BEIJING, Nov. 13 /Xinhua-PRNewswire-FirstCall/ -- Xinhua Finance Media Limited ("XFMedia" or "the Company"; Nasdaq: XFML), China's leading diversified financial and entertainment media company, today announced its unaudited financial results for the quarter ended September 30, 2007.
Third Quarter 2007 Highlights
-- Net revenue for the third quarter of 2007 was $40.7 million, up 118%
year-over-year from $18.7 million in the third quarter of 2006 or up
41% sequentially from $29.0 million in the second quarter of 2007.
The increase in revenue was driven by strong organic business growth
and contribution from new acquisitions.
-- EBITDA (non-GAAP), defined as earnings before interest expense,
taxes, depreciation, amortization and share-based compensation
expenses, for the third quarter of 2007 was $14.7 million, up 199%
year-over-year from $4.9 million in the third quarter of 2006 or up
62% sequentially from $9.1 million in the second quarter of 2007.
-- Net income for the third quarter of 2007 was $9.0 million, up 964%
year-over-year from $0.8 million in the third quarter of 2006 or up
301% sequentially from $2.3 million in the second quarter of 2007.
-- Adjusted net income (non-GAAP), defined as net income before
amortization of intangible assets, imputed interest and share-based
compensation expenses, for the third quarter of 2007 was $14.9
million, up 424% year-over-year from $2.8 million in the third
quarter of 2006 or up 87% sequentially from $7.9 million in the
second quarter of 2007.
-- Net income and adjusted net income per ADS and per share are shown in
the following table:
Net income per ADS - basic * 0.14
Net income per ADS - diluted * 0.13
Adjusted net income per ADS - basic * 0.23
Adjusted net income per ADS - diluted * 0.21
Net income per share - basic * 0.07
Net income per share - diluted * 0.06
Adjusted net income per share - basic * 0.12
Adjusted net income per share - diluted * 0.10
* Weighted average number of ADS - basic: 63.5 million; weighted
average number of ADS - diluted: 71.4 million; weighted average
number of share - basic: 126.9 million; weighted average number
of share - diluted: 142.8 million.
"We are pleased to report strong financial results for the third quarter of 2007 that came from strong business growth in advertising revenue," said Ms Fredy Bush, XFMedia's Chief Executive Officer, "demonstrating our ability to capitalize on the growing advertising market in China. We look forward to progress across our business groups as we continue to leverage the prospects generated by China's dynamic development."
Third Quarter 2007 Financial Results
Net revenue for the third quarter of 2007 was $40.7 million, up 118% year-over-year from $18.7 million in the third quarter of 2006 or up 41% sequentially from $29.0 million in the second quarter of 2007.
Net Revenues by type and segment
The following is a summary of net revenue relating to each segment reconciled to amounts on the accompanying consolidated financial statements for the third quarter of 2007:
Advertising Broadcast Print
Net revenues:
Media production $ -- $ -- $ --
Advertising sales 3,801,931 4,993,633 3,551,108
Advertising services 18,763,878 3,693,157 2,110,687
Publishing services -- -- 291,072
Total net revenues $22,565,809 $8,686,790 $5,952,867
Production Research Total
Net revenues:
Media production $ 2,073,675 $ -- $ 2,073,675
Advertising sales -- -- 12,346,672
Advertising services -- 1,445,257 26,012,979
Publishing services -- -- 291,072
Total net revenues $ 2,073,675 $ 1,445,257 $40,724,398
Advertising Group
Net revenue for the Advertising Group for the third quarter of 2007 was $22.6 million, up 99% year-over-year from $11.4 million in the third quarter of 2006 or up 48% sequentially from $15.3 million in the second quarter of 2007.
Television Advertising
Net revenue for Television for the third quarter of 2007 was $3.8 million, up 84% year-over-year from $2.0 million in the third quarter of 2006 or down 21% sequentially from $4.8 million in the second quarter of 2007. The sequential decrease was due to seasonality of the business. In addition, a higher portion of television programming during the quarter focused on the coverage of the 17th Party Congress and resulted in a mix of television advertisement that generated on average a lower level of revenue.
Print/Online Advertising
Net revenue for Print for the third quarter of 2007 was $9.5 million, up 92% year-over-year from $4.9 million in the third quarter of 2006 or up 59% sequentially from $6.0 million in the second quarter of 2007.
