Revenue Increased by 213.7% and Net Income Increased by 278.6% Year-over-year
SHANGHAI, China, Nov. 21 /Xinhua-PRNewswire/ -- Focus Media Holding
Limited (Nasdaq: FMCN), China’s largest out-of-home multi-platform life-
style media company, today announced its unaudited financial results for the
third quarter ended September 30, 2006.
Highlights:
-- Total revenues grew 213.7% year-over-year and 20.8% quarter-over-
quarter to $61.1 million.
-- Net income for the quarter was $27.0 million compared to $7.1 million
for the three months ended September 30, 2005, growing by 278.6% year-
over-year. Focus Media also provides an operating margin, net income
and earnings per ADS on a non-GAAP basis that exclude non-cash share-
based compensation expense and acquired intangible assets amortization
expense for investor’s better assessment of the Company’s operating
performance. The non-GAAP measures are described below and reconciled
to the corresponding GAAP measure in the section below titled “Use of
non-GAAP Financial Measures”. Net income, excluding non-cash share-
based compensation expenses and amortization of acquired intangible
assets resulting from acquisitions (non-GAAP) was $30.2 million.
-- Our Commercial Location Network
-- Advertising service revenue from our commercial location network,
including revenue from our outdoor LED network and pre-movie
advertising network, grew 125.2% year-over-year and 25.3% quarter-
over-quarter to $38.9 million.
-- For our Premier Office Building Channel A (“Premier Channel A”),
which consists primarily of the office building locations on Focus
Media’s commercial location network prior to the Target Media
acquisition: Average advertising revenue per 30-second equivalent
time slot (“ASP”) in Focus Media’s Tier-I Cities (Beijing,
Shanghai, Guangzhou and Shenzhen) increased 3.9% to $12,797 in the
third quarter from $12,320 in the second quarter of 2006. During
the third quarter of 2006, in addition to Tier-I cities, three of
our Tier-II Cities (all non-Tier-I cities in which Focus Media
operates directly or through regional distributors) have reached
full capacity utilization. The ASP for those seven cities at full
capacity utilization (including the four Tier-I cities) increased to
$8,302 in the third quarter from $8,115 in the previous quarter. The
number of 30-second equivalent time slots available for sale
(“Network Capacity”) also increased by 38.6% to 15,679 due to the
expansion of our Premier Channel A network into an additional 14
cities in China.
-- During the third quarter 2006, we made significant progress in
increasing sales in the Office Building Channel B, which primarily
consists of LCD screens acquired in the Target Media acquisition.
Revenue from Office Building B in the third quarter increased by
96.8% compared to the previous quarter while ASP of Office Building
Channel B increased by 37.3% from the level in the second quarter
2006.
-- Our In-store Network
-- Advertising service revenue from our in-store network grew 300.1%
year-over-year and 10.8% sequentially by quarter to $7.3 million in
the third quarter of 2006.
-- The total number of hypermarkets covered by our in-store network by
the end of September 30, 2006 increased to 899, as compared to 872
on June 30, 2006. At this time, substantially all of the revenue
from our In-store Network is derived from our LCD network in
hypermarkets. The installed base of supermarkets and convenience
stores was 1,049 and 1,946 respectively, as of September 30, 2006.
-- Our In-elevator Poster Frame Network
-- Advertising service revenue from our in-elevator poster frame
network was $11.3 million in the third quarter 2006, up 15.3% from
$9.8 million in the second quarter of 2006.
-- The total number of frames available for sale was 95,878 as of
September 30, 2006, as compared to 82,200 as of June 30, 2006.
-- Focus Media Wireless
-- Advertising service revenue from Focus Media Wireless was $3.5
million in the third quarter 2006, up 14.3% from $3.1 million in the
second quarter 2006. Gross margin increased to 40.6% in the third
quarter 2006 from 26.0% in the second quarter 2006 as we
successfully increased our advertising sales mix to non-MVAS (Mobile
Value-added Service Provider) advertisers.
