Focus Media Reports Third Quarter 2011 Results

SHANGHAI, Nov. 17, 2011 /PRNewswire-Asia/ -- Focus Media Holding Limited (Nasdaq: FMCN), China's largest out-of-home lifestyle interactive targeted digital media group, today announced its unaudited financial results for the third quarter ended September 30, 2011.

Highlights for Third Quarter 2011:

  • Total net revenue for the third quarter of 2011 was $210.7 million, of which
  • Aggregate net revenue from the LCD display network (including the movie theater network), in-store network and poster frame network was $196.1 million, which exceeded by approximately 11% the mid-point of the Company's guidance range of $175-177 million. This represented year-on-year growth of 53% from $128.4 million for the third quarter of 2010 and quarter-on-quarter growth of 18% from $166.1 million for the second quarter of 2011.
  • Net revenue from the traditional outdoor billboard network for the third quarter of 2011 was $14.6 million, which exceeded by approximately 22% the midpoint of the Company's guidance of $11-13 million. This represented year-on-year growth of 64% from $8.9 million for the third quarter of 2010 and quarter-on-quarter growth of 13% from $12.9 million for the second quarter of 2011.
  • GAAP net income attributable to Focus Media for the third quarter of 2011 was $62.2 million, representing an increase of 45% from $42.8 million for the second quarter of 2011 and compared to $112.7 million for the third quarter of 2010 (which included one-off income of $79.0 million resulting from the sale of our Internet business).
  • Non-GAAP net income attributable to Focus Media for the third quarter of 2011 was $82.7 million, exceeding the mid-point of the Company's guidance range of $68-$70 million by 20%, representing year-on-year growth of 60% from non-GAAP net income attributable to Focus Media of $51.8 million for the third quarter of 2010 and quarter-on-quarter growth of 31% from non-GAAP net income attributable to Focus Media of $62.9 million for the second quarter of 2011. Please see the sections on "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to non-GAAP" elsewhere in this announcement for more information about the non-GAAP measures referred to within this announcement.
  • GAAP net income attributable to Focus Media per fully diluted ADS for the third quarter of 2011 was $0.44, comparing to $0.76 per fully diluted ADS in the third quarter of 2010 which was boosted by one-off income of $79.0 million resulting from the sale of our Internet business and representing a growth of 47% from $0.30 per fully diluted ADS for the second quarter of 2011.
  • Non-GAAP net income attributable to Focus Media per fully diluted ADS for the third quarter of 2011 was $0.59, representing year-on year growth of 69% from $0.35 per fully diluted ADS for the third quarter of 2010 and quarter-on-quarter growth of 34% from $0.44 for the second quarter of 2011.

Highlights for Balance Sheet and Cash Flow Results of Third Quarter 2011:

  • Cash, cash equivalents and short-term investments were $639.9 million as of September 30, 2011, increasing by 8% from $590.9 million as of June 30, 2011.
  • Short term bank loan was $30 million as of September 30 2011 which was used to finance a portion of the Company's share repurchases during the quarter. Operationally, the Company generates cash inflow in Renminbi onshore and offshore bank loans are used to increase our offshore USD base cash resources.
  • Net cash inflow from operating activities in the third quarter of 2011 was $86.3 million, an increase of 71% from $50.6 million for the second quarter of 2011 and more than doubled the $34.2 million for the third quarter of 2010.
  • Net accounts receivable for the LCD display network (including the movie theater network), in-store network and poster frame network was $215.3 million as of September 30, 2011, an increase of 17% from $184.8 million as of June 30, 2011 as a result of sequential increase of revenues. Days sales outstanding were 85 days in the third quarter of 2011 versus 87 days for the second quarter of 2011.
  • Capital expenditures were $6.1 million for the third quarter of 2011, mostly attributable to upgrading our LCD screens into interactive screens in seven major cities in China.
  • Cash used in the purchase of subsidiaries in the third quarter of 2011 was $4.1 million, primarily attributable to acquisitions in the poster frame network and the traditional outdoor billboard network as part of our ongoing strategy to expand into additional cities for poster frame network and increasing media resources in the traditional outdoor billboard network.
  • Cash used for repurchasing shares in the third quarter of 2011 was $66.1 million.

