China New Media Reports Third Quarter Fiscal Year 2012 Financial Results

DALIAN, China, May 16, 2012 /PRNewswire-Asia/ -- China New Media Corp. (OTCBB: CMDI) (the "Company"), China's fast-growing advertising media company who owns or operates an outdoor media network located in Dalian, Shenyang, Tianjin, Beijing, Shanghai, and New York City, today announced its financial results for the third quarter of fiscal year 2012 ended March 31, 2012.

Mr. James Wang, Chairman and Chief Executive Officer of China New Media, stated, "During the third quarter of fiscal year 2012, we still see a tougher macro economic environment. Advertisers in certain cyclical industries, such as real estate, have tightened their advertising budgets since the second half of 2011. Facing this unfavorable economic conditions, we are working diligently to strengthen our position in the market – continue to focus on our expansion strategy of adding more advertising platforms geographically, at the same time, focus more on sales, marketing and promotional efforts, and provided more value-added services in order to maintain existing customers and add new customers in our new markets. For each new market we have developed our own sales team to sell existing advertising platforms and develop new advertising platforms. The investment required to build greater future sales resulted in decrease in overall gross profit margins and profitability during the quarter. However, we believe over the long term there will be greater leverage in this model and we strongly believe that it is the best plan of action for the value of the Company and our shareholders."

Mr. Wang continued, "During the third quarter of fiscal year 2012, one of the most significant breakthroughs in our company history is the acquisition of the operation right of the 684 square-foot LED screen located at No.1 Times Square in New York City, USA. It's the first step for our company to expand our media platform and sales network directly to overseas market. We are confident that we will have a margin recovery as the new market gains sales momentum."

Summary Financials for 2012 Fiscal Third Quarter Ended March 31, 2012:  

Financial Results for the 2012 Fiscal Third Quarter Ended March 31, 2012

Revenue for the 2012 fiscal third quarter ended March 31, 2012 totaled $4,071,427 a decrease of 24.6% compared to $5,402,726 for the same period in fiscal 2011. The decline in revenue was primarily attributable to a decrease in contracting demand from advertisers under unfavorable macro economic conditions. Advertisers from certain industries, such as real estate, have significantly decreased their advertising budget in the third quarter of fiscal year 2012. However, since we maintained our expansion strategy of getting more advertising platforms at desired locations, we believe we can have a revenue recovery once we further develop our new market.

Revenue generated from the outdoor billboard advertising platform increased 7% compared with same quarter last year and accounted for 49.5% of total revenue during the 2012 fiscal third quarter. The billboard advertising platform has presented a significant growth opportunity with gross profit margin of 33.0% during the 2012 fiscal third quarter. The outdoor billboard platform is established in Dalian, Shenyang, Tianjin, Beijing, Shanghai and New York City, and going forward the Company will continue to establish its presence in these markets.

Cost of sales for the 2012 fiscal third quarter ended March 31, 2012 totaled $2.8 million or 68.4% of revenue, an increase of 18.8% compared to $2.3 million or 43.4% of revenue for the 2011 fiscal third quarter ended March 31, 2011. The increase in cost of revenue was primarily attributable to increased depreciation of advertising equipment, labor and raw material cost.

Gross profit for the 2012 fiscal third quarter ended March 31, 2012 totaled $1.29 million, a decrease of 57.9% compared to $3.1 million for the 2011 fiscal third quarter ended March 31, 2011. The decrease in gross profit was primarily due to decrease in revenue while an increased cost of revenue. Gross profit margin was 31.6% and 56.6% for the 2012 and 2011 fiscal third quarters ended March 31, 2012 and 2011, respectively. The decrease in our gross profit margin during the third quarter of 2012 was primarily due to (i) decrease in revenue caused by certain cyclical industries; (ii) increased cost of revenue which was mainly caused by increased depreciation expense of advertising equipment and increased labor and raw material cost. As a result, our gross profit margin was lower than the level we normally would expect. We intend to increase our sales effort to improve the utilization rate of our new platforms in the coming quarters to improve our gross profit margin.

Selling, general and administrative expenses consist primarily of sales personnel salaries, sales representative commissions, rent expenses and related administrative expenses totaling $1.4 million for the 2012 fiscal third quarter as compared to $1.0 million for the 2011 fiscal third quarter. This increase was due to salary increase, an increased sales effort from the Company to address the more competitive overall advertising market and to accommodate its geographic expansion of its media platforms, higher maintenance, professional fees and other expenses related to the growth of the business.

