China Mass Media Reports First Quarter 2010 Unaudited Financial Results

Jun 14, 2010, 18:21 ET from China Mass Media Corp.

BEIJING, June 14 /PRNewswire-FirstCall/ -- China Mass Media Corp. ("China Mass Media" or the "Company") (NYSE: CMM), a leading media company in China, today announced its unaudited financial results for the first quarter ended March 31, 2010.  

First Quarter 2010 Highlights(1)

  • Total net revenues were RMB 56.0 million (US$ 8.2 million), a decrease of 62.6% from the first quarter of 2009, a decrease of 52.2% from the fourth quarter of 2009.
  • Operating income was RMB 13.9 million (US$ 2.0 million), a decrease of 78.6% from the first quarter of 2009, and a decrease of 62.0 % from the fourth quarter of 2009.
  • Net income was RMB 10.1 million (US$ 1.5 million), a decrease of 83.0% from the first quarter of 2009 and a decrease of 68.4 % from the fourth quarter of 2009.
  • Net cash provided by operating activities was RMB 40.3 million (US$5.9 million), compared to net cash provided by operating activities of RMB 232.5 million in the first quarter of 2009 and net cash used in operating activities of RMB 171.9 million in the fourth quarter of 2009.

"Our performance in the first quarter of 2010 declined on a year-over-year basis, primarily because we were not the exclusive advertising agent for CCTV's 2010 Chinese New Year Gala program," commented Mr. Shengcheng Wang, Chairman and Chief Executive Officer of China Mass Media.  "CCTV decided to bring the Chinese New Year Gala program in-house at the end of 2009 upon the expiry of our agency contract and began to sell the advertising time relating to this program by itself.  We had been the exclusive advertising agent of this event since 2004.  Throughout this period, we, along with CCTV's advertising department, successfully promoted and marketed this gala program and made the event a consistent and great success for CCTV.  Being the exclusive advertising agent of this program allowed us to accumulate an abundant amount of experience in organizing and promoting big events and designing and executing in-program advertisements, which we believe is our greatest asset for our future operations.

"Another reason for the decrease was mounting market competition and overall rising media costs in 2010.  Advertising agencies were particularly aggressive with their pricing as they competed for advertisers, and advertisers decided to enter into short-term contracts so that they could easily move from one advertising agency to another to take advantage of the market conditions.  We also noticed that some advertisers reduced their exposure to CCTV and switched their advertisements to regional networks or other alternative mediums.  We anticipate such competition will continue in the coming quarters.  This challenging environment started in March and deteriorated in April, so we are anticipating a difficult second quarter of 2010. In the upcoming low seasons, we will adopt a more flexible marketing strategy to address this challenge.

"In November 2009 during the CCTV resources bidding process, we reduced our investment in advertising time on CCTV-4 from six programs to one carefully selected program, the "Periodic China News Package".  We have seen good results from this program as a result of our successful pricing strategy and relatively low media cost compared to our competitors on CCTV-4.  So far, more than 75% of our advertising time slots for the year have been presold for the rest of the year.  We believe that this product could turn profitable in 2010."

"We are very proud to announce that we won a 'Gold World Medal' at The New York Festivals® International Television & Film Awards® for our 'Liquid Ink Chapter' commercial that we created and produced for China Central Television (CCTV) for its national branding campaign in 2010. Founded in 1957, the New York Festivals is one of the world's most well known and well respected media organizations.  The awards show honors what it considers to be 'The World's Best Work' in a variety of areas within the entertainment world.  'Liquid Ink Chapter' was the first commercial from a Chinese domestic advertising company to receive this prestigious award.  It has also won a number of other awards both internationally and domestically.  The commercial uses images of Chinese ink in a unique manner that alludes to the beauty of Chinese culture by combining traditional wash painting skills and modern animation techniques.  The innovative images take on various moving forms that simulate vivid water-like depictions of mountains and seas, cranes and dragons, the Great Wall and Tai Chi.  We are optimistic that companies in China will be drawn to our services based on the creativity that we displayed to win this award.