Jason Jiang, Chairman and Chief Executive Officer of Focus Media said, "We reached two important historical milestones in the third quarter of 2011. Not only did we achieve record high total revenue in our core business, but we also opened up a new chapter in the history of the Company whereby we have taken our media into an interactive age. Driven by positive secular domestic consumption trend in the PRC, we believe for the rest of the year and 2012 advertising demand for our media will continue to be healthy and robust. Over the next several years, leveraging our media interactive capability, we will strive to retain our brand advertising leadership in the industry as well as endeavor to become one of the key default promotional media platforms in the PRC."

Kit Low, the Company Executive Director and Chief Financial Officer added, "In the third quarter of 2011, the Company achieved aggregate net revenue year on year growth in our LCD display (including the movie theater network), in-store and poster frame businesses of 53%. GAAP net income attributable to Focus Media and non-GAAP net income attributable to Focus Media for the third quarter of 2011 was $62.2 million and $82.7 million, respectively. We achieved a positive net cash inflow from operating activities after deducting the purchase of equipment and subsidiaries of $76.1 million in the third quarter of 2011 as compared to a net cash inflow of $37.3 million in the second quarter of 2011 and a net cash inflow of $23.8 million in the third quarter of 2010. In the first three quarters of 2011, the Company cumulatively generated net cash inflow from operating activities net of capital expenditure and acquisitions of subsidiaries of $118.5 million."

Third Quarter 2011 financial results

Advertising net revenue from the LCD display network (including the movie theatre network) was $133.6 million for the third quarter of 2011, representing an increase of 54% from $86.8 million for the third quarter of 2010 and an increase of 18% from $113.0 million for the second quarter of 2011.

Advertising net revenue from the poster frame network was $46.6 million for the third quarter of 2011, representing an increase of 45% from $32.2 million for the third quarter of 2010 and an increase of 22% from $38.2 million for the second quarter of 2011.

Advertising net revenue from the in-store network was $15.9 million for the third quarter of 2011, representing an increase of 69% from $9.4 million for the third quarter of 2010 and an increase of 7% from $14.9 million for the second quarter of 2011.

As of September 30, 2011, the total installed base of LCD displays in our LCD display network was 178,382 nationwide, including 169,810 displays through our directly owned networks, and 8,572 displays through our regional distributors, as compared to total LCD displays of 169,798 as of June 30, 2011. The total number of non-digital frames available for use in our poster frame network was 391,304 as of September 30, 2011, as compared to 354,945 as of June 30, 2011. In addition, as of September 30, 2011, we had 34,711 digital frames installed in our poster frame network, a slight decrease from 35,217 as of June 30, 2011 due to optimization of the network. The total number of displays installed in our in-store network was 50,696 as of September 30, 2011, as compared to 50,129 as of June 30, 2011.

Advertising net revenue from the traditional outdoor billboard network was $14.6 million for the third quarter of 2011, representing an increase of 64% from $8.9 million for the third quarter of 2010 and an increase of 13% from $12.9 million for the second quarter of 2011.

Non-GAAP gross profit from the LCD display network (including the movie theatre network) for the third quarter of 2011 was $105.9 million, representing an increase of 61% from $65.6 million for the third quarter of 2010 and an increase of 18% from $89.7 million for the second quarter of 2011.

Non-GAAP gross profit from the poster frame network for the third quarter of 2011 was $19.6 million, representing an increase of 61% from $12.2 million for the third quarter of 2010 and an increase of 61% from $12.2 million for the second quarter of 2011.

Non-GAAP gross profit from the in-store network for the third quarter of 2011 was $10.0 million, almost tripling the $3.4 million for the third quarter of 2010 and an increase of 9% from $9.2 million for the second quarter of 2011.

Non-GAAP gross profit from the traditional outdoor billboard network for the third quarter of 2011 was $3.2 million, representing an increase of 39% from $2.3 million for the third quarter of 2010 and representing a decrease of 11% from $3.6 million for the second quarter of 2011.

Non-GAAP operating expense for the third quarter of 2011 was $46.9 million, representing an increase of 46% from $32.2 million for the third quarter of 2010,  which was mainly attributable to: 1) an increase of bad debt provision expenses in the amount of $3.6 million in the third quarter of 2011; 2) an increase of sales commission expenses resulted from revenue growth; and 3) an increase of employees' salary and welfare in the amount of $2.2 million in the third quarter of 2011; and 4) the Company incurred the disposal loss for fixed assets in the amount of $1.6 million in the third quarter of 2011 to prepare for upgrading most of the screens in seven major cities into the next generation interactive screens for the fourth quarter of 2011. It also represented a slight increase of 2% from $45.9 million for the second quarter of 2011.

