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,
-------------------
December
March 31, 31,
--------- ---------
2009 2009
---- ----
RMB RMB
Revenues:
Advertising agency services 138,577,218 117,037,635
Advertisement production
and sponsorship services 19,270,539 5,323,586
---------- ---------
Total revenues 157,847,757 122,361,221
Less: Business tax (8,086,432) (5,201,731)
---------- ----------
149,761,325 117,159,490
Total net revenues -----------
Operating costs and
expenses:
Cost of revenues (73,384,387) (67,347,729)
Sales and marketing
expenses (3,668,251) (6,559,458)
General and administrative
expenses (7,671,858) (6,614,127)
---------- ----------
Total operating costs and
expenses (84,724,496) (80,521,314)
----------- -----------
Operating income 65,036,829 36,638,176
Interest and investment
income 3,410,939 1,090,272
Other expense, net 34,299 458,323
------ -------
Income before tax 68,481,997 38,186,771
Income tax expense (8,867,756) (6,182,705)
---------- ----------
Net income 59,614,241 32,004,066
========== ==========
Earnings per ordinary
share, basic and diluted 0.076 0.041
===== =====
Earnings per ADS, basic and
diluted 2.27 1.22
====
Shares used in calculating
earnings per ordinary
share, basic 788,012,500 788,012,500
=========== ===========
Shares used in calculating
earnings per ordinary
share, diluted 788,012,500 790,117,882
=========== ===========
Shares used in calculating
earnings per ADS, basic 26,267,083 26,267,083
========== ==========
Shares used in calculating
earnings per ADS, diluted 26,267,083 26,337,263
========== ==========
THREE MONTHS ENDED,
-------------------
March 31, March 31,
--------- ---------
2010 2010
---- ----
RMB US$
Revenues:
Advertising agency services 55,466,324 8,125,981
Advertisement production
and sponsorship services 460,169
-------
3,141,023
-------
Total revenues 58,607,347 8,586,150
Less: Business tax (2,626,585) (384,803)
---------- --------
Total net revenues 55,980,762 8,201,347
Operating costs and
expenses:
Cost of revenues (29,340,334) (4,298,446)
Sales and marketing
expenses (5,293,944) (775,579)
General and administrative
expenses (7,409,378) (1,085,496)
---------- ----------
Total operating costs and
expenses (42,043,656) (6,159,521)
----------- ----------
Operating income 13,937,106 2,041,826
Interest and investment
income 858,166 125,724
Other expense, net 6,246 915
----- ---
Income before tax 14,801,518 2,168,465
Income tax expense (4,690,509) (687,174)
---------- --------
Net income 10,111,009 1,481,291
========== =========
Earnings per ordinary
share, basic and diluted 0.013 0.002
===== =====
Earnings per ADS, basic and
diluted 0.38 0.06
Shares used in calculating
earnings per ordinary
share, basic 788,012,500 788,012,500
=========== ===========
Shares used in calculating
earnings per ordinary
share, diluted 789,873,237 789,873,237
=========== ===========
Shares used in calculating
earnings per ADS, basic 26,267,083 26,267,083
========== ==========
Shares used in calculating
earnings per ADS, diluted 26,329,108 26,329,108
========== ==========
CHINA MASS MEDIA CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
2009 March 31, March 31,
------------- --------- ---------
2010 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
---------- ---------- ---------
711,116,185 731,991,718 107,238,965
Total Assets =========== =========== ===========
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
------------------
December
March 31, 31, 2009
--------- ---------
2009
----
RMB RMB
Cash flows from operating
activities:
Net income 59,614,241 32,004,066
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation expense 754,671 795,561
Investment income (1,926,395) (703,452)
Exchange loss/ (gain) (37,491) 36,929
Share-based compensation 943,280 (332,378)
Loss on disposal of property
and equipment - -
Changes in assets and
liabilities:
Notes receivable (250,000) 455,010
Accounts receivable (12,490,400) 345,110
Prepaid expense and other
current assets 4,009,075 (29,549,357)
Deposit paid to a related
party - 1,000,000
Accounts payable 139,758,683 (135,696,443)
Customer advances (41,518,831) (39,071,097)
Accrued expenses and other
current liabilities 1,839,760 2,377,819
Taxes payable 11,051,580 4,838,147
Amount due to related parties 70,720,013 (8,364,352)
---------- ----------
Net cash provided by /(used
in) operating activities 232,468,186 (171,864,437)
----------- ------------
Cash flows from investing
activities:
Net proceeds from (purchase) /
redemption of short-term
investments with term of
three months or less 400,000,000 -
Purchase of property and
equipment (22,232,998) (644,551)
Proceeds from investment
income 2,465,079 726,247
--------- -------
Net cash (used in) /provided
by investing activities 380,232,081 81,696
----------- ------
Cash flows from financing
activities:
Dividends distributed (96,335,115) -
Net cash used in financing
activities (96,335,115) -
----------- ---
22,883 (36,931)
Effect of foreign currency
exchange ------ -------
Net (decrease) /increase in
cash and cash equivalents 516,388,035 (171,819,672)
Cash and cash equivalents at
beginning of the period 566,889,261 680,597,686
----------- -----------
Cash and cash equivalents at
end of the period 1,083,277,296 508,778,014
============= ===========
THREE MONTHS ENDED
------------------
March 31, March 31,
--------- ---------
2010 2010
---- ----
RMB US$
Cash flows from operating
activities:
Net income 10,111,009 1,481,293
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation expense 809,997 118,667
Investment income (426,230) (62,444)
Exchange loss/ (gain) 84,690 12,407
Share-based compensation 519,777 76,148
Loss on disposal of property
and equipment 12,263 1,797
Changes in assets and
liabilities:
Notes receivable (2,327,289) (340,955)
Accounts receivable (9,421,011) (1,380,206)
Prepaid expense and other
current assets 6,978,143 1,022,319
Deposit paid to a related
party - -
Accounts payable 32,393,192 4,745,699
Customer advances 4,681,626 685,872
Accrued expenses and other
current liabilities (944,176) (138,324)
Taxes payable (2,085,359) (305,511)
Amount due to related parties (123,360) (18,073)
-------- -------
Net cash provided by /(used
in) operating activities 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 (120,000,000) (17,580,357)
Purchase of property and
equipment (26,330,276) (3,857,464)
Proceeds from investment
income 233,162 34,160
------- ------
Net cash (used in) /provided
by investing activities (146,097,114) (21,403,661)
------------ -----------
Cash flows from financing
activities:
Dividends distributed - -
Net cash used in financing
activities - -
--- ---
(84,692) (12,408)
Effect of foreign currency
exchange ------- -------
Net (decrease) /increase in
cash and cash equivalents (105,918,534) (15,517,380)
Cash and cash equivalents at
beginning of the period 508,778,014 74,537,492
----------- ----------
Cash and cash equivalents at
end of the period 402,859,480 59,020,112
=========== ==========
CHINA MASS MEDIA CORP.
SELECTED OPERATING DATA
THREE MONTHS ENDED
December
March 31, 31, 2009 March 31,
2009 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
--------------
Non-GAAP
GAAP Result Adjustment Result
RMB RMB RMB
Operating
income 65,036,829 943,280 65,980,109
Net income 59,614,241 943,280 60,557,521
Three months ended
------------------
March 31, 2010
--------------
GAAP Non-GAAP
Result Adjustment Result
RMB RMB RMB
Operating
income 13,937,106 519,777 14,456,883
Net income 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.
