BEIJING, China, Dec. 7 /PRNewswire-Asia-FirstCall/ -- China Mass Media Corp. (NYSE: CMM), a leading media company in China, today announced its unaudited financial results for the third quarter ended September 30, 2009.
Third Quarter 2009 Highlights(1)
-- Total net revenues were RMB 80.70 million ($ 11.82 million), an
increase of 10.4% from the third quarter 2008 and a sequential increase
of 4.3% from the second quarter 2009.
-- Operating income was RMB 3.66 million ($ 0.54 million), a decrease of
80.4% from RMB 18.62 million in the third quarter of 2008, and a
sequential increase compared with an operating loss of RMB 3.13 million
in the second quarter 2009.
-- Net income was RMB 4.04 million ($ 0.59 million), a decrease of 76.8%
from the third quarter of 2008 and a sequential increase of 988.1% from
the second quarter of 2009.
-- During the third quarter 2009, cash flow used in operating activities
was RMB 396.65 million ($58.11 million), cash flow used in investing
activities was RMB 49.49 million ($7.25 million), and there was no cash
flow from financing activities, so cash and cash equivalents decreased
by RMB 446.34 million ($65.39) million during the third quarter.
(1) The U.S. dollar (US$) 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 exchange rate
set forth in the statistical release issued by the Federal Reserve
Board on September 30, 2009, which was RMB6.8262 to US$1.00. The
percentages stated are calculated based on RMB.
Mr. Shengcheng Wang, Chairman and Chief Executive Officer of China Mass Media, said, "The third quarter was extremely busy and full of changes. We embraced the 60th anniversary of the People's Republic of China along with the resumption of higher growth rates in our economy. We were very pleased to see robust demand in the advertising market during the quarter, especially in September. That strength has continued into the fourth quarter of the year.
The marketing adjustments we put in place have paid off. Our "Day Time Advertising Package" on CCTV sold well, as did sales of our advertising time slots on CCTV's "Television Guide" channel, and on CCTV-4 programs, largely due to our winning a large number of new clients.
CCTV's prime time advertisement auction and bidding session for 2010, which was held in November 2009, raised nearly RMB 10.97 billion, an 18.5 percent increase from RMB 9.26 billion in 2009. While we are confident in the economic outlook for 2010, the intense bidding reflected China's rebounding economy and the huge demand in the advertising market. Several of our clients participated in and won ideal time slots through our services.
CCTV also initiated their open bidding process to sell advertising time slots to advertising agency companies using a new wholesale contracting system. We won the "Periodic China News Package" on CCTV-4 at a reasonable price. Our media resources in 2010, therefore, include our "Day Time Advertising Package," the "Periodic China News Package," advertising time slots on CCTV's "Television Guide," and public service announcement sponsorship opportunities.
Starting in 2009, CCTV initiated a series of reforms to improve its advertising operations. As a part of the reform, CCTV will bring their sales and marketing efforts in-house for the Chinese New Year Gala program, for which we worked as the exclusive advertising agent for several years. We will continue to provide support to CCTV for this event, but we do not expect it to be a significant source of revenue in 2010.
We plan to continue to further strengthen our production and client services. As brand advisors for our various clients, we will expand our integrated services to provide one-stop comprehensive solutions for our clients. By leveraging our unique public service announcement program and advertising platform on CCTV, we believe we can further improve our production and public services advertising, which can help our clients increase the awareness of public welfare and social responsibilities from a unique angle.
Right after the CCTV auction, we started the pre-sales of our 2010 media resources to win a large share of our clients' 2010 advertising budgets. We expect to continue to grow through this kind of organic growth and possibly through careful, logical, and financially prudent acquisitions."
Mr. Eric Cheung, Chief Financial Officer of China Mass Media, added, "Effective implementation of our expanded marketing strategy led to the strong sequential increase in revenues from advertising agency services. We are beginning to see strong demand for 2010, and expect to benefit from the strong growth in China's expanding economy. We believe that our strengthened sales force and market position will allow us to take advantage of the growth in advertising demand."