Net cash inflow from operating activities in the third quarter of 2011 was $86.3 million, increasing by 71% from $50.6 million for the second quarter of 2011 and more than doubling the $34.2 million for the third quarter of 2010.

Net cash used in investing activities for the third quarter of 2011 was $28.1 million. In the third quarter of 2011, the Company incurred capital expenditures of $6.1 million, mostly attributable to upgrading our LCD screens into interactive screens in seven major cities in China, as well as consideration payments of $4.1 million for our poster frame and traditional outdoor billboard related acquisitions, and net investments of $14.9 million in short-term investments (as part of our ongoing effort to improve our interest income by depositing some cash into longer term dated deposits).

Business Outlook for Fourth Quarter 2011

The Company provides the following guidance with respect to the fourth quarter ending December 31, 2011:

Net revenues for the core business (inclusive of the LCD display network and other, the in-store network and the poster frame network) are expected to be in the range of $212-$214 million, the mid-point of which would represent year-on-year growth of 45% and quarter-on-quarter growth of 9%. Net revenues for the non-core business (the traditional outdoor billboard network) are expected to be in the range of $14-$16 million. The Company's non-GAAP net income is expected to be in the range of $88-$90 million. The Company estimates the weighted average ADS outstanding for the calculation of fully diluted earnings per ADS in the fourth quarter is 140 million, assuming no further share repurchases during the quarter.

Announced Share Repurchase Program

On October 3, 2011, Focus Media announced an increase in the size of its share repurchase program to US$650 million from $450 million. As of November 17, 2011, the Company has cumulatively spent approximately $355 million in share repurchases.

Foreign Currency Translation

The reporting currency of the Company is the US dollar. The financial records of the Company's subsidiaries are maintained in its local currency, the Renminbi ("RMB"), which is the functional currency. Assets and liabilities are translated at the exchange rate as of September 30, 2011, which was $1 to RMB6.3549. Equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the third quarter of 2011, which was $1 to RMB6.4132. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statement of equity and comprehensive income (loss).

Use of Non-GAAP Financial Measures

In addition to Focus Media's consolidated financial results under GAAP, the Company also provides non-GAAP financial measures, including non-GAAP gross profit (cumulatively and by segment), non-GAAP operating expenses, non-GAAP operating profit (loss), non-GAAP net income and non-GAAP fully-diluted earnings per ADS, all excluding share-based compensation expenses, amortization of acquired intangible assets, profit or loss from disposal of previously acquired subsidiaries, loss from equity method investee and impairment charges of goodwill. Management uses these non-GAAP financial measures to better assess operating performance of the Company. The Company believes that these non-GAAP financial measures provide investors with another method for assessing Focus Media's operating results in a manner that is focused on the performance of its ongoing operations. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results in the attached financial information. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Focus Media and when planning and forecasting future periods. The Company computes its non-GAAP financial measures using a consistent method from quarter to quarter and the reconciliation items mostly include share-based compensation expenses, amortization of acquired intangible assets, profit or loss from disposal of previously acquired subsidiaries, loss from equity method investee and goodwill impairment charges. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.

Focus Media Holding Ltd.

Reconciliation of GAAP to non-GAAP

(U.S. Dollars in thousands, except share and per-share data)

(Unaudited)



Three months ended September 30, 2011


GAAP

(1)

(2)

(3)

Non-GAAP







Gross Profit






LCD display and other:

104,586

200

1,112

105,898

LCD display network

98,196

200

1,101

99,497

Movie theater network

6,390

11

6,401

Poster frame network

18,588

989

19,577

In—store network

10,022

10,022

Traditional outdoor billboard network

2,364

818

3,182

Total Gross Profit

135,560

200

2,919

138,679







General and administrative

32,588

(14,424)

18,164

Selling and marketing

32,594

(933)

(1,051)

30,610

Other operating income, net

(1,919)

(1,919)

Total operating expense

63,263

(15,357)

(1,051)