Mr. Eric Cheung, the Company's Chief Financial Officer, added, "We intend to continue to focus on further strengthening our marketing strategy and sales of media resources by expanding our client base and increasing our cross selling to existing clients.  By constantly enhancing our creativeness and client services, we will provide a one-stop comprehensive solution for our clients.

"As a testament to our ongoing efforts to increase value to our shareholders, our board of directors approved a stock dividend for common shareholders who were registered by June 16, 2010.  At this time, there are currently 716,375,000 common shares outstanding.  Shareholders will receive three common shares for each ADS held.  We also submitted an application at the end of May to be dual listed on the main board of the Hong Kong Stock Exchange.  There will be no related capital raise.  Our ADS's were listed on NYSE Arca on August 4, 2008 and subsequently moved up to the NYSE main board on August 25, 2009. Our board of directors believes that a dual listing in New York and Hong Kong will help diversify our shareholder base, especially around greater China, and enhance liquidity of the Company's shares."  

First Quarter 2010 Financial Results

Revenues

Revenues from advertising agency services were RMB 55.5 million (US$ 8.1 million) in the first quarter of 2010, a decrease of 60.0% from RMB 138.6 million in the first quarter of 2009, and a decrease of 52.6% from RMB 117.0 million in the fourth quarter of 2009.  The decrease from the first quarter of 2009 was primarily because the Company ceased to own the exclusive advertising rights for the CCTV Chinese New Year Gala program and because management decided to reduce the Company's investment in CCTV-4 advertising time slots.  The decrease from the fourth quarter of 2009 was primarily because of heightened market competition and because the fourth quarter is traditionally the peak season for the advertising industry.

Revenues from production and sponsorship services were RMB 3.1 million (US$ 0.46 million) in the first quarter of 2010, a decrease of 83.7% from RMB 19.3 million in the first quarter of 2009, and a decrease of 41.0% from RMB 5.3 million in the fourth quarter of 2009.  The year-over-year decrease was mainly because the Company recognized certain advertisement production revenues of RMB 13.1 million from CCTV for a series of 2008 Beijing Olympic Games-related advertisements and promotion films in the first quarter of 2009. The decrease compared to the fourth quarter of 2009 was primarily because the Company delivered fewer promotional films in the first quarter of 2010. During the fourth quarter of 2009, the Company produced and delivered the major "Liquid Ink Chapter" to CCTV. A number of other major advertisements production for third party customers were in development during the first quarter of 2010.

Operating costs and expenses

Cost of revenues was RMB 29.3 million (US$ 4.3 million) in the first quarter of 2010, a decrease of 60.0% from RMB 73.4 million in the first quarter of 2009 and a decrease of 56.4% from RMB 67.3 million in the fourth quarter of 2009. The decrease from the first quarter of 2009 was because fewer media resources were available for sale on CCTV-4, which drove down media costs, and the fact that the Company no longer incurs production costs for the Chinese New Year Gala program in 2010. The decrease from the fourth quarter of 2009 was primarily because the Company discontinued the underwriting of five news-related programs on CCTV-4 starting from the beginning of 2010.  The Company only retained time slots for the "Periodic China News Package" at CCTV's resource bidding process held by CCTV in November 2009.

Sales and marketing expenses were RMB 5.3 million (US$ 0.78 million) in the first quarter of 2010, an increase of 44.3% from RMB 3.7 million in the first quarter of 2009 and a decrease of 19.3% from RMB 6.6 million in the fourth quarter of 2009. The increase from the first quarter of 2009 was primarily due to the increase in travel expenses for sales people and higher salaries incurred for the Company's additional sales management personnel. The decrease from the fourth quarter of 2009 was due to lower sales commissions paid to the sales team following the decline in sales performance during the first quarter of 2010.

