China Mass Media Reports Second Quarter 2009 Unaudited Financial Results

PRWeb

August 31, 2009 8:00am Comments

B EIJING, Aug. 31 /PRNewswire-FirstCall/ -- China Mass Media Corp. ("China Mass Media" or the "Company") (NYSE: CMM), a leading television advertising company in China, today reported its unaudited financial results for the second quarter ended June 30, 2009.

Second Quarter of 2009 Highlights(1)

Total net revenues were RMB 77.4 (US$ 11.3 million), an increase of 13.7% from the second quarter of 2008 and a sequential decrease of 48.3% from the first quarter of 2009.
Operating loss was RMB 3.1 million (US$ 0.5 million), compared to operating income of RMB 7.8 million in the second quarter of 2008 and operating income of RMB 65.0 million in the first quarter of 2009.
Net income was RMB 0.4 million (US$ 0.1 million), a decrease of 96.5% from the second quarter of 2008 and a sequential decrease of 99.4% from the first quarter of 2009.
Net cash used in operating activities was RMB 13.5 million (US$ 2.0 million), compared to net cash provided by operating activities of RMB 22.3 million in the second quarter of 2008 and net cash provided by operating activities of RMB 232.5 million in the first quarter of 2009.

Mr. Shengcheng Wang, Chairman and Chief Executive Officer of China Mass Media, commented, "While the broader economy in China, especially the stock and property markets, appeared to rebound fairly well in the second quarter, we remain in the shadow of the global economic recession and our customers did not increase their advertising budgets during the period. Generally speaking, advertising budgets in the current year were set at the end of last year when the global economic crisis started to have its impact on the Chinese economy. Given the fact that the second quarter is usually the low season for the advertising industry and there were no special events, advertisers chose not to increase their spending and our sales were affected as a result. However, we decided to take advantage of this quiet period to initiate a number of changes to reposition ourselves for future growth. During the quarter, we recruited a number of senior sales staff to further strengthen our sale force, restructured our sales team with an aim to better serve our customers, and implemented a new incentive plan to better align our sales people with our company's growth objectives. We believe such changes will have a positive effect on our sales in the coming months.

Looking forward, one of the biggest national events of the year will occur in the third quarter of 2009 with the celebration of the 60th anniversary of the founding of the People's Republic of China. C CTV has prepared a series of themed programs for the celebrations, and we have seen substantial interest in the related advertising time slots. As a result, we believe our sales are likely to begin to rebound in the second half of the year due to this event. Additionally, C CTV has recently started to refocus the news content of its network. We believe C CTV-4, the Chinese international channel of C CTV, will benefit from such changes and allow us to improve the sales results of our C CTV-4 time slots."

Mr. Eric Cheung, Chief Financial Officer of China Mass Media, added, "With our strengthened sales force and expanded marketing efforts, we believe the sales and the utilization of the majority of our media resources along with production and sponsorship services are likely to start to rebound in the third quarter. We are currently reviewing certain market opportunities to further expand our media resources and therefore have decided to defer the declaration of a dividend to a later stage."

Second Quarter of 2009 Financial Results

Revenues

Revenues from advertising agency services were RMB 61.8 million (US$ 9.1 million) in the second quarter of 2009, a decrease of 6.7% from RMB 66.3 million in the second quarter of 2008, and a decrease of 55.4% from RMB 138.6 million in the first quarter of 2009. In addition to a typical seasonal sequential decline in revenues from the first to the second quarter, the Company faced significant headwind due to the global economic recession as the Company's customers, many of which are privately owned companies in mainland China, attempted to conserve cash and became less willing to place advertisements when facing such uncertainty.

At the beginning of the year, C CTV raised the C CTV-4 airtime charge rate, citing higher viewer numbers. However, the Company's advertising customers were not receptive to the rate increase and the Company's revenues declined as a result. The decline in revenues derived from C CTV-4 programs compared to the same period in 2008 was offset by a significant rebound in sales of daytime advertising packages from the abnormal slump in 2008 that was related to the cancellation of commercial advertisements during the Sichuan earthquake and the slowdown in advertisements before the Beijing Olympics as companies prepared for big advertising campaigns during the Games.

Revenues from special events services were RMB14.6 million (US$ 2.1 million) in the second quarter of 2009. There were no revenues from special events services in the first quarter of 2009 or the second quarter of 2008. Special events services revenues were fees receivable from C CTV for advertising and marketing services provided in connection with the 2008 Beijing Olympic Games. The Company was notified in writing by C CTV in mid-June of 2009 that the computation of its special events services fees in relation to the 2008 Beijing Olympic Games was finalized. Prior to the receipt of this notice, the Company did not possess any reliable information to estimate the amount of special event services fees and, therefore, did not record any revenues for the special events services until the second quarter of 2009.