46,855







Operating profit from continuing operations

72,297

15,557

3,970

91,824







Profit before tax from continuing operations

77,692

15,557

3,970

97,219







Net profit from continuing operations

62,666

15,557

3,970

985

83,178

Net profit from discontinued operations

-







Net income attributable to Focus Media

62,229

15,557

3,970

985

82,741







Basic net income from continuing operations per ADS

0.47




0.62

Diluted net income from continuing operations per ADS

0.45




0.59







Basic net income from discontinued operations per ADS




Diluted net income from discontinued operations per ADS










Basic net income attributable to Focus Media per ADS

0.47




0.62

Diluted net income attributable to Focus Media per ADS

0.44




0.59







ADS used in calculating basic income per ADS

133,718,768




133,718,768

ADS used in calculating diluted income per ADS

139,866,888




139,866,888







(1). Share-based compensation.

(2). Amortization of acquired intangible assets.

(3). Loss from equity method investee (VisionChina)






Three months ended June 30, 2011


GAAP

(1)

(2)

(3)

Non-GAAP







Gross Profit






LCD display and other:

88,382

198

1,130

89,710

LCD display network

85,260

198

1,114

86,572

Movie theater network

3,122

16

3,138

Poster frame network

11,080

1,118

12,198

Instore network

9,162

9,162

Traditional outdoor billboard network

3,129

449

3,578

Total Gross Profit

111,753

198

2,697

114,648







General and administrative

30,240

(14,274)

15,966

Selling and marketing

33,079

(924)

(1,056)

31,099

Other operating income, net

(1,209)

(1,209)

Total operating expense

62,110

(15,198)

(1,056)

45,856







Operating profit from continuing operations

49,643

15,396

3,753

68,792







Profit before tax from continuing operations

52,790

15,396

3,753

71,939







Net profit from continuing operations

42,863

15,396

3,753

992

63,004

Net profit from discontinued operations







Net income attributable to Focus Media

42,804

15,396

3,753

992

62,945







Basic net income from continuing operations per ADS

0.32




0.46

Diluted net income from continuing operations per ADS

0.30




0.45







Basic net income from discontinued operations per ADS




Diluted net income from discontinued operations per ADS










Basic net income attributable to Focus Media per ADS

0.32




0.46

Diluted net income attributable to Focus Media per ADS

0.30




0.44







ADS used in calculating basic income per ADS

135,624,717




135,624,717

ADS used in calculating diluted income per ADS

141,562,763




141,562,763







(1). Share-based compensation.

(2). Amortization of acquired intangible assets.

(3). Loss from equity method investee (VisionChina)






Three months ended September 30, 2010


GAAP

(1)

(2)

(3)

(4)

Non- GAAP








Gross Profit







LCD display and other:

64,225

286

1,105


65,616

-LCD display network

63,875

286

1,090

65,251

-Movie theater network

350

15

365

Poster frame network

10,557

1,668


12,225

In-store network

3,411


3,411

Traditional outdoor billboard network

1,872

431


2,303

Total Gross Profit

80,065

286

3,204


83,555








General and administrative

24,942

(11,526)


13,416

Selling and marketing

24,474

(1,257)

(1,036)


22,181

Other operating expenses (income), net

(2,699)


(733)

(3,432)

Total operating expense

46,717

(12,783)

(1,036)


(733)

32,165








Operating profit from continuing operations

33,348

13,069

4,240


733

51,390








Profit before tax from continuing operations

36,015

13,069

4,240


733

54,057








Net profit from continuing operations

33,454

13,069

4,240

733

51,496

Net profit from discontinued operations

79,341

22

(79,000)

363








Net income attributable to Focus Media

112,737

13,069

4,262

(79,000)

733

51,801








Basic net income from continuing operations per ADS

0.24





0.36

Diluted net income from continuing operations per ADS

0.23





0.35








Basic net income from discontinued operations per ADS

0.56





0.00

Diluted net income from discontinued operations per ADS

0.54





0.00








Basic net income attributable to Focus Media per ADS

0.79





0.36

Diluted net income attributable to Focus Media per ADS

0.76





0.35








ADS used in calculating basic income per ADS


141,944,371






141,944,371

ADS used in calculating diluted income per ADS

147,490,755





147,490,755








(1). Share-based compensation.

(2). Amortization of acquired intangible assets.

(3). Profit from disposal of the internet business.

