China Mass Media Reports Second Quarter 2010 Unaudited Financial Results
BEIJING, Sept. 13 /PRNewswire-Asia-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 second quarter ended June 30, 2010.
Second Quarter 2010 Highlights(1):
-- Total net revenues were RMB56.9 million (US$8.4 million), a decrease of
11.0% from the second quarter of 2009, and an increase of 1.6% from the
first quarter of 2010.
-- Operating income was RMB8.1 million (US$1.2 million), compared to an
operating loss of RMB14.6 million in the second quarter of 2009 and
operating income of RMB13.9 million in the first quarter of 2010.
-- Net income was RMB4.3 million (US$0.6 million), a decrease of 57.0%
from the first quarter of 2010, compared to a net loss of RMB9.2
million in the second quarter of 2009.
-- Net cash inflows from operating activities was RMB41.2 million (US$6.1
million), compared to net cash outflows from operating activities of
RMB13.5 million in the second quarter of 2009 and net cash inflows from
operating activities of RMB40.3 million in the first quarter of 2010.
(1) The U.S. dollar (US$) 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 June 30, 2010, which was RMB6.7815 to US$1.00. The percentages
stated are calculated based on RMB.
"As we expected, demand in the advertising market experienced a traditional seasonal decline," commented Mr. Shengcheng Wang, Chairman and Chief Executive Officer of China Mass Media. "Our performance was directly impacted because client expense budgets are typically lower in this quarter, and competition for clients' limited budgets is fierce with continuing pricing pressures. Intense competition has also led to shorter contract periods as clients want to have the flexibility to switch television advertising agencies to achieve lower costs of advertising when opportunities appear. This had a negative impact on our sales of the Daytime Advertising Package and Television Guides on CCTV-1 and CCTV-2. The decrease in sales of the two products impacted our overall revenues, and further caused the decrease of net income in the second quarter. On the other hand, our efforts to promote the sales of, and discipline our investments in, CCTV-4 media resources at the end of 2009 started to pay off in the second quarter of 2010. We have successfully turned the CCTV-4 products profitable in the second quarter of 2010, while we made a loss of more than RMB24 million a year ago."
"We started to see good results from the promotion of "Periodic China News Package" in the first quarter, and we did not take the strategy of cutting our selling prices like some of our competitors. Instead, we focused our efforts to develop new clients and won several annual contracts. Both the sales revenues and utilization of "Periodic China News Package" have increased significantly from the first quarter of 2010 and we expect this good performance will continue for the rest of the year. With the excellent performance of "Periodic China News Package," we plan to further strengthen our marketing promotions and improve the utilization of "Periodic China News Package," in the second half of 2010, and maximize profits from the program."
"Our revenues from production and public sponsorship services increased over 100% on both a year-over-year and sequential basis. During the second quarter, we produced a variety of public service announcements based on such themes as clean environment, caring for women's health and good citizenship, and obtained sponsorship from certain government agencies, non-government organizations and private institutions who considered that their objectives and corporate values could be effectively conveyed to the public through such public service announcements. In addition as we put in more sales and marketing efforts and our production quality received wider recognition, we obtained more business opportunities for our commercial advertisement production services. We have successfully won a number of mandates to produce commercial advertisements for a number of well-known brand names in China.
"We expect advertising demand to begin picking up again in the second half of 2010, because there will be a series of trade shows and promotional fairs starting from September. Our targeted customers traditionally place more advertisements in the second half of the year in order to make sure their products receive the right exposure to the market before the end of the year. Internally, we will continue to strengthen our sales activities and adjust our marketing strategy to increase our media resource utilization rate and meet market demand. In the coming two months, we will also pro-actively look for new clients who would like to participate in the annual CCTV prime time advertisement resources auction event. In the prior year, we successfully introduced solar energy and education industry leaders to CCTV's prime time auction to serve their advertisement needs. We will continue to do so in the upcoming auction event."
Mr. Eric Cheung, the Company's Chief Financial Officer, added, "We intend to continue to focus on sales of media resources by expanding our client base and managing our advertising agency clients. By constantly enhancing our creativity and client services, we will provide a one-stop comprehensive solution for our clients. On the capital markets front, in order to help diversify our shareholder base, especially around greater China, and to enhance liquidity of the Company's shares, we have submitted an application with the Hong Kong Stock Exchange to be dual listed on its main board while maintaining our listing on the New York Stock Exchange. We expect the review process by the Hong Kong Stock Exchange to be finished before the end of the year."