Outdoor/Other Advertising Services
Net revenue for Outdoor/Other for the third quarter of 2007 was $5.7 million, up 29% year-over-year from $4.4 million in the third quarter of 2006 or up 52% sequentially from $3.7 million in the second quarter of 2007.
We completed the acquisition of Convey Advertising Company Limited ("Convey") on July 2, 2007. Convey contributed $3.8 million in post-acquisition net revenue for the third quarter of 2007. The acquisition of Convey expands XFMedia's outdoor advertising network significantly by adding to it billboards along key transit routes linking mainland China with Hong Kong and Macau.
Excluding the contribution from Convey, net revenue was down by 50% sequentially due primarily to a lower level of event marketing activities conducted during the period leading up to the 17th Party Congress.
Below-The-Line Marketing
Net revenue for Below-The-Line Marketing for the third quarter of 2007 was $3.6 million, up 363% sequentially from $0.8 million in the second quarter of 2007. There was no comparable revenue for the Below-The-Line Marketing business in the third quarter of 2006 as this business was acquired in June of 2007. The sequential increase was primarily due to full quarter consolidation of Shanghai Singshine Marketing Service Ltd.
Broadcast Group
Net revenue for the Broadcast Group for the third quarter of 2007 was $8.7 million, up 4655% year-over-year increase from $0.2 million in the third quarter of 2006 or up 107% sequentially from $4.2 million in the second quarter of 2007. The year-over-year increase was primarily due to revenue contribution from the television business which was acquired in September of 2006.
Television
Net revenue for the television business for the third quarter of 2007 was $3.5 million, up 1806% year-over-year from $0.2 million in the third quarter of 2006 or up 48% sequentially from $2.3 million in the second quarter of 2007.
Radio
Net revenue for the radio business for the third quarter of 2007 was $1.9 million, up 61% sequentially from $1.2 million in the second quarter of 2007. There was no comparable revenue for the radio business in the third quarter of 2006 as the radio business was acquired in September 2006 and only started to generate revenue in the fourth quarter of 2006.
Mobile Services
Net revenue for the mobile services business for the third quarter of 2007 was $3.3 million, up 388% sequentially from $0.7 million in the second quarter of 2007. There was no comparable revenue for the mobile services business in the third quarter of 2006 as this business was acquired in the second quarter of 2007. The sequential increase was partially due to full quarter consolidation of Beijing Mobile Interactive Co., Ltd, which was acquired in June, 2007.
Print Group
Net revenue for the Print Group for the third quarter of 2007 was $6.0 million, up 57% year-over-year from $3.8 million in the third quarter of 2006 or up 19% sequentially from $5.0 million in the second quarter of 2007. The Print Group consists of the advertising business in newspapers and magazines.
Newspaper
Net revenue for the newspaper business for the third quarter of 2007 was $2.5 million, up 45% year-over-year from $1.7 million in the third quarter of 2006 or up 17% sequentially from $2.2 million in the second quarter of 2007.
Magazine
Net revenue for the magazine business for the third quarter of 2007 was $3.4 million, up 68% year-over-year from $2.0 million in the third quarter of 2006 or up 21% sequentially from $2.8 million in the second quarter of 2007.
Production Group
Net revenue for the Production Group for the third quarter of 2007 was $2.1 million, down 22% year-over-year from $2.7 million in the third quarter of 2006 or down 32% sequentially from $3.1 million in the second quarter of 2007. The decrease was primarily due to seasonality of distribution of TV drama series.
Research Group
Net revenue for the Research Group for the third quarter of 2007 was $1.4 million, up 100% year-over-year from $0.7 million in the third quarter of 2006 or down 1% sequentially from $1.5 million in the second quarter of 2007.
Cost of Revenues
Cost of revenues for the third quarter of 2007 was $23.3 million, up 113% year-over-year from $11.0 million in the third quarter of 2006 or up 36% sequentially from $17.2 million in the second quarter of 2007. The increase in cost of revenues was in line with the increase in net revenues, which increased by 118% year-to-year or 41% sequentially. Adjusted cost of revenue (non-GAAP), defined as cost of revenues before amortization of intangible assets, for the third quarter of 2007 was $20.4 million, up 95 % year-over-year from $10.5 million in the third quarter of 2006 or up 42% sequentially from $14.4 million in the second quarter of 2007.