Commenting on the third quarter results, Chief Executive Officer Jason
Jiang said, “We are pleased to report another record quarterly results for
Focus Media. We continue to see strong demand growth for all of our media
platforms. In addition to continuing the expansion of our business outside
of the four Tier-I cities, we have made significant progress in improving the
sales of our sub-channels. For example, revenue from our Office Building
Channel B nearly doubled during the third quarter while its ASP increased
37.3% sequentially. Moreover, we see some advertisers successfully marketing
their products and services through Focus Media’s multiple media platforms
(e.g. LCD plus outdoor LED plus wireless) based on their demographic-specific
marketing strategy. We believe that our multiple-media demographic-specific
solution will help advertisers achieve higher media effectiveness in terms of
reach and recall.”
Financial Results
For the third quarter of 2006, Focus Media reported total revenues of
$61.1 million, an increase of 213.7% compared to $19.5 million for the third
quarter of 2005 and an increase of 20.8% compared to $50.6 million for the
second quarter of 2006.
Commercial Location Network
For the commercial location network, advertising service revenue was
$38.9 million in the third quarter of 2006, an increase of 125.2% from $17.3
million in the third quarter of 2005 and an increase of 25.3% sequentially
from $31.1 million in the previous quarter.
The total number of displays installed on our commercial location network
in our directly operated cities was 68,723 as of September 30, 2006 while the
number of displays in networks operated by our regional distributors was
5,290 as of September 30, 2006.
For our Premier Channel A, which consists primarily of the office
building locations on Focus Media’s commercial location network prior to the
Target Media acquisition, the total number of 30-second equivalent time slots
sold (“Slots Sold”) in the third quarter of 2006 was 6,111, as compared to
5,369 in the previous quarter, while the number of 30-second equivalent time
slots available for sale (“Network Capacity”) increased to 15,679 in the
third quarter from 11,314 in the second quarter of 2006 due to network
expansion into 14 additional cities. Slots sold in Tier-I Cities increased
to 1,232 in the third quarter 2006 from 1,158 in the second quarter 2006,
which implies a sell-out rate, or Slots Sold expressed as a percentage of
Network Capacity, of 98.8% in the third quarter 2006. ASP in the Tier-I
Cities continued to increase sequentially by 3.9% to $12,797 from $12,320 in
the second quarter of 2006. During the third quarter of 2006, in addition to
Tier-I cities, three of our Tier-II Cities have reached full capacity
utilization. The ASP for those seven cities at full capacity utilization
(including the four Tier-I cities) increased to $8,302 in the third quarter
from $8,115 in the previous quarter. In other Tier-II Cities, we focus our
effort on continuing increasing the network sell-out rate towards full-
capacity utilization in each of those networks. Slots sold in Tier-II Cities
increased 15.9% to 4,879 in the third quarter 2006 from 4,211 in the second
quarter 2006, which implies a sell-out rate of 33.8% based on the increased
capacity. The average ASP from all Tier-II Cities was $1,950 in the third
quarter as we continue our expansion into less populated Tier-II cities where
the local advertising rates per slot are lower than that of Tier-I Cities.
The Premier Channel A accounted for approximately 66% of total commercial
location advertising service revenues in the quarter while other channels
(Office Building Channel B, Elite Channel, Travel Channel, Fashion Channel,
Healthcare Channel and IT Mall Channel), our outdoor LED network and pre-
movie advertising business contributed the remaining 34%.
In-store Network
Advertising service revenue from our in-store network in the third
quarter 2006 was $7.3 million, up 10.8% from $6.5 million in the second
quarter of 2006 and 300.1% from $1.8 million in the third quarter 2005. In
the third quarter 2006, we further expanded the installed base of our
hypermarkets to 899 stores from 872 hypermarkets at the end of second
quarter. The installed base of supermarkets and convenience stores was 1,049
and 1,946 respectively, as of September 30, 2006. The number of displays
installed in our in-store network increased to 36,387 as of September 30,
2006 compared to 35,511 as of June 30, 2006.