(4). Loss from disposal of previously acquired subsidiaries, all attributable to poster frame business.




Focus Media Holding Ltd.

Reconciliation of GAAP to non—GAAP

(U.S. Dollars in thousands, except share and per—share data)

(Unaudited)


Nine months ended September 30, 2011


GAAP

(1)

(2)

(3)

Non GAAP







Gross Profit






LCD display and other:

257,618

593

3,352

261,563

LCD display network

246,338

593

3,309

250,240

Movie theater network

11,280

43

11,323

Poster frame network

40,043

3,285

43,328

In—store network

22,996

22,996

Traditional outdoor billboard network

6,880

1,712

8,592

Total Gross Profit

327,537

593

8,349

336,479







General and administrative

89,452

(42,852)

46,600

Selling and marketing

96,874

(2,775)

(3,165)

90,934

Other operating income, net

(7,833)

(7,833)

Total operating expense

178,493

(45,627)

(3,165)

129,701







Operating profit from continuing operations

149,044

46,220

11,514

206,778







Profit before tax from continuing operations

159,947

46,220

11,514

217,681







Net profit from continuing operations

125,313

46,220

11,514

4,750

187,797

Net profit from discontinued operations







Net income attributable to Focus Media

125,585

46,220

11,514

4,750

188,069







Basic net income from continuing operations per ADS

0.93




1.39

Diluted net income from continuing operations per ADS

0.89




1.34







Basic net income from discontinued operations per ADS




Diluted net income from discontinued operations per ADS










Basic net income attributable to Focus Media per ADS

0.93




1.39

Diluted net income attributable to Focus Media per ADS

0.89




1.34







ADS used in calculating basic income per ADS

134,972,295




134,972,295

ADS used in calculating diluted income per ADS

140,567,619




140,567,619







(1). Share-based compensation.

(2). Amortization of acquired intangible assets.

(3). Loss from equity method investee (VisionChina)






Nine months ended September 30, 2010


GAAP

(1)

(2)

(3)

(4)

Non- GAAP








Gross Profit







LCD display network and other:

161,186

848

2,995

165,029

-LCD display network

157,129

848

2,949

160,926

-Movie theater network

4,057

46

4,103

Poster frame network

22,847

4,941

27,788

In-store network

10,600

10,600

Traditional outdoor billboard network

5,420

1,286

6,706

Total Gross Profit

200,053

848

9,222

210,123








General and administrative

62,997

(34,217)

28,780

Selling and marketing

73,795

(3,732)

(3,070)

66,993

Impairment loss

5,736

(5,736)

Other operating (income), net

(7,848)

(2,257)

(10,105)

Total operating expense

134,680

(37,949)

(3,070)

(5,736)

(2,257)

85,668








Operating profit from continuing operations

65,373

38,797

12,292

5,736

2,257

124,455








Profit before tax from continuing operations

69,533

38,797

12,292

5,736

3,545

129,903








Net profit from continuing operations

55,928

38,797

12,292

5,736

3,545

116,298

Net profit from discontinued operations

83,078

766

(79,000)

4,844








Net income attributable to Focus Media

137,119

38,797

13,058

5,736

(75,455)

119,255








Basic net income (loss) from continuing operations per ADS

0.39





0.81

Diluted net income (loss) from continuing operations per ADS

0.38





0.78








Basic net income (loss) from discontinued operations per ADS

0.58





0.03

Diluted net income (loss) from discontinued operations per ADS

0.56





0.03








Basic net income (loss) attributable to Focus Media per ADS

0.95





0.83

Diluted net income (loss) attributable to Focus Media per ADS

0.93





0.81








ADS used in calculating basic income per ADS

143,584,320





143,584,320

ADS used in calculating diluted income per ADS

148,090,998





148,090,998








(1). Share-based compensation.

(2). Amortization of acquired intangible assets.

(3). Impairment charges of goodwill as a result of earn-out payments in poster frame business.

(4). Net profit from disposal of previously acquired business, including $79M profit from internet disposal and $3.5M loss from the write-off of certain assets of previously acquired subsidiaries.