Third Quarter 2009 Financial Results
Revenues from Advertising Agency Services were RMB 79.83 million ($ 11.7 million) in the third quarter of 2009, an increase of 13.0% from RMB 70.66 million in the third quarter of 2008, and a sequential increase of 29.1% from RMB 61.84 million in the second quarter of 2009.
In the third quarter 2009, advertising agency services revenues increased 13.0% from the third quarter of 2008, primarily due to securing new advertisers and producing higher revenues from advertisements on "Day Time Advertising Package" and on "Television Guide." In August 2008, the "Day Time Advertising Package" and "Television Guide" programs were suspended for 16 days due to live broadcasting of the Olympic Games by CCTV, which led to a decline in revenues generated from these two programs in the third quarter 2008.
Comparing sequentially with the second quarter 2009, advertising agency services revenues increased 29.1% in the third quarter 2009 due to securing more clients' advertising expenditures and producing higher revenues from advertisements on "Day Time Advertising Package," on "Television Guide," on "First News" and on CCTV-4 programs. With higher growth rates resuming in the Chinese economy and the coming traditional peak advertising seasons in China for September and October, many advertisers were willing to increase their budgets to improve the market awareness of their products. Through our enlarged sales team, the company has been able to secure more customers across various industry sectors, including household appliances, consumer goods, and pharmaceutical products.
Revenues from special events services: There were no special events in the third quarter 2009 or in the third quarter 2008, so no revenues occurred in those quarters. The RMB 14.60 million ($ 2.14 million) in special events services revenues in the second quarter 2009 related to revenues that were recognized from assisting CCTV to sell and market advertisements during the Beijing Olympic Games in 2008.
Revenues from production and sponsorship services were RMB 2.83 million ($ 0.41 million) in the third quarter of 2009, a decrease of 45.3% from RMB 5.18 million in the third quarter of 2008, primarily due to lower revenues from public service announcements sponsorship services. Sequentially, revenues from production and sponsorship services in the third quarter 2009 decreased 1.7% from RMB 2.88 million in the second quarter of 2009.
Operating costs and expenses
Cost of revenues was RMB 65.12 million ($ 9.54 million) in the third quarter 2009, an increase of 36.4% from RMB 47.73 million in the third quarter 2008, primarily due to higher media resource underwriting costs for CCTV-4. The cost of revenues sequentially increased 1.2% from RMB 64.38 million in the second quarter 2009.
Sales and marketing expenses were RMB 3.90 million ($ 0.57 million) in the third quarter of 2009, an increase of 96.1% from RMB 1.99 million in the third quarter of 2008, due primarily to increased salaries and other compensation for additional sales employees. Sales and marketing expenses decreased sequentially by 25.6% from RMB 5.24 million ($ 0.77 million) in the second quarter 2009, mainly due to the absence in the third quarter 2009 of a distribution of commission and bonus related to the special event revenue recorded in the second quarter 2009.
General and administrative expenses were RMB 8.02 million ($ 1.17 million) in the third quarter of 2009, an increase of 69.2% from RMB 4.74 million in the third quarter of 2008, mainly due to additional expenses incurred as a U.S. publicly listed company, including legal and independent auditors' fees and the cost of compliance with the Sarbanes-Oxley Act of 2002, and higher salaries.
General and administrative expenses decreased sequentially 26.3% in the third quarter 2009 from RMB 10.89 million in the second quarter 2009 mainly due to a decrease in the provision for bad debt from RMB 3.5 million to RMB 0.4 million.
Operating income, as a result of the foregoing factors, was RMB 3.66 million ($ 0.54 million) in the third quarter 2009, down 80.4% compared with operating income of RMB 18.62 million in the third quarter of 2008. Operating income sequentially increased to RMB 3.66 million in the third quarter 2009 from an operating loss of RMB 3.13 million in the second quarter of 2009. The operating margin was 4.53% in the third quarter 2009, a negative 4.05% in the second quarter 2009, and 25.48% in the third quarter 2008.