For the in-store network, the total number of 30-second equivalent time
slots (on a per week per store basis) sold in the third quarter of 2006 was
90,647, as compared to 87,450 in the previous quarter. The number of 30-
second equivalent time slots available for sale, or network capacity, was
273,909, as compared to 261,360 in the previous quarter. The network sell-
out rate was 33.1%, relatively flat compared to the previous quarter due to
the increased capacity. Average advertising revenue per 30-second equivalent
time slot per week per store was $80 for the in-store network in third
quarter of 2006, up from $75 in second quarter of 2006.
Poster Frame Network
Advertising service revenue from our poster frame network placed
primarily in the elevators of residential complexes was $11.3 million in the
third quarter of 2006, up 15.3% from $9.8 million in the second quarter of
2006. The total number of frames available for sale was 95,878 as of
September 30, 2006, as compared to 82,200 as of June 30, 2006. The number of
frame slots (on a monthly basis) sold in the third quarter increase 3.6% to
160,437, as compared to 154,793 in the previous quarter. The network
capacity calculated based on the number of frame slots (on a monthly basis)
available for sale in the third quarter of 2006 was 267,603, as compared to
243,959 in the previous quarter. The network sell-out rate was 60.0%, as
compared to 63.5% in the second quarter of 2006 due to larger network
capacity. Average advertising revenue per frame slot was $70 per month in
the third quarter of 2006 as compared to $63 per month in the second quarter
of 2006.
Advertising on Wireless Network
Advertising service revenue from Focus Media Wireless in the third
quarter of 2006 was $3.5 million, up 14.3% from $3.1 million in the second
quarter of 2006.
In the third quarter of 2006, for our commercial location and in-store
businesses, we added approximately 291 new advertising clients, bringing the
cumulative number of advertisers on the Focus Media commercial location
network and in-store network to over 2,500. In addition, over 1,000
advertisers cumulatively purchased frame advertising on our poster frame
network as of the end of third quarter 2006.
“We continue to see strong leverage in our business model,” said Daniel
Wu, Chief Financial Officer, “the gross margin has improved significantly to
65.3% in the third quarter. Gross margin for the wireless business increased
to 40.6% from 26.0% in the previous quarter as we have successful changed the
wireless business model from pure MVAS-based advertising to serving more
traditional advertisers directly. While continuing our focus on cost
optimization, we will further look for opportunities to expand our media
coverage of Chinese urban consumers through earning-accretive acquisitions.
For example, we have successfully expanded our Poster Frame Network into four
new cities through earning-accretive acquisitions recently. We believe there
are many similar opportunities in other major cities in China.”
Gross profit for the third quarter of 2006 was $39.9 million,
representing an increase of 242.7% compared to $11.6 million for the
corresponding period a year ago and a 33.9% increase compared to $29.8
million in the second quarter 2006. Gross margin for the third quarter was
65.3%, up from 58.9% in the previous quarter. For the commercial location
network (including our outdoor LED network and pre-movie advertising
business), gross margin was 71.4% in the third quarter 2006, improving
significantly from 63.8% in the second quarter of 2006 as we continue to
increase the sell-out rate of our media inventories while focusing on cost
optimization. For the in-store network, gross margin was 36.4% in the third
quarter of 2006, increasing from 32.9% in the second quarter of 2006. For
the poster frame network, gross margin was 70.7% in the third quarter of
2006, as compared to 71.2% in the second quarter of 2006. For Focus Media
wireless, gross margin was 40.6% in the third quarter of 2006, up
significantly from 26.0% in the second quarter of 2006 as we successfully
increased our advertising sales mix to non-MVAS (Mobile Value-added Service
Provider) advertisers.