Conference Call

The Company will host a conference call to discuss the third quarter 2011 results at 8:00 p.m. U.S. Eastern Time on November 17, 2011 (5:00 p.m. U.S. Pacific Time on November 17, 2011 and 9:00 a.m. Beijing/Hong Kong Time on November 18, 2011). The dial-in details for the live conference call are set forth below:

International Toll Dial-In Number:

+ 65.6723.9381



Local Dial-In Number(s):


Hong Kong:

+852.2475.0994

United States:

+1.718.354.1231



International Toll Free Dial-in Number(s):


China, Domestic Mobile:

400.620.8038

China, Domestic:

800.819.0121

Hong Kong:

+852.800.930.346

United States:

+1.866.519.4004

Conference ID #:

24920812



A replay of the call will be available from November 17, 2011 23:00 until November 26, 2011 10:59pm (US Eastern Time). The dial-in details for the replay are set forth below:

International Toll Dial-In Number:

+61.2.8235.5000



Local Dial-In Number(s):


China:

400.692.0026

United States:

+1.718.354.1232



International Toll Free Dial-in Number(s):


China North:

10800.714.0386

China South:

10800.140.0386

Hong Kong:

+852. 800.901.596

United States:

+1.866.214.5335



Conference ID #:

24920812



Additionally, a live and archived web cast of this call will be available on the Focus Media web site at http://ir.focusmedia.cn.

Safe Harbor: Forward-Looking Statements

This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the 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. Focus Media may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K., in its annual report 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 Focus Media's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in Focus Media's filings with the U.S. Securities and Exchange Commission, including its registration statements on Form F-1, F-3 and 20-F, in each case as amended. Focus Media does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

This release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.

About Focus Media Holding Limited

Focus Media Holding Limited (Nasdaq: FMCN) operates China's largest lifestyle targeted interactive digital media network. The Company offers one of the most comprehensive targeted interactive digital media platforms aimed at Chinese consumers at various urban locations. The increasingly fragmented and mobile lifestyle of Chinese urban consumers has created the need for more efficient media means to capture consumer attention. Focus Media's mission is to build an increasingly comprehensive and measurable interactive urban media network that reaches consumers at various out-of-home locations. As of September 30, 2011, Focus Media's out-of-home lifestyle interactive digital media network had approximately 178,000 LCD displays in about 100,000 commercial buildings that covered more than 100 cities, 426,000 in-elevator poster and digital picture frames in residential buildings that covered 35 cities, approximately 51,000 LCD displays in more than 2,800 hypermarkets, supermarkets and convenience stores and approximately 2,000 movie screens in about 300 movie theaters throughout China.


Focus Media Holding Limited

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S Dollars in Thousands)



2011-09-30

2011-06-30


Note 1


ASSETS



Current assets



Cash and cash equivalents

435,322

404,704

Short-term investments

204,567

186,198

Accounts receivable, net

230,552

200,660

Prepaid expenses and other current assets

39,060

44,053

Deposit paid for acquisition of subsidiaries

618

Rental deposits

56,143

50,557

Other current assets

8,098

1,722

Total current assets

973,742

888,512

Rental deposits, non-current

4,770

5,722

Equipment, net

68,786

65,807

Acquired intangible assets, net

26,995

17,553

Goodwill

463,894

429,525

Investment under equity method

59,148

58,209

Other long term assets

17,354

19,273

Total assets

1,614,689

1,484,601




LIABILITIES AND EQUITY



Current liabilities



Short-term bank loan

30,000

Accounts payable

22,146

18,330

Accrued expenses and other current liabilities

132,625

117,155

Income taxes payable

10,943

314

Amount due to Related parties

4,175

1,842

Deferred tax liabilities

25,172

24,180

Total current liabilities

225,061

161,821

Long-term payable

14,051

Deferred tax liabilities, non-current

12,617

9,995

Total liabilities

251,729

171,816




Equity



Ordinary shares

33

34

Additional paid in capital

1,668,269

1,716,322

Subscription receivable

(1,236)

Accumulated deficit

(437,368)

(499,597)

Accumulated other comprehensive income

111,447

95,815

Total Focus Media equity

1,341,145

1,312,574

Noncontrolling interests

21,815

211

Total equity

1,362,960

1,312,785

Total liabilities and equity

1,614,689

1,484,601




Note 1: The Company acquired 51% interests in 4 subsidiaries engaged in outdoor billboard business for an aggregate consideration of approximately $21.4 million in the third quarter of 2011 as part of the traditional outdoor billboard network strategy to expand its media resources. The aggregate consideration is the maximum possible consideration likely to be paid over a three year period base on achieving certain operating targets. The Company has performed a preliminary purchase price allocation to allocate the purchase consideration to the estimated fair values of the assets and liabilities of the subsidiaries acquired as of September 30, 2011. The amounts may be subject to change when the Company finalizes the purchase price allocation, with the assistance of a third-party valuation expert.