Net income was RMB 4.04 million ($ 0.60 million) in the third quarter 2009, a decrease of 76.8% from RMB 17.41 million in the third quarter 2008 and an sequential increase of 988.1% from RMB 0.37 million in the second quarter 2009. Net profit margin was 5.01% in the third quarter 2009, 0.48% in the second quarter 2009, and 23.83% in the third quarter 2008.
Basic and diluted earnings per ADS for the third quarter of 2009 was RMB 0.17 ($ 0.02) per ADS, compared with RMB 0.81 per ADS in the third quarter 2008. The basic and diluted earnings per ADS in second quarter 2009 was RMB 0.02 per ADS. Each ADS represents 30 ordinary shares of the company.
Cash and cash equivalents
As of September 30, 2009, the Company had cash and cash equivalents of RMB 680.6 million ($99.7 million) compared with RMB 1,126.9 million at June 30, 2009. The decrease in cash and cash equivalents was mainly due to cash used in operating activities and the purchase of certain investment products issued by state-owned banks classified as short-term investments.
Financial Outlook
The Company currently expects to generate total net revenues of RMB 95 million to RMB 105 million for the fourth quarter of 2009. The range results in a potential increase of 22.6% to 35.5% as compared with the fourth quarter of 2008 and a potential sequential increase of 17.7% to 30.1% compared with the third quarter of 2009. This forecast reflects the company's current and preliminary view, which is subject to change.
Conference Call
China Mass Media will host a conference call and live webcast at 8:00 a.m. Eastern Time (EST) (9:00 p.m., Beijing/Hong Kong time) on Monday, Dec 7, 2009, to discuss the third quarter 2009 results and answer questions.
The dial-in details for the live conference call are as follows:
U.S. toll free number: +1 866 730 5768
China toll free number (Telecom): +10 800 152 1490
China toll free number (Unicom): +10 800 130 0399
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: 36387039
Safe Harbor Statement
This news release includes statements that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Act of 1934 as amended, and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements, which are based on certain assumptions and future plans, strategies, and expectations of the Company, are generally identified by the use of words such as believe, expect, intend, anticipate, estimate, or project or similar words.
The fourth quarter and year 2009 outlook contains forward-looking statements, based on management's current plans, estimates, and expectations, are not a guarantee of future performance.
The forward-looking statements involve risks and uncertainties. A number of factors could cause actual results to differ materially from forward-looking statements. Additional information concerning these factors is contained in the Securities and Exchange Commission filings of the company at www.sec.gov. China Mass Media does not undertake any obligation to update any forward-looking statements, except as required by 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 more than 500 minutes of advertising time slots on CCTV Channels 1, 2, 4, E and F. CCTV is the largest television network in China. Since 2003, the Company has produced more than 300 advertisements and has won a number of prestigious awards in China.
China Mass Media's website is located at http://www.chinammia.com .
For further information, please contact:
China Mass Media Corp.