In the third-quarter of 2006, operating expenses totalled $14.0 million,
including $1.6 million in acquired intangible asset amortization resulting
from acquisitions and non-cash share-based compensation expense of $1.6
million. Operating expenses as a percentage of total revenues in the third
quarter was 23.0%, as compared to 25.9% in the previous quarter. Selling and
marketing expenses in the third quarter totalled $6.5 million or 10.6% of
total revenues. General and administrative expense in the third quarter was
$6.0 million or 9.8% of total revenues. As a result, operating margin in the
third quarter of 2006 was 42.3%, up from 33.0% in the second quarter of
2006. Excluding non-cash share-based compensation expense and acquired
intangible asset amortization expense, operating margin (non-GAAP) was 47.4%
in the third quarter 2006.
Net income for the third quarter of 2006 was $27.0 million, an increase
of 278.6% compared to $7.1 million for the same period in 2005. Fully
diluted net income per ADS for the third quarter of 2006 was $0.49. Net
income excluding non-cash share-based compensation expenses and amortization
of acquired intangible assets resulting from acquisitions (non-GAAP) in the
third quarter of 2006 was $30.2 million, or $0.55 per fully diluted ADS. In
the third quarter of 2006, cash flow from operating activities was $28.8
million, increasing 128.6% from $12.6 million in the previous quarter. Total
depreciation expense was $3.7 million. Day Sales Outstanding (“DSO”) was
75 days. As of September 30, 2006, the company had a cash and bank balance
and investment in available-for-sale securities of $130.0 million.
Other Recent Developments
In the third quarter, we completed the acquisition of Appreciate Capital
Limited (“ACL”). ACL’s network was renamed as Focus Media’s “movie
theatre network” and will initially be included in the commercial location
network when compiling financial results. Our movie theatre network currently
covers over 120 movie theatres throughout China, which represents
approximately 85% of the theatre ticket revenue in China. ACL has the right
to three minutes of screen-time prior to each showing of the movie, and sells
that screen time to advertisers in 30-second or shorter time slots.
Recently, we have signed agreements to acquire approximately 22,700
frames in Nanjing, Suzhou, Changzhou, Wuhan, Dalian and Shenyang, which will
be added to our Poster Frame Network. We expect those acquisitions to close
before December 31, 2006.
We are on schedule in expanding our street-side outdoor LED network in
prime commercial and shopping areas (“iStreet Network”) in Shanghai. We
expect the number of the LED screens in our iStreet Network to double from
the current level to approximately 200 units by the end of 2006. We look to
build similar networks in other major metropolitan areas in China in 2007.
BUSINESS OUTLOOK
The company estimates its total revenues for the fourth quarter of 2006
to range from $67 million to $69 million. Fourth quarter 2006 net income
excluding share-based compensation expenses and amortization of acquired
intangible assets resulting from acquisitions (non-GAAP) is expected to be
between $34 million and $35 million or $0.62 to $0.64 per fully diluted ADS
based on 55 million total ADS equivalent shares outstanding.
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
operating margin, non-GAAP net income and earning per fully diluted ADS, all
excluding non-cash share-based compensation and amortization of acquired
intangible assets resulting from acquisitions. The company believes that the
non-GAAP financial measures will 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 for the three-month periods of 2005 and 2006, respectively, in
the attached financial statements.