General and administrative expenses were RMB 7.4 million (US$ 1.1 million) in the first quarter of 2010, a decrease of 3.4% from RMB 7.7 million in the first quarter of 2009 and an increase of 12.0% from RMB 6.6 million in the fourth quarter of 2009. The increase from the fourth quarter was primarily due to professional fees paid for the Company's listing in Hong Kong.  The Company expects to incur further professional fees during the second and third quarters of 2010, which may lead to higher levels of general and administrative expenses as compared to corresponding periods in the prior year.

Operating income, as a result of the foregoing factors, was RMB13.9 million (US$ 2.0 million) in the first quarter of 2010, a decrease of 78.6% from RMB 65.0 million in the first quarter of 2009 and a decrease of 62.0% from RMB 36.6 million in the fourth quarter of 2009. The Company's operating margin was 24.9%, 31.3% and 43.4% for the three months ended March 31, 2010, December 31, 2009 and March 31, 2009, respectively.

Net income was RMB 10.1 million (US$ 1.5 million) in the first quarter of 2010, a decrease of 83.0% from RMB 59.6 million in the first quarter of 2009 and a decrease of 68.4% from RMB 32.0 million in the fourth quarter of 2009.  The Company's net margin was 18.1%, 27.3% and 39.8% for the three months ended March 31, 2010, December 31, 2009 and March 31, 2009, respectively.

Basic and diluted earnings per ADS for the first quarter of 2010 declined to RMB 0.38 (US$ 0.06), compared to basic and diluted earnings per ADS of RMB 2.27 for the first quarter of 2009 and RMB 1.22 for the fourth quarter of 2009.

Each ADS represents 30 ordinary shares.

Basic and diluted earnings per ADS and per share for all periods presented have been retroactively adjusted to reflect the 1 for 10 stock dividend.

Business Outlook

For the second quarter of 2010, the Company currently expects to generate total net revenues of between RMB 54 million and RMB 56 million, which represents a potential decrease of 27.6% to 30.2 % compared to the second quarter of 2009. The expected decrease will mainly be due to a reduction in investment on CCTV-4 advertising time slots as the company seeks higher returns, and significant continued price competition for time slots on CCTV channels 1 and 2.  Compared to the first quarter of 2010, the guidance reflects a flat to potential decline of 3.5%.  

This forecast reflects the Company's current and preliminary estimates, which are subject to change.

Conference Call

China Mass Media will host a conference call and live webcast at 9:00 p.m. Eastern Time (EDT) on June 14, 2010, 9:00 a.m. Beijing time on June 15, 2010.

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

- U.S. Toll Free Number:

+1 866 804 6929

- International dial-in number:

+1 857 350 1675

- China Toll Free Number:

+10 800 152 1490 (North)

+10 800 130 0399 (South)

- Hong Kong Toll Free Number:

+800 96 3844

 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 for seven days 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:   19107424

Safe Harbor Statement:

This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements involve a number of risks and uncertainties.

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 482 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 380 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.

http://www.chinammia.com  

(1) The U.S. dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader.  The conversion of Renminbi (RMB) into US$ in this release is based on the noon buying rate in The City of New York for cable transfers in RMB per US$ as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2010, which was RMB6.8258 to US$1.00.  The percentages stated are calculated based on RMB.

For further information, contact:

China Mass Media Corp.

Julie Sun

V.P. Corporate Development

6/F, Tower B, Corporate Square,

35 Finance Street Xicheng District

Beijing, 100032

P. R. China

Tel:  86 10 8809 1050

E-mail: juliesun@chinammia.com

Christensen

Tip Fleming

Tel:  852 2117 0861

E-mail:   tfleming@ChristensenIR.com

Roger Hu

Tel:  86 158 1049 5326

E-mail:  rhu@ChristensenIR.com

CHINA MASS MEDIA CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED,

March 31,

2009

December 31,

2009

March 31,

2010

March 31,

2010

RMB

RMB

RMB

US$

Revenues:

Advertising agency services

138,577,218

117,037,635

55,466,324

8,125,981

Advertisement production and sponsorship services

19,270,539

5,323,586

 3,141,023  

460,169

Total revenues

157,847,757

122,361,221

58,607,347

8,586,150

Less: Business tax

(8,086,432)

(5,201,731)

(2,626,585)

(384,803)

Total net revenues

149,761,325

117,159,490

55,980,762

8,201,347

Operating costs and expenses:

Cost of revenues

(73,384,387)

(67,347,729)

(29,340,334)

(4,298,446)

Sales and marketing expenses

(3,668,251)

(6,559,458)

(5,293,944)

(775,579)

General and administrative expenses

(7,671,858)

(6,614,127)

(7,409,378)

(1,085,496)

Total operating costs and expenses

(84,724,496)

(80,521,314)

(42,043,656)

(6,159,521)

Operating income

65,036,829

36,638,176

13,937,106

2,041,826

Interest and investment income

3,410,939

1,090,272

858,166

125,724

Other expense, net

34,299

458,323

6,246

915

Income before tax

68,481,997

38,186,771

14,801,518

2,168,465

Income tax expense

(8,867,756)

(6,182,705)

(4,690,509)

(687,174)

Net income

59,614,241

32,004,066

10,111,009

1,481,291

Earnings per ordinary share, basic and diluted

0.076

0.041

0.013

0.002

Earnings per ADS, basic and diluted

2.27

1.22

0.38

0.06

Shares used in calculating earnings per ordinary share, basic

788,012,500

788,012,500

788,012,500

788,012,500

Shares used in calculating earnings per ordinary share, diluted

788,012,500

790,117,882

789,873,237

789,873,237

Shares used in calculating earnings per ADS, basic

26,267,083

26,267,083

26,267,083

26,267,083

Shares used in calculating earnings per ADS, diluted

26,267,083

26,337,263

26,329,108

26,329,108

CHINA MASS MEDIA CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2009

March 31,

2010

March 31,

2010

RMB

RMB

US$

Assets

Current assets:

Cash and cash equivalents

508,778,014

402,859,480

59,020,112

Short-term investments

80,000,000

200,000,000

29,300,595

Notes receivable

1,937,450

4,264,739

624,797

Accounts receivable, net of allowance for doubtful accounts of RMB 6,507,638 as of December 31, 2009 and March 31, 2010

375,568

9,796,580

1,435,228

Prepaid expenses and other current assets

64,560,752

60,430,077

8,853,187

Total current assets

655,651,784

677,350,876

99,233,919

Non-current assets:

Property and equipment, net

55,464,401

54,640,842

8,005,046

Total non-current assets

55,464,401

54,640,842

8,005,046

Total Assets

711,116,185

731,991,718

107,238,965

Liabilities and Shareholder's Equity

Current liabilities:

Accounts payable

35,846,460

68,239,652

9,997,312

Customer advances

20,657,147

25,338,773

3,712,206

Accrued expenses and other current liabilities

18,133,340

17,189,164

2,518,264

Taxes payable

23,198,999

23,768,040

3,482,089

Amount due to related parties

127,068,624

100,613,688

14,740,205

Total current liabilities

224,904,570

235,149,317

34,450,076

Total Liabilities

224,904,570

235,149,317

34,450,076

Commitments and Contingencies

Shareholders' equity:

Ordinary shares ($0.001 par value; 900,000,000,000 shares authorized; 716,375,000 issued and outstanding as of December 31, 2009 and March 31, 2010))

4,893,500

4,893,500

716,912

 Additional paid-in capital

332,354,066

332,873,843

48,767,008

 Statutory reserves

25,000,000

25,000,000

3,662,574

 Retained earnings

123,964,049

134,075,058

19,642,395

Total Shareholders' Equity

486,211,615

496,842,401

72,788,889

 