Focus Media Holding Limited

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S Dollar in thousands, except earnings per ADS and ADS data)



Three months ended

Nine months ended


2011-09-30

2011-06-30

2010-9-30

2011-09-30

2010-09-30


Note 1



Note 1


Revenues






LCD display network and other:

146,169

123,142

96,182

367,770

241,362

-LCD display network

132,555

113,518

91,654

336,098

227,137

-Movie theater network

13,614

9,624

4,528

31,672

14,225

In-store network

17,367

16,339

10,389

44,111

30,875

Poster frame network

51,023

41,648

35,496

131,953

90,532

Traditional outdoor billboard network

14,886

13,090

9,135

38,598

28,489

Total gross revenues

229,445

194,219

151,202

582,432

391,258

Less: Sales taxes

18,783

15,257

13,850

46,229

34,643

Total net revenue (Note 2)

210,662

178,962

137,352

536,203

356,615







Cost of revenues






LCD display network and other:

28,965

24,614

22,551

79,392

57,269

-LCD display network

22,364

18,630

19,023

60,619

48,455

-Movie theater network

6,601

5,984

3,528

18,773

8,814

In-store network

5,849

5,774

5,997

17,324

17,339

Poster frame network

28,056

27,098

21,670

80,859

59,416

Traditional outdoor billboard network

12,232

9,723

7,069

31,091

22,538

Total cost of revenues

75,102

67,209

57,287

208,666

156,562

Gross profit

135,560

111,753

80,065

327,537

200,053







Operating expenses






General and administrative

32,588

30,240

24,942

89,452

62,997

Selling and marketing

32,594

33,079

24,474

96,874

73,795

Impairment loss

5,736

Other operating income, net

(1,919)

(1,209)

(2,699)

(7,833)

(7,848)

Total operating expenses

63,263

62,110

46,717

178,493

134,680







Operating profit

72,297

49,643

33,348

149,044

65,373

Interest income

5,395

3,147

2,667

10,903

5,448

Investment loss

(1,288)

Income from continuing operations before income taxes

77,692

52,790

36,015

159,947

69,533

Provision for income taxes

14,041

8,935

2,561

29,884

13,605

Loss from equity method investee

985

992

4,750

Net income from continuing operations

62,666

42,863

33,454

125,313

55,928







Net income from discontinued operations, net of tax

79,341

83,078

Net income

62,666

42,863

112,795

125,313

139,006







Less: Net income (loss) attributable to noncontrolling interests

437

59

58

(272)

1,887

Net income attributable to Focus Media

62,229

42,804

112,737

125,585

137,119







Net income from continuing operations per ADS






-basic

0.47

0.32

0.24

0.93

0.39

-diluted

0.45

0.30

0.23

0.89

0.38







Net income from discontinued operations per ADS






-basic

0.56

0.58

-diluted

0.54

0.56







Net income attributable to Focus Media per ADS






-basic

0.47

0.32

0.79

0.93

0.95

-diluted

0.44

0.30

0.76

0.89

0.93







ADS used in calculating basic income per ADS

133,718,768

135,624,717

141,944,371

134,972,295

143,584,320

ADS used in calculating diluted income per ADS

139,866,888

141,562,763

147,490,755

140,567,619

148,090,998


Note 1: The Company acquired 51% interests in 4 subsidiaries engaged in outdoor billboard business for an aggregate consideration of approximately $21.4 million in the third quarter of 2011 as part of the traditional outdoor billboard network strategy to expand its media resources. The aggregate consideration is the maximum possible consideration likely to be paid over a three year period base on achieving certain operating targets. The Company has performed a preliminary purchase price allocation to allocate the purchase consideration to the estimated fair values of the assets and liabilities of the subsidiaries acquired as of September 30, 2011. The amounts may be subject to change when the Company finalizes the purchase price allocation, with the assistance of a third-party valuation expert.