The company believes that both management and investors benefit from
referring to these non-GAAP financial measures in assessing the performance
of Focus Media’s liquidity and when planning and forecasting future
periods. The company computes its non-GAAP financial measures using the same
consistent method from quarter to quarter. 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 Non-GAAP to GAAP
(U.S. Dollar in thousands, except share data)
Three months ended Nine months ended
2006-9-30 2005-9-30 2006-6-30 2006-9-30 2005-9-30
(unaudited)(unaudited)(unaudited)(unaudited)
(unaudited)
GAAP net income
attributable to
shareholders $ 27,005 $ 7,132 $ 16,671 $ 53,109 $ 14,122
Amortization of
acquired intangible
assets 1,577 120 1,494 4,070 310
Share-based
compensation 1,569 100 1,897 4,932 646
Non-GAAP net
income $ 30,151 $ 7,352 $ 20,062 $ 62,111 $ 15,078
GAAP income per
ADS - basic $ 0.51 $ 0.20 $ 0.33 $1.08 $ 0.67
GAAP income per
ADS - diluted $ 0.49 $ 0.19 $ 0.31 $ 1.04 $ 0.59
Non-GAAP income
per ADS - basic $ 0.57 $ 0.21 $ 0.39 $ 1.26 $ 0.72
Non-GAAP income
per ADS - diluted $ 0.55 $ 0.19 $ 0.38 $ 1.21 $ 0.63
Shares used in
calculating basic
GAAP /Non-GAAP
income per ADS 52,556,597 34,929,638 50,913,117 49,116,445 21,037,782
Shares used in
calculating
diluted GAAP /
Non-GAAP income
per ADS 54,646,585 37,950,853 53,273,694 51,187,666 23,820,661
GAAP income from
operations $ 25,833 $ 6,472 $ 16,666 $ 51,548 $ 13,887
Amortization of
acquired
intangible
assets 1,577 120 1,494 4,070 310
Share-based
compensation 1,569 100 1,897 4,932 646
Non-GAAP income
from operations $ 28,979 $ 6,692 $ 20,057 $ 60,550 $ 14,843
Non-GAAP
operating margin 47.4 % 34.4 % 39.7 % 41.8 % 34.0 %
TODAY’S CONFERENCE CALL
Focus Media will host a conference call to discuss the third-quarter 2006
financial results and forth-quarter 2006 business outlook at 8:00 p.m. U.S.
Eastern Time on November 20, 2006 (5:00 p.m. U.S. Pacific Time on November
20, 2006; 9:00 a.m. Beijing/Hong Kong time on November 21, 2006). The dial-
in details for the live conference call are: U.S. Toll Free Number +1-866-713-
8310, Hong Kong dial-in number +852-3002-1672, International dial-in number
+1-617-597-5308; Pass code 27364874.
A replay of the call will be available from November 20, 2006 until
November 27, 2006 (U.S. Eastern Time). The dial-in details for the replay
are: U.S. Toll Free Number +1-888-286-8010; international dial-in number +1-
617-801-6888; pass code 93026263. A webcast of this call will also be
available live and archived on Focus Media’s website at
http://ir.focusmedia.cn .
ABOUT FOCUS MEDIA HOLDING LIMITED
Focus Media Holding Limited (Nasdaq: FMCN) is China’s leading out-of-
home multi-platform life-style media company, which operates the largest out-
of-home advertising network in China using audiovisual flat-panel displays.
Based on an audience-centric approach, Focus Media provides targeted
advertising channels which cover specific demographics groups and their daily
activities, from office buildings to retail chain stores, residential
building, shopping malls, golf country clubs, airports, and airport transit
buses. As of September 30, 2006, Focus Media had approximately 74,000
display units in our commercial location network, 36,000 display units in our
in-store network, 95,000 advertising poster frames installed throughout China
and 80 outdoor LED displays in Shanghai. Over 2,500 international and
domestic advertisers had placed advertisements through our networks as of
September 30, 2006. For more information about Focus Media, please visit our
website http://ir.focusmedia.cn .
SAFE HARBOR: FORWARD-LOOKING STATEMENTS
This announcement contains forward-looking statements. These statements
are made under the "safe harbor" provisions of the U.S. 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. Among other things, the Business
Outlook section and quotations from management in this press release, as well
as Focus Media’s strategic and operational plans, contain forward-looking
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. 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-1and F-3, in each case as amended. Focus Media does not undertake any
obligation to update any forward-looking statement, except as required under
applicable law.