Second Quarter 2010 Financial Results
Revenues
Revenues from advertising agency services were RMB50.8 million (US$7.5 million) in the second quarter of 2010, a decrease of 17.9% from RMB61.8 million in the second quarter of 2009, and a decrease of 8.4% from RMB55.5 million in the first quarter of 2010. As we expected, the second quarter was a traditionally low season for the "Daytime Advertising Package" and "Television Guides". The holding of the 2010 FIFA World Cup event in June and July of 2010, an event on which some clients preferred to spend their advertising budget over our media resources, and price competition had also led to a loss of revenue. However, this negative impact has seen partially offset by improved sales results from CCTV-4's "Periodic China News Package" due to the right investment and pricing strategy we made earlier.
The decrease of advertising revenue from the second quarter of 2009 was mainly due to the pricing pressure we experienced on selling the "Daytime Advertising Package" and the fact that the Company sold less advertising time on CCTV-4 because we reduced our investment in media resources on CCTV-4 from six programs to one program, the "Periodic China News Package."
Revenues from production and sponsorship services were RMB8.9 million (US$1.3 million) in the second quarter of 2010, an increase of 207.6% from RMB2.9 million in the second quarter of 2009, and an increase of 182.0% from RMB3.1 million in the first quarter of 2010. In the second quarter, the Company secured several new clients for sponsorship of public service announcements, which led to a significant growth in revenues from sponsorship services. As for commercial advertising production, the Company's production capability obtained wider recognition in the industry after winning a series of international awards for a product called "Liquid Ink."
Operating costs and expenses
Cost of revenues was RMB32.7 million (US$4.8 million) in the second quarter of 2010, a decrease of 49.2% from RMB64.4 million in the second quarter of 2009 and an increase of 11.5% from RMB29.3 million in the first quarter of 2010. The significant decrease in cost of revenues from the second quarter of 2009 was a result of lower media costs for fewer media resources secured on CCTV-4. The increase from the first quarter of 2010 was due to more production and delivery of commercials, advertisements and public service announcements during the quarter.
Sales and marketing expenses were RMB4.0 million (US$0.6 million) in the second quarter of 2010, an increase of 22.7% from RMB3.2 million in the second quarter of 2009 and a decrease of 25.0% from RMB5.3 million in the first quarter of 2010. The increase from the second quarter of 2009 was due to an increase in staff wages and travel expenses as the Company expanded its sales team and strengthened sales efforts. The decrease from the first quarter of 2010 was mainly due to less sales commission distributed in connection with the lower level of advertisement revenues generated in the second quarter,
General and administrative expenses were RMB12.1 million (US$1.8 million) in the second quarter of 2010, an increase of 11.3% from RMB10.9 million in the second quarter of 2009 and an increase of 63.6% from RMB7.4 million in the first quarter of 2010. The increase from the first quarter of 2010 was mainly due to intermediary services fees of sponsors, lawyers and auditors for the dual listing application on the main board of the Hong Kong Stock Exchange.
Operating income, as a result of the foregoing factors, was RMB8.1 million (US$1.2 million) in the second quarter of 2010, compared to an operating loss of RMB14.6 million in the second quarter of 2009 and operating income of RMB13.9 million in the first quarter of 2010. The Company's operating margin was -22.8%, 24.9% and 14.2% for the three months ended June 30, 2009, March 31, 2010 and June 30, 2010, respectively.
Other expenses included an exchange loss of RMB 1.3 million (US$0.2 million) recognized in the second quarter of 2010 as the Company's functional currency, the RMB, appreciated against the USD while the Company maintained significant USD deposits.
Income tax expense was RMB3.7 million (US$0.5 million) in the second quarter of 2010, as compared to a tax credit of RMB1.8 million in the second quarter of 2009 and a decrease of 20.6% from RMB4.7 million in the first quarter of 2010. The Company's effective tax rate was 16.4%, 31.7% and 46.2% for the three months ended June 30, 2009, March 31, 2010 and June 30, 2010, respectively. The effective tax rate for the second quarter of 2010 was higher than the statutory tax rate mainly due to approximately RMB 4.5 million (US$ 0.7 million) intermediary services expenses incurred in connection with the application for a dual listing on Hong Kong Stock Exchange which were not tax deductible for our operations in China.
Net income was RMB4.3 million (US$0.6 million) in the second quarter of 2010, compared to a net loss of RMB9.2 million in the second quarter of 2009 and representing a decrease of 57.0% from RMB10.1 million in the first quarter of 2010. The Company's net margin was -14.4%, 18.1% and 7.6% for the three months ended June 30, 2009, March 31, 2010 and June 30, 2010, respectively.
Basic and diluted earnings per ADS for the second quarter of 2010 were RMB0.17 (US$0.02), compared to basic loss per ADS of RMB 0.35 for the second quarter of 2009 and basic earnings per ADS of RMB0.38 for the first quarter of 2010.