Note 2: Details of net revenues by segment are as follows (U.S. Dollars in thousands):


Three months ended

Nine months ended


2011-09-30

2011-06-30

2010-09-30

2011-09-30

2010-09-30

Gross revenues






LCD display network

132,555

113,518

91,654

336,098

227,137

Movie theater network

13,614

9,624

4,528

31,672

14,225

In-store network

17,367

16,339

10,389

44,111

30,875

Poster frame network

51,023

41,648

35,496

131,953

90,532

Traditional outdoor billboard network

14,886

13,090

9,135

38,598

28,489

Total gross revenues

229,445

194,219

151,202

582,432

391,258

Less: Sales taxes






LCD display network

11,995

9,628

8,755

29,141

21,553

Movie theater network

623

519

651

1,619

1,354

In-store network

1,496

1,403

981

3,791

2,936

Poster frame network

4,379

3,470

3,269

11,051

8,269

Traditional outdoor billboard network

290

237

194

627

531

Total sales tax

18,783

15,257

13,850

46,229

34,643

Net revenues






LCD display network

120,560

103,890

82,899

306,957

205,584

Movie theater network

12,991

9,105

3,877

30,053

12,871

In-store network

15,871

14,936

9,408

40,320

27,939

Poster frame network

46,644

38,178

32,227

120,902

82,263

Traditional outdoor billboard network

14,596

12,853

8,941

37,971

27,958

Total net revenues

210,662

178,962

137,352

536,203

356,615




Focus Media Holding Limited

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS

(U.S. Dollar in thousands)


Three months ended

Nine months ended


2011-09-30

2010-09-30

2011-09-30

2010-09-30

Operating activities:





Net income

62,666

112,795

125,313

139,006

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





Bad debt expenses  

4,466

867

10,258

1,205

Share-based compensation  

15,557

13,069

46,220

38,797

Depreciation

7,291

6,721

21,398

21,792

Amortization of acquired intangible assets

3,970

4,262

11,514

13,058

Profit on disposal of previously acquired subsidiaries

(79,000)

(79,000)

Loss on disposal of equity method investment

2,833

Loss from equity method investee

985

4,750


Impairment charges for goodwill, acquired intangible assets and fixed assets

5,736

Write-off of long-term assets

990

Others

1,798

129

1,940

242

Net changes in current assets and current liabilities, net of effects of acquisitions

(10,465)

(24,594)

(71,018)

(66,440)

Net cash provided by operating activities  

86,268

34,249

151,365

77,229






Investing activities:





Purchase of equipment and other long term assets  

(6,058)

(6,675)

(23,425)

(11,600)

Payment paid to acquired subsidiaries

(4,115)

(3,767)

(9,475)

(26,306)

Investment in equity method investee

(61,003)

Investment in short-term investments

(505,921)

(116,100)

(937,663)

(116,100)

Proceeds from the sale of short-term investments

490,972

878,037

29,290

Proceeds received from disposal of fixed assets

125

166

572

309

Advances to a related party

(3,147)

(3,147)

Disposal of subsidiaries

73,278

7,296

76,067

Net cash (used in)/provided by investing activities

(28,144)

(53,098)

(148,808)

(48,340)






Financing activities:





Proceeds received from short-term bank loans

30,000

30,000

Cash used for share repurchase

(66,106)

(200,000)

(69,106)

(236,715)

Cash collection from (deposit for) share repurchase

6,265

(36)

Capital injection  from (repayment to) noncontrolling interests

11

(76)

10,980

Proceeds from issuance of ordinary shares,  

1,260

568

1,828

2,387

Net cash provided by/(used in) financing activities  

(34,846)

(193,156)

(37,354)

(223,384)

Effect of exchange rate changes  

7,340

7,006

15,643

9,589






Net increase (decrease) in cash and cash equivalents  

30,618

(204,999)

(19,154)

(184,906)

Cash and cash equivalents, beginning of period

404,704

588,252

454,476

568,159






Cash and cash equivalents, end of period

435,322

383,253

435,322

383,253






Supplemental disclosure of cash flow information:





Income taxes paid  

3,321

3,854

24,612

27,793

Interest paid

105

105






Supplemental disclosure of non-cash investing activity:





 Accrual for acquisition of subsidiaries

22,092

7,284

22,092

7,284









SOURCE Focus Media Holding Limited



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