Focus Media Holding Limited
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)
2006-9-30 2005-12-31
(unaudited) (audited)
ASSETS
Current assets
Cash and cash equivalents $95,109 $36,653
Investment in available-
for-sale securities 34,935 34,836
Accounts receivables, net 58,577 22,235
Inventories 979 480
Prepaid expenses and
other current assets 5,236 45,364
Amount due from related
parties 3,672 2,073
Total current assets $198,508 141,641
Rental Deposits 11,811 11,819
Deposit paid for
acquisition of equipment 3,683
Equipment, net 68,609 43,695
Acquired intangible
assets, net 29,668 1,158
Goodwill 499,261 13,298
Long term investments 63 --
Other long term assets 530 --
Deferred tax assets 564 743
Total assets $812,697 $212,354
LIABILITIES AND SHAREHOLDERS’
EQUITY
(DEFICIENCY)
Current liabilities
Short term bank loans $-- $991
Other short term loans 3,076 --
Accounts payable 4,456 5,848
Accrued expenses and
other current
liabilities 29,371 11,747
Income taxes payable 2,627 2,108
Total current
liabilities $39,530 $20,694
Minority interest 379 246
Shareholders’ equity
Ordinary shares 27 19
Additional paid in
capital 702,152 177,420
Deferred compensation
charge -- (247)
Retained earnings 66,105 12,997
Accumulated other
comprehensive income 4,504 1,225
Total shareholders’
equity $772,788 $191,414
Total liabilities and
shareholders’ equity $812,697 $212,354
Focus Media Holding Limited
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. Dollar in thousands, except share data)
Three months ended Nine months ended
2006-9-30 2005-9-30 2006-6-30 2006-9-30 2005-9-30
(unaudited) (unaudited) (unaudited) (unaudited)
(unaudited)
Gross revenues
(note 3):
-- Commercial
Locations $42,992 $19,056 $34,023 $100,569 $44,823
-- In-store
Network 8,017 2,001 7,242 21,077 2,374
-- In-elevator
Poster Frame 12,386 -- 10,752 29,796 --
-- Mobile
Handset
Advertising 3,801 -- 3,365 7,166 --
Advertising
Equipment
Revenue 90 366 106 500 772
Total gross
revenues $67,286 $21,423 $55,488 $159,108 $47,969
Less: Sales taxes 6,213 1,957 4,912 14,322 4,345
Total net
revenues $61,073 $19,466 $50,576 $144,786 $43,624
Cost of revenues:
Net advertising
service cost
-- Commercial
Locations 11,125 4,943 11,244 30,404 12,198
-- In-store
Network 4,616 2,606 4,394 12,983 3,971
-- In-elevator
Poster Frame 3,301 -- 2,815 8,513 --
-- Mobile
Handset
Advertising 2,088 -- 2,275 4,363 --
Advertising
Equipment Cost 80 285 80 392 545
Total cost of
revenues 21,210 7,834 20,808 56,655 16,714
Gross profit 39,863 11,632 29,768 88,131 26,910
Operating expenses:
General and
administrative
(Note 4) 5,956 2,337 6,298 16,649 6,564
Selling and
marketing (note 4) 6,497 2,703 5,310 15,864 6,149
Amortization
of acquired
intangible
assets 1,577 120 1,494 4,070 310
Total
operating
expenses 14,030 5,160 13,102 36,583 13,023
Income from
operations 25,833 6,472 16,666 51,548 13,887
Interest
income, net 1,070 791 605 2,561 822
Other income
(expenses),
net (170) 8 (136) (231) 10
Income before
tax and minority
interests 26,733 7,271 17,135 53,878 14,719
Income tax
expense
- Current (134) 312 553 484 757
- Deferred (183) (225) (180) 189 (267)
Total income
taxes (317) 87 373 673 490
Income before