The cost of revenues for the five business segments are as follows:
Advertising Broadcast Print
Cost of revenues:
Media production $ -- $ 202,884 $ --
Advertising sales 1,636,063 2,664,941 747,933
Advertising services 12,739,178 2,993,949 80,054
Publishing services -- -- 283,714
Total cost of revenues $14,375,241 $ 5,861,774 $1,111,701
Amortization of intangible assets (237,557) (2,381,048) (307,220)
Adjusted cost of revenues $14,137,684 $ 3,480,726 $ 804,481
Production Research Total
Cost of revenues:
Media production $ 1,302,047 $ -- $ 1,504,931
Advertising sales -- -- 5,048,937
Advertising services -- 696,800 16,509,981
Publishing services -- -- 283,714
Total cost of revenues $ 1,302,047 $ 696,800 $23,347,563
Amortization of intangible assets -- -- (2,925,825)
Adjusted cost of revenues $ 1,302,047 $ 696,800 $20,421,738
Operating Expenses
Operating expenses for the third quarter of 2007 were $11.1 million, up 91% year-over-year from $5.8 million in the third quarter of 2006 or up 24% sequentially from $9.0 million in the second quarter of 2007.
Total operating expenses were composed of selling and marketing expenses and general and administrative expenses. Selling and marketing expenses for the third quarter of 2007 were $4.3 million, up 167% year-over-year from $1.6 million in the third quarter of 2006 or up 37% sequentially from $3.2 million in the second quarter of 2007.
General and administrative expenses for the third quarter of 2007 were $6.8 million, up 61% year-over-year from $4.2 million in the third quarter of 2006 or up 17% sequentially from $5.8 million in the second quarter of 2007. Included in the general and administrative expenses were share-based compensation expenses of US$0.5 million, resulting from grants made in 2006.
EBITDA (non-GAAP)
EBITDA (non-GAAP), defined as earnings before interest expense, taxes, depreciation, amortization and share-based compensation expenses, for the third quarter of 2007 was $14.7 million, up 199% year-over-year from $4.9 million in the third quarter of 2006 or up 62% sequentially from $9.1 million in the second quarter of 2007.
The following is a summary of EBITDA (non-GAAP) relating to each segment for the third quarter of 2007:
Advertising Broadcast Print
Segment EBITDA (non-GAAP) $ 6,512,142 $ 3,850,243 $ 4,090,007
Less: net head office expenses
EBITDA (non-GAAP)
Production Research Total
Segment EBITDA (non-GAAP) $ 481,723 $ 375,829 $ 15,309,944
Less: net head office expenses (613,022)
EBITDA (non-GAAP) $14,696,922
* Net head office expenses represent corporate expenses of $3.6 million
less interest income of $2.4 million and other income of $0.6 million.
Net Income and Adjusted Net Income (non-GAAP)
Net income for the third quarter of 2007 was $9.0 million, up 964% year-over-year from $0.8 million in the third quarter of 2006 or up 301% sequentially from $2.3 million in the second quarter of 2007.
Adjusted net income (non-GAAP), defined as net income before amortization of intangible assets, imputed interest and share-based compensation expenses, for the third quarter of 2007 was $14.9 million, up 424% year-over-year from $2.8 million in the third quarter of 2006 or up 87% sequentially from $7.9 million in the second quarter of 2007.
Outlook for 2007
XFMedia maintains its full year revenue guidance of US$128 to 133 million. Fourth quarter revenue is expected to be US$42 to 47 million. This forecast reflects XFMedia's current and preliminary view, which is subject to change.
Conference Call Information
Following the earnings announcement, Xinhua Finance Media's senior management will host a conference call on November 13, 2007 at 5:00 PM (New York) / November 14, 2007 at 6:00 AM (Beijing) to review the results and discuss recent business activity.
Interested parties may dial into the conference call at:
(US) +1-480-293-1744
(UK) +44-20-7190 1232
(Asia Pacific) +852-3009-5027
A telephone replay will be available shortly after the call for one week at:
(US) +1-303-590-3030 (Passcode: 3800017#)
(UK) +44-207-154-2833 (Passcode: 3800017#)
(Asia Pacific) +852-2287-4304 (Passcode: 124110#)
A real-time webcast and replay will be also available at: http://www.xinhuafinancemedia.com/earnings
About Xinhua Finance Media Limited
Xinhua Finance Media ("XFMedia"; NASDAQ: XFML) is China's leading diversified financial and entertainment media company targeting high net worth individuals nationwide. The company reaches its target audience via TV, radio, newspapers, magazines and other distribution channels. Through its five synergistic business groups, Advertising, Broadcast, Print, Production and Research, XFMedia offers a total solution empowering clients at every stage of the media process and keeping people connected and entertained.