Net loss attributable to China New Media Corp. for the three months ended March 31, 2012 was $442,000 as compared to income $1.4 million for the three months ended March 31, 2011. The decrease was due to decreased revenue compared to same period last year with an increase in cost of revenues and selling, general and administrative expenses. Basic and diluted earnings per share for the 2012 fiscal third quarter ended March 31, 2012 was -$0.02 based on 27.6 million basic and diluted shares versus basic and diluted earnings per share of $0.05 for the 2011 fiscal third quarter ended March 31, 2011 based on 27.6 million basic and diluted shares outstanding.

Summary Financials for Nine Months of Fiscal 2012 Ended March 31, 2012:  

Financial Results for the Nine Months FY 2012 Ended March 31, 2012

Revenue for the nine months FY 2012 ended March 31, 2012 totaled $13.7 million, dropped 6.1% compared to $14.6 million for the same period in fiscal 2011 under current unfavorable macro economic conditions. The Company plans to spend more effort on sales, marketing and promotion in order to generate sales from existing and new customers, and continue focusing on expanding outdoor advertising network at more desirable locations for the various outdoor advertising platforms.

Cost of sales for the nine months ended March 31, 2012 totaled $7.2 million or 52.6% of revenue, an increase of 21.5% compared to $6.3 million or 43.3% of revenue for the nine months ended March 31, 2011, mainly attributable to increased depreciation of advertising equipment, labor and raw material cost.

Gross profit for the nine months ended March 31, 2012 totaled $6.5million, a decrease of 21.5% compared to $8.3 million for the same period the prior year. Gross profit margin was 47.4% and 56.7% for the nine months ended March 31, 2012 and 2011, respectively. The decrease in gross profit margin was mainly due to the decrease in revenue while an increase in cost of revenue, especially with an increased depreciation of advertising equipment, and the increase of labor and raw material cost.

Selling, general and administrative expenses totaled $3.9 million for the nine months of fiscal 2012 as compared to $2.7 million for the same period in fiscal 2011. This increase was due to an increased sales effort from the Company to accommodate its geographic expansion of its media platforms and tougher macro economic conditions, higher maintenance, professional fees and other expenses related to the growth of the business.

Net income attributable to China New Media Corp. for the nine months ended March 31, 2012 was $1.0 million, a decrease of 72.1%, as compared to $3.7 million for the same period ended March 31, 2011. Basic and diluted earnings per share for the nine months ended March 31, 2012 was $0.04 based on 27.6 million basic and diluted shares versus basic and diluted earnings per share of $0.14 and $0.13 for the nine months ended March 31, 2011 based on 27.6 million basic and 28.2 million diluted shares outstanding.

Liquidity and Capital Resources

As of March 31, 2012, China New Media had approximately $1.1 million in cash and cash equivalents. As of March 31, 2012, total current assets and total assets were $9.4 million and $41.8 million, respectively. During the same period, total current liabilities and total liabilities were $20.4 million and $20.9million respectively. Shareholder's equity totaled 20.9 million, or a fully diluted book value of $0.76 per share, as of March 31, 2012.

Conference Call Details:

It is recommended that participants dial in approximately 10 minutes prior to the start of the 8:30 a.m. Eastern call. A telephonic replay of the conference call may be accessed approximately two hours after the call through May 31, 2012. Please dial 877-870-5176 for U.S. and 858-384-5517 for international callers and entering the access code, 4540184.

There will also be a simultaneous live webcast and archived recording of the conference call available by clicking on the following link, http://public.viavid.com/index.php?id=100574.

About China New Media Corp.

Founded in September 2000, Dalian Vastitude Media Group Co., Ltd., now known as China New Media Corp., is headquartered in Dalian, the commercial center of Northeastern China. The company owns and operates the city's largest outdoor media network encompassing over 800 bus shelters furnished with billboards and displays; 130 taxi stops with displays; and 22 large-size billboards, majority of which are large-size LED displays at major traffic conjunctions. The company also furnishes more than 400 buses with advertising posters and 35 metro-trains throughout Dalian Metro Lines. China New Media provides comprehensive adverting services from art design to ad publishing, from daily maintenance to technical upgrading. Launched in Dalian in 2009, China New Media's proprietary LED multimedia display network, City Navigator®, is one of the country's first web-based outdoor advertising networks. For more information, please visit www.gywj.cn.

Forward-Looking Statements

This press release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are "forward-looking statements", including statements regarding the Company's ability to meet its obligations under its various contracts; the timeliness of payments and other economic benefits the Company expects to receive under such contracts; and the Company's ability to maintain its customer relationships and to maintain its ability to pursue its commercial objectives. In addition, the Company's operations are conducted in the PRC and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe such as risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

Company Contact:

Rita Jiang
Executive Vice President of Finance
646-691-5047
[email protected]
www.gywj.cn

SOURCE China New Media Corp.