minority
interests 27,050 7,184 16,762 53,205 14,229
Minority
Interests 45 52 91 96 107
Net income 27,005 7,132 16,671 53,109 14,122
Income per ADS
- basic $0.51 $0.20 $0.33 $1.08 $0.67
Income per ADS
- diluted $0.49 $0.19 $0.31 $1.04 $0.59
Shares used in
calculating
basic income
per ADS 52,556,597 34,929,638 50,913,117 49,116,445 21,037,782
Shares used in
calculating
diluted income
per ADS 54,646,585 37,950,853 53,273,694 51,187,666 23,820,661
Focus Media Holding Limited
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(U.S. Dollar in thousands)
Three months ended Nine months ended
2006-9-30 2005-9-30 2006-9-30 2005-9-30
(unaudited) (unaudited)(unaudited) (unaudited)
Operating activities:
Net income $27,005 $7,132 $53,109 $14,122
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Minority interest 45 52 96 107
Bad debt provision 627 (86) 1,397 255
Share based compensation 1,569 100 4,932 646
Depreciation 3,714 1,341 9,844 2,736
Amortization of
acquired intangible
assets 1,577 120 4,070 310
Investment income -- (28) -- --
Loss on disposal of
equipment -- -- 159 --
Changes in assets and
liabilities, net of
effects of acquisitions (5,695) (8,923) (27,373) (15,960)
Net cash provided by (used in)
operating activities $28,842 $(292) 46,234 $2,216
Investing activities:
Purchase of equipment (1,696) (9,701) (13,304) (24,307)
Purchase of
subsidiaries, net of
cash acquired (38,568) (317) (125,627) (4,437)
Investment in available-for-
sale securities -- (35,000) -- (34,951)
Net cash used in
investing activities $(40,264) $(45,018) $(138,931) $(63,695)
Financing activities:
Proceeds from issuance
of ordinary shares,
net of issuance costs 5,710 118,847 154,390 118,847
Proceeds from short-term
bank loans -- 3,089 24,598 3,089
Capital injection from
minority shareholders -- 3 249 3
Repayment of
short-term bank loans (23,351) -- (25,589) --
Repayment of
short-term other loans -- -- (3,813) --
Net cash (used in)
provided by financing
activities $(17,641) 121,939 $149,835 $121,939
Effect of exchange rate
changes 1,488 700 1,318 845
Net (decrease) increase
in cash and cash
equivalents (27,575) 77,329 58,456 61,305
Cash and cash equivalents,
beginning of period 122,684 6,645 36,653 22,669
Cash and cash
equivalents, end of
period $95,109 $83,974 $95,109 $83,974
Supplemental disclosure of
cash flow information:
Income taxes paid $12 -- $30 --
Interest paid $218 $2 $245 $2
Three months ended Nine months ended
2006-9-30 2005-9-30 2006-9-30 2005-9-30
(unaudited) (unaudited)(unaudited) (unaudited)
Supplemental disclosure of
non-cash investing activity:
Acquisition of subsidiaries:
Value of ordinary
share consideration $-- $-- $36,660 $--
Accounts payable (29,938) -- 277 1,160
Notes:
Note 1: Basic income per ADS is computed by dividing income
attributable to holders of ordinary shares by the weighted
average number of ADS outstanding during the year/period.
Diluted income per ADS reflects the potential dilution that
could occur if securities or other contracts to issue ADS were
exercised or converted into ADS.
Note 2: The conversion of Renminbi (“RMB”) amounts into USD amounts
is based on the rate of USD1 = RMB7.9087 on September 30, 2006.