Julie Sun
Vice President of Corporate Development
Tel: +86-10-8809 1050
Email: juliesun@chinammia.com
or
Christensen
Hong Kong:
Roger Hu
Tel: +852-2117-0861
Email: rhu@ChristensenIR.com
United States:
Linda Bergkamp
Tel: +1-480-614-3004l
Email: bergkamp@christensenIR.com
CHINA MASS MEDIA CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED,
September 30, June 30, September 30, September 30,
2008 2009 2009 2009
RMB RMB RMB US$
Revenues:
Advertising
agency
services 70,661,244 61,838,249 79,826,310 11,694,107
Special events
services -- 14,600,000 -- --
Advertisement
production and
sponsorship
services 5,179,717 2,879,443 2,831,067 414,735
Total revenues 75,840,961 79,317,692 82,657,377 12,108,842
Less: Business tax (2,763,372) (1,942,304) (1,959,112) (286,999)
Total net revenues 73,077,589 77,375,388 80,698,265 11,821,843
Operating costs
and expenses:
Cost of
revenues (47,733,904) (64,383,133) (65,123,775) (9,540,268)
Sales and
marketing
expenses (1,987,275) (5,237,281) (3,897,454) (570,955)
General and
administrative
expenses (4,738,804) (10,887,394) (8,020,381) (1,174,941)
Total operating
costs and
expenses (54,459,983) (80,507,808) (77,041,610) (11,286,164)
Operating income/
(loss) 18,617,606 (3,132,420) 3,656,655 535,679
Interest and
investment
income 3,671,955 3,345,142 1,647,683 241,376
Other income/
(expense), net (1,799,274) 228,942 (189,169) (27,712)
Income before tax 20,490,287 441,664 5,115,169 749,343
Income tax
expense (3,076,395) (70,401) (1,075,459) (157,549)
Net income 17,413,892 371,263 4,039,710 591,794
Net income
allocated to
participating
preferred shares (1,160,674) -- -- --
Net income
available
to ordinary
shareholders 16,253,218 371,263 4,039,710 591,795
Earnings per
ordinary share,
basic and
diluted 0.03 0.001 0.006 0.001
Earnings per ADS,
basic and
diluted 0.81 0.02 0.17 0.02
Shares used in
calculating
earnings per
ordinary share,
basic and
diluted 600,732,337 716,375,000 716,375,000 716,375,000
Shares used in
calculating
earnings per
ADS, basic and
diluted 20,024,411 23,879,167 23,879,167 23,879,167
CHINA MASS MEDIA CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30, September 30,
2008 2009 2009
RMB RMB US$
Assets
Current assets:
Cash and cash equivalents 566,889,261 680,597,686 99,703,742
Short-term investments 500,000,000 80,000,000 11,719,551
Notes receivable -- 2,392,460 350,482
Accounts receivable, net of
allowance for doubtful
accounts of RMB 4,319,808
and RMB 8,303,818 as of
December 31, 2008
and September 30, 2009 14,367,193 720,677 105,575
Prepaid expenses and other
current assets 68,301,523 46,567,929 6,821,940
Deposit paid to a related
party 1,000,000 1,000,000 146,494
Total current assets 1,150,557,977 811,278,752 118,847,784
Non-current assets:
Property and equipment, net 57,261,208 55,615,411 8,147,347
Total non-current assets 57,261,208 55,615,411 8,147,347
Total Assets 1,207,819,185 866,894,163 126,995,131
Liabilities and Shareholder's
Equity
Current liabilities:
Accounts payable 330,085,426 171,542,903 25,130,073
Customer advances 75,422,483 59,728,244 8,749,853
Dividend payable 96,335,115 -- --
Accrued expenses and other
current liabilities 13,765,090 15,755,521 2,308,095
Taxes payable 51,958,677 29,894,592 4,379,390
Amount due to
related parties 252,209,794 135,432,975 19,840,171
Total current liabilities 819,776,585 412,354,235 60,407,582
Total Liabilities 819,776,585 412,354,235 60,407,582
Commitments and Contingencies
Shareholders' equity:
Ordinary shares ($0.001 par
value; 900,000,000,000
shares authorized;
716,375,000 issued and
outstanding as of December
31, 2008 and June 30, 2009) 4,893,500 4,893,500 716,870
Additional paid-in capital 330,214,330 332,686,444 48,736,697
Statutory reserves 25,000,000 25,000,000 3,662,360