Headquartered in Beijing, the company has offices and affiliates in major cities of China including Beijing, Shanghai, Guangzhou, Shenzhen and Hong Kong. For more information, please visit http://www.xinhuafinancemedia.com.
Safe Harbor
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 outlook for fourth quarter and full year 2007 and quotations from management in this announcement, as well as XFMedia's strategic and operational plans, contain forward-looking statements. XFMedia may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, 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 XFMedia's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our growth strategies; our future business development, results of operations and financial condition; our ability to attract and retain customers; competition in the Chinese advertising and media market; changes in our revenues and certain cost or expense items as a percentage of our revenues; the outcome of ongoing, or any future, litigation or arbitration, including those relating to copyright and other intellectual property rights; the expected growth of the Chinese advertising and media market; and Chinese governmental policies relating to advertising and media. Further information regarding these and other risks is included in our registration statement on Form F-1, as amended, filed with the Securities and Exchange Commission. XFMedia does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Non-GAAP Financial Measures
To supplement XFMedia's consolidated financial results presented in accordance with U.S. GAAP, XFMedia uses the following non-GAAP financial measures: adjusted cost of revenue, EBITDA and adjusted net income. The presentation of these 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 U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP results" set forth at the end of this release.
XFMedia believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity. XFMedia believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. To provide investors with a better understanding of our underlying operational and financial performance, starting from this quarter, XFMedia has adopted the measure "adjusted cost of revenue", defined as cost of revenue excluding amortization of intangible assets, and has changed the methodology of presenting "adjusted net income", by defining adjusted net income as net income excluding amortization of intangible assets, imputed interest and share-based compensation. XFMedia believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP measures which exclude share-based compensation expenses is that share-based compensation expenses have been and will continue to be a significant recurring expense in our business. A limitation of using non-GAAP adjusted cost of revenue, EBITDA and adjusted net income is that they do not include all items that impact our net income for the period. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
Reconciliations of GAAP and non-GAAP results (in USD thousands, unaudited)
Three months ended Three months ended
September 30, 2007 September 30, 2006
GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP
Results Results Results Results
Cost of revenue (*) 23,348 (2,926) 20,422 10,976 (482) 10,494
Operating Profit (**) 6,248 8,449 14,697 1,909 3,004 4,913
Net Income (***) 9,038 5,814 14,852 849 1,985 2,834
Three months ended June 30, 2007
GAAP Adjustment Non-GAAP
Results Results
Cost of revenue (*) 17,209 (2,855) 14,354
Operating Profit (**) 2,757 6,316 9,073
Net Income (***) 2,254 5,680 7,934
(*) The adjustments are for amortization for intangible assets.
(**) The adjustments are for share-based compensation expenses, interest
income, depreciation, and amortization for intangible assets.
(***) The adjustments are for amortization of intangible assets, imputed
interest, and share-based compensation expenses.