Note 3: Details of net revenues are as follows (U.S. Dollars in
thousands):
Three months ended Nine months ended
2006-9-30 2005-9-30 2006-6-30 2006-9-30 2005-9-30
(unaudited) (unaudited) (unaudited) (unaudited)(unaudited)
Gross Advertising Service
Commercial Locations
-- Unrelated
parties $40,179 $18,019 $32,331 $93,710 $40,953
-- Related
parties 2,813 1,037 1,692 6,859 3,870
Total Commercial
Locations 42,992 19,056 34,023 100,569 44,823
In-store Network
-- Unrelated
parties 7,146 2,001 6,661 19,023 2,374
-- Related
parties 871 -- 581 2,054 --
Total in-store
network 8,017 2,001 7,242 21,077 2,374
In-elevator
Poster Frame
-- Unrelated
parties 12,386 -- 10,752 29,796 --
Total In-elevator
Poster Frame 12,386 -- 10,752 29,796 --
Mobile Handset
Advertising
-- Unrelated
parties 3,801 -- 3,365 7,166 --
Total Mobile Handset 3,801 -- 3,365 7,166 --
Gross Advertising
Services 67,196 21,057 55,382 158,608 47,197
Less: Sales taxes：
Commercial
Locations 4,063 1,769 2,959 9,104 4,123
In-store Network 763 188 697 1,984 222
In-elevator
Poster Frame 1,102 -- 967 2,660 --
Mobile Handset
Advertising 285 -- 289 574 --
Total sales taxes 6,213 1,957 4,912 14,322 4,345
Net Advertising
Service Revenue 60,983 19,100 50,470 144,286 42,852
Add: Advertising
Equipment 90 366 106 500 772
Net revenues: $61,073 $19,466 $50,576 $144,786 $43,624
Note 4: Share based compensations included under SFAS 123R are as follows
(U.S. Dollars in thousands):
Three months ended Nine months ended
2006-9-30 2005-9-30 2006-6-30 2006-9-30 2005-9-30
(unaudited) (unaudited) (unaudited) (unaudited)(unaudited)
Selling and
marketing $210 $8 341 $887 $36
General and
administrative 1,359 92 1,556 4,045 610
Total $1,569 $100 $1,897 $4,932 $646
Note 5: The Company has performed preliminary purchase price allocation on
their small acquisitions based on an internal valuation performed
by management. The purchase price allocation will be revised once
the independent valuation report is obtained.
Focus Media Holding Ltd.
Reconciliation of Non-GAAP to GAAP
(U.S. Dollar in thousands, except share data)
Three months ended Nine months ended
2006-9-30 2005-9-30 2006-6-30 2006-9-30 2005-9-30
(unaudited) (unaudited) (unaudited) (unaudited)(unaudited)
GAAP net income
attributable to
shareholders $27,005 $7,132 $16,671 $53,109 $14,122
Amortization of
acquired intangible
assets 1,577 120 1,494 4,070 310
Share-based
compensation 1,569 100 1,897 4,932 646
Non-GAAP net
income $30,151 $7,352 $20,062 $62,111 $15,078
GAAP income per
ADS - basic $0.51 $0.20 $0.33 $1.08 $0.67
GAAP income per
ADS - diluted $0.49 $0.19 $0.31 $1.04 $0.59
Non-GAAP income
per ADS - basic $0.57 $0.21 $0.39 $1.26 $0.72
Non-GAAP income
per ADS - diluted $0.55 $0.19 $0.38 $1.21 $0.63
Shares used in
calculating
basic GAAP
/Non-GAAP
income per ADS 52,556,597 34,929,638 50,913,117 49,116,445 21,037,782
Shares used in
calculating
diluted GAAP/
Non-GAAP income
per ADS 54,646,585 37,950,853 53,273,694 51,187,666 23,820,661
GAAP income from
operations $25,833 $6,472 $16,666 $51,548 $13,887
Amortization of
acquired intangible
assets 1,577 120 1,494 4,070 310
Share-based
compensation 1,569 100 1,897 4,932 646
Non-GAAP income
from operations $28,979 $6,692 $20,057 $60,550 $14,843
Non-GAAP operating
margin 47.4 % 34.4 % 39.7 % 41.8 % 34.0 %