Retained earnings 27,934,770 91,959,984 13,471,622
Total Shareholders' Equity 388,042,600 454,539,928 66,587,549
Total Liabilities and
Shareholder's Equity 1,207,819,185 866,894,163 126,995,131
CHINA MASS MEDIA CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
September 30, June 30, September 30, September 30,
2008 2009 2009 2009
RMB RMB RMB US$
Cash flows from
operating
activities:
Net income 17,413,892 371,263 4,039,710 591,795
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Depreciation
expense 245,232 757,596 766,329 112,263
Investment
income (2,018,356) (2,408,306) (956,768) (140,161)
Exchange
(gain)/loss 1,796,769 161,392 202,609 29,681
Share-based
compensation 855,239 1,085,726 443,108 64,913
Changes in assets
and liabilities:
Notes
receivable 5,741,441 250,000 (2,392,460) (350,482)
Accounts
receivable (32,023) 22,373,853 3,763,062 551,267
Prepaid
expense and
other current
assets 129,514 (1,021,315) (887,194) (129,969)
Deposit paid to a
related party -- (391,664) 391,664 57,377
Accounts
payable 5,042,095 5,693,360 (303,994,566) (44,533,498)
Customer
advances 3,443,327 (3,946,321) 29,770,913 4,361,272
Accrued
expenses and
other current
liabilities (1,638,245) 3,807,441 (3,656,772) (533,525)
Taxes payable 3,220,834 (13,701,311) (366,530) (53,695)
Amount due to
related
parties 51,689,579 (26,535,415) (123,772,918) (18,132,038)
Net cash provided
by/ (used in)
operating
activities 85,889,298 (13,503,701) (396,649,813) (58,106,972)
Cash flows from
investing
activities:
Redemption/
(purchase) of
short-term
investments -- 70,000,000 (50,000,000) (7,324,719)
Purchase of
property and
equipment (125,598) (158,508) (415,185) (60,822)
Proceeds from
investment
income 4,205,575 2,487,704 923,891 135,345
Net cash
provided by/
(used in)
investing
activities 4,079,977 72,329,196 (49,491,294) (7,250,196)
Cash flows
from financing
activities:
Proceeds from
issuance of
ordinary shares
and preferred
shares 290,431,451 -- -- --
Distribution
made to
shareholder in
connection
with the
reorganization -- (15,000,000) -- --
Net cash
provided by/
(used) in
financing
activities 290,431,451 (15,000,000) -- --
Effect of
foreign
currency
exchange (1,796,769) (161,389) (202,609) (29,681)
Net increase
in cash and
cash
equivalents 378,603,957 43,664,106 (446,343,716) (65,386,850)
Cash and cash
equivalents at
beginning of
the period 213,286,232 1,083,277,296 1,126,941,402 165,090,592
Cash and cash
equivalents
at end of
the period 591,890,189 1,126,941,402 680,597,686 99,703,742
CHINA MASS MEDIA CORP.
SELECTED OPERATING DATA
THREE MONTHS ENDED
September 30, June 30, September 30,
2008 2009 2009
Number of programs secured during
the period 40 41 41
Total advertising time obtained
(seconds) 2,843,520 2,909,160 2,938,860(1)
Total advertising time sold
(seconds) 238,917 389,786 264,660(2)
(1) Represents the total amount of time during regular television programs
secured through our contracts with CCTV, including 554,220 seconds
from CCTV-1, CCTV-2 and CCTV-4 and 2,384,640 seconds from CCTV-E and
CCTV-F.
(2) During the three-month periods ended September 30, 2008, June 30, 2009
and September 30, 2009, the company has sold nil, 167,760 seconds and
27,840 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
September 30, 2008 September 30, 2009
GAAP Non-GAAP GAAP Non-GAAP
Result Adjustment Result Result Adjustment Result
RMB RMB RMB RMB RMB RMB
Operating
income 18,617,606 855,239 19,472,845 3,656,655 443,108 4,099,763
Net income 17,413,892 855,239 18,269,131 4,039,710 443,108 4,482,818
(*) 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 operating income and 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 unaudited 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.