Total Liabilities and Shareholder's Equity

711,116,185

731,991,718

107,238,965

CHINA MASS MEDIA CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED

March 31,

2009

December 31, 2009

March 31,

2010

March 31,

2010

RMB

RMB

RMB

US$

Cash flows from operating activities:

Net income

59,614,241

32,004,066

10,111,009

1,481,293

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

 

Depreciation expense

754,671

795,561

809,997

118,667

Investment income

(1,926,395)

(703,452)

(426,230)

(62,444)

   Exchange loss/ (gain)

(37,491)

36,929

84,690

12,407

  Share-based compensation

943,280

(332,378)

519,777

76,148

   Loss on disposal of property and equipment

-

-

12,263

1,797

Changes in assets and liabilities:

 

Notes receivable

(250,000)

455,010

(2,327,289)

(340,955)

Accounts receivable

(12,490,400)

345,110

(9,421,011)

(1,380,206)

Prepaid expense and other current assets

4,009,075

(29,549,357)

6,978,143

1,022,319

Deposit paid to a related party

-

1,000,000

-

-

Accounts payable

139,758,683

(135,696,443)

32,393,192

4,745,699

Customer advances

(41,518,831)

(39,071,097)

4,681,626

685,872

Accrued expenses and other current liabilities

1,839,760

2,377,819

(944,176)

(138,324)

Taxes payable

11,051,580

4,838,147

(2,085,359)

(305,511)

Amount due to related parties

70,720,013

(8,364,352)

(123,360)

(18,073)

Net cash provided by / (used in) operating activities

232,468,186

(171,864,437)

40,263,272

5,898,689

Cash flows from investing activities:

Net proceeds from (purchase) / redemption of short-term investments with term of three months or less

400,000,000

-

(120,000,000)

(17,580,357)

Purchase of property and equipment

(22,232,998)

(644,551)

(26,330,276)

(3,857,464)

Proceeds from investment income

2,465,079

726,247

233,162

34,160

Net cash (used in) / provided by investing activities

380,232,081

81,696

(146,097,114)

(21,403,661)

Cash flows from financing activities:

Dividends distributed

(96,335,115)

-

-

-

Net cash used in financing activities

(96,335,115)

-

-

-

Effect of foreign currency exchange

22,883

(36,931)

(84,692)

(12,408)

Net (decrease) / increase in cash and cash equivalents

516,388,035

(171,819,672)

(105,918,534)

(15,517,380)

Cash and cash equivalents at beginning of the period

566,889,261

680,597,686

508,778,014

74,537,492

Cash and cash equivalents at end of the period

1,083,277,296

508,778,014

402,859,480

59,020,112

CHINA MASS MEDIA CORP.

SELECTED OPERATING DATA

THREE MONTHS ENDED

March 31,

2009

December 31, 2009

March 31,

2010

Number of programs secured during the period

41

41

35

Total advertising time obtained (seconds)

2,896,140(1)

2,933,640

2,595,780(1)

Total advertising time sold (seconds)

694,985(2)

746,667

118,355(2)

(1) Represents the total amount of time during regular television programs secured through the Company's contracts with CCTV, including 262,980 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, 2009, December 31, 2009, and March 31, 2010, the company has sold 451,080, 392,160 and 5,430 seconds of advertisements in CCTV-E and CCTV-F

RECONCILIATIONS OF UNAUDITED NON-GAAP RESULTS OF OPERATIONS

MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES (*)

Three months ended

March 31, 2009

Three months ended

March 31, 2010

GAAP Result

Adjustment

Non-GAAP Result

GAAP Result

Adjustment

Non-GAAP Result

RMB

RMB

RMB

RMB

RMB

RMB

Operating income

65,036,829

943,280

65,980,109

13,937,106

519,777

14,456,883

Net income

59,614,241

943,280

60,557,521

10,111,009

519,777

10,630,786

(*) 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.



RELATED LINKS

http://www.chinammia.com