Xinhua Finance Media Limited
Condensed Consolidated Balance Sheets
(In U.S. dollars) September 30, December 31,
2007 2006
Unaudited (Note 1)
Assets
Current assets: $75,350,743 $36,353,547
Cash
Restricted cash (Note 2) 37,202,191 12,579,822
Short-term investment 40,700,000 --
Accounts receivable (Note 3) 40,657,189 17,403,632
Prepaid program expenses 8,455,823 8,597,935
Other current assets 27,579,563 22,114,480
Total current assets 229,945,509 97,049,416
Content production deposit and cost,
net 6,836,842 5,854,271
Property and equipment, net 8,674,224 4,367,329
Intangible assets, net (Note 4) 215,891,059 176,201,528
Goodwill 136,597,341 83,670,010
Investment 500,000 500,000
Deposits for acquisition of
subsidiaries 25,634,000 29,246,500
Deposits for acquisition of
intangible asset -- 2,561,246
Other long-term asset 8,563,980 --
Total assets $632,642,955 $399,450,300
Liabilities and shareholders’ equity
Current liabilities:
Bank borrowings $33,704,539 $11,218,256
Bank overdrafts 1,525,086 --
Other current liabilities 42,124,072 163,848,633
Total current liabilities 77,353,697 175,066,889
Deferred tax liabilities 33,344,407 41,168,035
Convertible loan -- 14,017,289
Long term payables, non-current
portion 72,189,021 64,937,958
Total liabilities 182,887,125 295,190,171
Minority Interests 4,121,929 3,010,407
Shareholders’ equity:
Class A common shares and nonvested
shares (par value $0.001; 69,035,751
as of December 31, 2006 and 143,822,874
as of September 30, 2007 shares
authorized; 32,011,154 as of December 31,
2006 and 88,017,922 as of September 30,
2007 shares issued and outstanding) 88,020 32,011
Class B common shares (par value
$0.001; 50,054,619 as of December
31, 2006 and September 30, 2007
shares authorized; 50,054,618 as of
December 31, 2006 and September 30,
2007 shares issued and outstanding) 7,442 7,442
Convertible preferred shares (par
value $0.001;15,600,000 as of
December 31, 2006 shares authorized;
15,585,254 as of December 31, 2006
shares issued and outstanding and
nil as of September 30, 2007 shares
issued and outstanding) -- 15,585
Additional paid-in capital 423,842,031 103,155,391
Retained earnings (deficits) 19,746,440 (2,797,112)
Accumulated other comprehensive
income 1,949,968 836,405
Total shareholders’ equity 445,633,901 101,249,722
Total $632,642,955 $399,450,300
Xinhua Finance Media Limited
Condensed Consolidated Statements of Operations
(in U.S. Dollars) Three months Three months Three months Nine months
ended ended ended ended
September September June 30, September
30, 2007 30, 2006 2007 30, 2007
Unaudited Unaudited Unaudited Unaudited
Net revenues:
Advertising services 26,012,979 12,974,827 19,165,786 54,253,721
Content production 2,073,675 2,668,838 3,050,899 5,904,289
Advertising sales 12,346,672 2,592,625 6,477,426 25,447,053
Publishing services 291,072 482,516 265,422 758,924
Total net revenues 40,724,398 18,718,806 28,959,533 86,363,987
Cost of revenues:
Advertising services 16,509,981 8,879,575 12,073,200 35,910,052
Content production 1,504,931 1,025,106 1,341,785 3,113,566
Advertising sales 5,048,937 32,968 3,613,015 12,567,865
Publishing services 283,714 1,037,963 180,902 615,540
Total cost of revenues 23,347,563 10,975,612 17,208,902 52,207,023
Operating expenses:
Selling and
distribution 4,337,558 1,621,663 3,165,211 9,082,225
General and
administrative 6,791,370 4,212,367 5,828,831 17,608,426
Total operating expenses 11,128,928 5,834,030 8,994,042 26,690,651
Other operating income
(Note 5) -- -- -- 2,261,788
Income from operations 6,247,907 1,909,164 2,756,589 9,728,101
Other income (expense):
Interest expense
(Note 7) (375,093) (915,523) (2,086,990) (3,673,022)
Interest income 2,431,529 617,994 1,858,221 4,746,584
Other, net 730,850 201,012 158,401 926,989
Income before provision
for income taxes 9,035,193 1,812,647 2,686,221 11,728,652
and minority interest
Provision for income
taxes (Note 8) (232,016) 128,307 202,457 (12,944,939)
Net income before
minority interest 9,267,209 1,684,340 2,483,764 24,673,591
Minority interest 229,467 782,908 229,355 791,706
Equity in loss of an
investment -- 52,211 -- --
Net income 9,037,742 849,221 2,254,409 23,881,885
Dividend on redeemable
convertible
preferred shares -- 2,169,227 -- 1,338,333
Net income (loss)
attributable to holders
of common shares 9,037,742 (1,320,006) 2,254,409 22,543,552
Net income per share:
Basic - Common shares 0.071 (0.029) 0.018 0.227
Basic - American
Depositary Shares 0.142 (0.058) 0.036 0.454
Diluted - Common
shares 0.063 (0.029) 0.016 0.193
Diluted - American
Depositary Shares 0.126 (0.058) 0.032 0.386
Xinhua Finance Media Limited
Condensed Consolidated Statements of Cash Flows
Three months Three months Three months
ended ended ended
September September June 30,
(in U.S. Dollars) 30, 2007 30, 2006 2007
(Unaudited) (Unaudited) Unaudited)
Net cash provided by operating
activities 1,550,989 6,489,492 41,081
Net cash used in investing
activities (9,536,253) (59,548,936) (97,768,365)
Net cash provided by financing
activities 1,660,617 2,449,972 2,660,996
Effect of exchange rate changes 263,683 144,605 546,121
Net decrease in cash (6,060,964) (50,464,867) (94,520,167)
Cash, as at beginning of the
period 81,411,707 62,195,089 175,931,874
Cash, as at end of the period 75,350,743 11,730,222 81,411,707
Notes to Financial Information
1) 2006 condensed consolidated balance sheets
Information was extracted from the audited financial statements
included in the prospectus on Form-1 of the Company filed with the
Securities and Exchange Commission on March 8, 2007.