Each ADS represents 30 ordinary shares.
Cash and cash equivalents
As of June 30, 2010, the Company had RMB543.7 million (USD80.2 million) of cash and cash equivalents, as compared to RMB402.9 million as of March 31, 2010. Cash and cash equivalents increased from redemption of financial products and short-term investments upon maturity together with net cash inflows from operating activities.
Business Outlook
For the third quarter of 2010, the Company currently expects to generate total net revenues of between RMB 50 million and RMB 55 million, which represents a potential decrease of 3.3% to 12.1% from the second quarter of 2010 due to continuous price competition in the market..
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 a.m. Eastern Time (EDT) on September 13, 2010, 9:00 p.m. Beijing time on September 13, 2010.
The dial-in details for the live conference call are as follows:
-- U.S. Toll Free Number: +1 866 543 6405
-- International dial-in number: +1 617 213 8897
-- 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 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: 29671880
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.
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
Email: [email protected]
Christensen
Hong Kong
Roger Hu
Tel: +852-2117-0861
Email: [email protected]
U.S.:
Linda Bergkamp
Tel: +1-480-614-3004
Email: [email protected]
CHINA MASS MEDIA CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED,
June 30, March 31, June 30, June 30,
2009 2010 2010 2010
RMB RMB RMB US$
Revenues:
Advertising
agency services 61,838,249 55,466,324 50,786,201 7,488,933
Advertisement
production and
sponsorship
services 2,879,443 3,141,023 8,857,474 1,306,123
Total revenues 64,717,692 58,607,347 59,643,675 8,795,056
Less: Business tax (774,304) (2,626,585) (2,757,039) (406,553)
Total net revenues 63,943,388 55,980,762 56,886,636 8,388,503
Operating costs and
expenses:
Cost of revenues (64,383,133) (29,340,334) (32,707,715) (4,823,080)
Sales and
marketing
expenses (3,237,281) (5,293,944) (3,972,271) (585,751)
General and
administrative
expenses (10,887,394) (7,409,378) (12,121,812) (1,787,482)
Total operating
costs and
expenses (78,507,808) (42,043,656) (48,801,798) (7,196,313)
Operating income/
(loss) (14,564,420) 13,937,106 8,084,838 1,192,190
Interest and
investment income 3,345,142 858,166 1,270,016 187,277
Other income/
(expense), net 228,942 6,246 (1,287,347) (189,832)
Income/ (loss)
before tax (10,990,336) 14,801,518 8,067,507 1,189,635
Income tax (549,246)
(expense)/ credit 1,797,990 (4,690,509) (3,724,709)
Net income/ (loss) (9,192,346) 10,111,009 4,342,798 640,389
Net income/ (loss)
available to
ordinary
shareholders (9,192,346) 10,111,009 4,342,798 640,389
Earnings/ (loss)
per ordinary share,
basic and diluted (0.012) 0.013 0.006 0.001
Earnings/ (loss)
per ADS, basic and
diluted (0.35) 0.38 0.17 0.02
Shares used in
calculating
earnings/(loss)
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 788,012,500 789,873,237 788,012,500 788,012,500
Shares used in
calculating
earnings/(loss)
per ADS, basic 26,267,083 26,267,083 26,267,083 26,267,083
Shares used in
calculating
earnings/(loss)
per ADS, diluted 26,267,083 26,329,108 26,267,083 26,267,083
CHINA MASS MEDIA CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December June 30, June 30,
31, 2010 2010
2009
RMB RMB US$
Assets
Current assets:
Cash and cash equivalents 508,778,014 543,670,688 80,169,681
Short-term investments 80,000,000 100,000,000 14,746,000
Notes receivable 1,937,450 -- --
Accounts receivable, net of
allowance for doubtful
accounts of RMB 6,507,638
and RMB 6,485,798 as of
December 31, 2009 and June
30, 2010 375,568 10,242,392 1,510,343
Prepaid expenses and other
current assets 66,560,752 56,127,492 8,276,560
Total current assets 657,651,784 710,040,572 104,702,584
Non-current assets:
Property and equipment, net 55,464,401 53,913,170 7,950,036
Total non-current assets 55,464,401 53,913,170 7,950,036
Total Assets 713,116,185 763,953,742 112,652,620
Liabilities and
Shareholder's Equity
Current liabilities:
Accounts payable 50,446,460 106,424,331 15,693,331
Customer advances 20,657,147 22,439,115 3,308,872
Accrued expenses and other
current liabilities 17,776,049 19,106,087 2,817,384
Taxes payable 20,519,899 23,314,571 3,437,967
