracts with CCTV,
including 219,420 seconds from CCTV-1, CCTV-2 and CCTV-4 and 2,332,800 seconds from CCTV-E and CCTV-F.


(2) During the three-month periods ended March 31, 2010, December 31, 2010 and March 31, 2011, the company
has sold 5,340 seconds and 39,120 seconds and 11,880 seconds of advertisements in CCTV-E and CCTV-F.





RECONCILIATIONS OF UNAUDITED NON-GAAP RESULTS OF OPERATIONS

MEASURES TOTHE NEAREST COMPARABLE GAAP MEASURES (*)



Three months ended March 31, 2010


Three months ended March 31, 2011


GAAP Results

Adjustment

NON-GAAP
Result


GAAP Result

Adjustment

NON-GAAP
Result


RMB

RMB

RMB


RMB

RMB

RMB









Operating income

13,937,106

519,777

14,456,883


13,144,566

361,253

13,505,819









Net income

10,111,009

519,777

10,630,786


8,299,350

361,253

8,660,603









(*)The adjustment is for share-based compensation expenses.



Non-GAAP Disclosure

In addition to the unaudited consolidated financial information presented in accordance with US GAAP, management uses a non-GAAP measure of net income excluding non-cash share-based compensation. Company management believes excluding the share-based compensation expenses from non-GAAP financial measures is useful for the investors' understanding of overall current financial performance. Nevertheless, the limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been and will continue to be a significant recurring expense in the Company's business.

The presentation of the 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 US GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth above, which shall be read in conjunction with the preceding financial information presented in accordance with US GAAP.

SOURCE China Mass Media Corp.



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