2) Restricted cash
Restricted cash is US dollar cash deposits pledged for the RMB loan
facilities granted by banks for RMB working capital purposes.
3) Accounts receivables and debtors turnover
Debtors turnover for the second quarter and third quarter of 2007 was
97 days and 92 days respectively. Our business groups generally
granted 90 days to 180 days average credit period to major customers,
which is in line with the industry practices in the PRC.
4) Intangible assets
Net book value for intangible assets as of September 30, 2007 was
$215.9 million. It mainly represents the fair value of the long term
advertising agreements for the Broadcast and Print Group. The net book
value of the intangible assets were primarily composed of $99.8
million advertising license agreement for our TV business, $59.8
million exclusive advertising agreement for our newspaper business,
and $7.7 million exclusive advertising agreements we entered for radio
advertising operations in Shanghai, Beijing and Guangdong. There is
derecognition of the intangible assets of $40.7 million for one of our
radio exclusive advertising agreements upon clarification of the terms
of one of our exclusive radio advertising agreements. We are in the
process of obtaining third-party valuations of certain identifiable
intangible assets for the acquisitions we completed in the second and
third quarters and hence the net book value for intangible assets is
preliminary and subject to revision once we complete the valuation
exercise.
5) Other operating income
Other operating income of $2.3 million represents reimbursement of IPO
related expenses by Bank of New York in the first quarter of 2007.
Those expenses, all of which had been recorded in the 2006 income
statement as operating expenses because they were not considered to be
directly related to the sale of securities, related primarily to audit
fees and fees paid to consultants during the listing process.
6) Amortization included in cost of sales, selling expenses, or
administrative expenses
Amortization for the second quarter and third quarter of 2007 were
$3.4 million and $4.2million respectively. It mainly represents the
amortization of the intangible assets as mentioned in note 4. The
amortization for the TV license agreement was $1.3 million for both
second and third quarter of 2007. The amortization for the newspaper
exclusive advertising agreement was $0.4 million and $0.3 million for
the second and third quarter of 2007. The amortization for the radio
exclusive advertising agreements was $0.7 million and $0.3 million for
the second and third quarter of 2007. The decrease in amortization is
due to the derecognition of the intangible assets of $40.7 million as
mentioned in note 4.
7) Interest expense
Included in interest expense is imputed interest of $1.7 million and
$1.1 million for the second quarter and third quarter of 2007
respectively. It mainly represents the monthly imputed interest
expense charged on the payment obligations for the above long term
contracts. There is also a one-time adjustment of $1.3 million,
representing reversal of the imputed interest taken in first half year
of 2007 (the imputed interest for the first quarter and second quarter
of 2007 were $0.6 million and $0.6 million respectively) as a result
of clarification of terms of one of our exclusive radio advertising
agreements as mentioned also in note 4. For the TV license agreement,
the imputed interest each quarter in 2007 was $0.7 million. For the
Newspaper exclusive advertising agreement, the imputed interest for
the second quarter and third quarter of 2007 were $0.4 million and
$0.3 million respectively. For radio exclusive advertising agreements,
the imputed interest for the second quarter and third quarter of 2007
were $0.6 million and $0.1 million respectively. The sequential
decrease was driven by the fact that there is no imputed interest
taken in the third quarter of 2007 as a result of clarification of
terms of one of our exclusive radio advertising agreements as
mentioned in note 4.
8) Provision for income taxes
Provision for income taxes included deferred tax credits of $0.7
million in both second quarter and third quarter of 2007.