Amount due to related
parties 127,068,624 100,490,328 14,818,304
Total current liabilities 236,468,179 271,774,432 40,075,858
Total Liabilities 236,468,179 271,774,432 40,075,858
Commitments and
Contingencies
Shareholders' equity:
Ordinary shares ($0.001 par
value; 900,000,000,000
shares authorized;
716,375,000 issued and
outstanding as of December
31, 2009 and June 30, 2010) 4,893,500 4,893,500 721,596
Additional paid-in capital 332,354,066 333,431,563 49,167,819
Statutory reserves 25,000,000 25,000,000 3,686,500
Retained earnings 114,400,440 128,854,247 19,000,847
Total Shareholders' Equity 476,648,006 492,179,310 72,576,762
Total Liabilities and
Shareholder's Equity 713,116,185 763,953,742 112,652,620
CHINA MASS MEDIA CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
June 30, March 31, June 30, June 30,
2009 2010 2010 2010
RMB RMB RMB US$
Cash flows from
operating
activities:
Net income/ (loss) (9,192,346) 10,111,009 4,342,798 640,389
Adjustments to
reconcile net
income/ (loss) to
net cash provided
by operating
activities:
Depreciation
expense 757,596 809,997 741,029 109,272
Investment income (2,408,306) (426,230) (900,712) (132,819)
Exchange (gain)/
loss 161,392 84,690 1,406,128 207,348
Share-based
compensation 1,085,726 519,777 557,720 82,241
Loss on disposal
of property and
equipment -- 12,263 -- --
Changes in assets
and liabilities:
Notes receivable 250,000 (2,327,289) 4,264,739 628,878
Accounts
receivable 22,373,854 (9,421,011) (445,813) (65,740)
Prepaid expense
and other
current assets (1,021,315) 8,478,143 7,145,623 1,053,694
Amount due from a
related party (391,664) -- -- --
Accounts payable 20,293,360 32,393,192 23,584,679 3,477,798
Customer advances (3,946,321) 4,681,626 (2,899,658) (427,583)
Accrued expenses
and other
current
liabilities 1,450,150 (2,444,178) 3,774,216 556,546
Taxes payable (16,380,410) (2,085,359) (266,311) (39,270)
Amount due to
related parties (26,535,414) (123,360) (123,360) (18,191)
Net cash provided
by/ (used in)
operating
activities (13,503,698) 40,263,270 41,181,078 6,072,563
Cash flows from
investing
activities:
Net proceeds from
redemption /
(purchase) of
short-term
investments with
term of three
months or less 70,000,000 (120,000,000) 100,000,000 14,746,000
Purchase of
property and
equipment (158,508) (26,330,276) (13,358) (1,970)
Proceeds from
investment income 2,487,704 233,162 1,049,616 154,776
Net cash provided
by/ (used in)
investing
activities 72,329,196 (146,097,114) 101,036,258 14,898,806
Cash flows from
financing
activities:
Distribution made
to shareholder in
connection with
the
reorganization (15,000,000) -- -- --
Net cash used in
financing
activities (15,000,000) -- -- --
Effect of foreign
currency exchange (161,392) (84,690) (1,406,128) (207,348)
Net increase /
(decrease) in
cash and cash
equivalents 43,664,106 (105,918,534) 140,811,208 20,764,021
Cash and cash
equivalents at
beginning of
the period 1,083,277,296 508,778,014 402,859,480 59,405,660
Cash and cash
equivalents at
end of the
period 1,126,941,402 402,859,480 543,670,688 80,169,681
CHINA MASS MEDIA CORP. SELECTED OPERATING DATA
THREE MONTHS ENDED
June 30, March 31, June 30,
2009 2010 2010
Number of programs secured
during the period 41 35 35
Total advertising time
obtained (seconds) 2,909,160 2,595,780 2,621,970(1)
Total advertising time sold
(seconds) 389,786 118,355 133,695(2)
(1) Represents the total amount of time during regular television
programs secured through the Company's contracts with CCTV, including
263,250 seconds from CCTV-1, CCTV-2 and CCTV-4 and 2,358,720 seconds
from CCTV-E and CCTV-F.
(2) During the three-month periods ended June 30, 2009, March 31,
2010, and June 30, 2010, the company has sold 167,760 seconds, 5,430
seconds and 9,630 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 Three months ended
June 30, 2009 June 30, 2010
Non-GAAP GAAP Non-GAAP
GAAP Result Adjustment Result Result Adjustment Result
RMB RMB RMB RMB RMB RMB
Operating
Income/
(loss) (14,564,420) 1,085,726 (13,478,694) 8,084,838 557,720 8,642,558
Net income/
(loss) (9,192,346) 1,085,726 (8,106,620) 4,342,798 557,720 4,900,518
(*) 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 table 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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