Revenues from production and sponsorship services were RMB 2.9 million (US$ 0.4 million) in the second quarter of 2009, a decrease of 32.8% from RMB 4.3 million in the second quarter of 2008 and a decrease of 85.1% from RMB 19.3 million in the first quarter of 2009. The sequential decrease of RMB16.4 million was mainly because the Company recognized production revenues from a number of advertising and promotional films for the Beijing Olympic Games in the first quarter of 2009. The decrease of RMB 1.4 million compared to the second quarter last year was mainly due to a pause in public service announcement sponsorships from several customers because of ongoing contract renewal negotiations.

Operating costs and expenses

Cost of revenues was RMB 64.4 million (US$ 9.4 million) in the second quarter of 2009, an increase of 23.1% from RMB 52.3 million in the second quarter of 2008 and a decrease of 12.3% from RMB 73.4 million in the first quarter of 2009. The second-quarter-over-second-quarter increase was primarily due to higher media resource underwriting costs for C CTV-4. The primary reason for the quarterly sequential decrease of RMB 9.0 million was because of the normal high production costs incurred for the Chinese New Year Gala program in the first quarter of 2009.

Sales and marketing expenses were RMB 5.2 million (US$ 0.8 million) in the second quarter of 2009, an increase of 267.5% from RMB 1.4 million in the second quarter of 2008 and an increase of 42.8% from RMB 3.7 million in the first quarter of 2009. The second-quarter-over-second-quarter and sequential increases were primarily due to an increase in salaries and other compensation as a result of the recruitment of additional sales employees.

General and administrative expenses were RMB 10.9 million (US$ 1.6 million) in the second quarter of 2009, an increase of 65.9% from RMB 6.6 million in the second quarter of 2008 and an increase of 41.9% from RMB 7.7 million in the first quarter of 2009. The second quarter 2009 increase over the second quarter 2008 was mainly due to the additional expenses incurred as a publicly listed company in the U.S., including employee share-based compensation expenses and consultancy fees incurred in relation to internal control improvement projects. The Company also incurred additional compensation expenses as it expanded the management team. The sequential increase was primarily due to a provision for doubtful accounts amounting to RMB 3.5 million.

Operating loss, as a result of the foregoing factors, was RMB 3.1 million (US$ 0.5 million) in the second quarter of 2009, compared to operating income of RMB 7.8 million in the second quarter of 2008 and operating income of RMB 65.0 million in the first quarter of 2009. The operating margin was (4.0%) for the second quarter of 2009, 43.4% for the first quarter of 2009, and 11.4% for the second quarter of 2008.

Net income was RMB 0.4 million (US$ 0.1 million) in the second quarter of 2009, a decrease of 96.5% from RMB 10.6 million in the second quarter of 2008 and a decrease of 99.4% from RMB 59.6 million (US$8.7 million) in the first quarter of 2009. Net margin was 0.5% in the second quarter 2009, 39.8% in the first quarter 2009, and 15.5% in the second quarter 2008.

Basic and diluted earnings per ADS for the second quarter of 2009 decreased to RMB 0.02 (US$ 0.002), from RMB 0.63 for the second quarter of 2008 and RMB 2.50 for the first quarter of 2009. Each ADS represents 30 ordinary shares of the Company.

Cash and cash equivalents

As of June 30, 2009, the Company had cash and cash equivalents of RMB 1,126.9 (US$ 165.0) million compared to RMB 1,083.3 million at March 31, 2009. The increase in cash and cash equivalents was mainly due to the redemption of certain matured investment products previously classified as short-term investments and was partially offset by cash used in operating activities.

Appointment to the Board of Directors

In August 2009, the Company appointed Mr. Yong Chen as an independent director of the Company. Mr. Chen is the editor in chief and director of Modern Advertising magazine. He is also the secretary general of the Interactive Internet Advertising Committee of China Advertising Association and a member of the International Advertising Association and the Academic Committee of China Advertising Association. Mr. Chen studied at Beijing Economic Management College and the postgraduate program in Liberal Arts Management at Beijing University. Mr. Chen has more than ten years of experience in the print media industry in China.

Successful Transfer from NYSE Arca to NYSE

On August 20, 2009, the Company received a letter from the New York Stock Exchange ("NYSE") authorizing the listing of the Company's American Depositary Shares ("ADSs") on the NYSE. The Company successfully transferred the listing of its ADSs from NYSE Arca to the NYSE on August 25,2009. The Company trading of the Company's ADSs remains under its current ticker symbol "CMM" on the NYSE.

Business Outlook

The Company currently expects to generate total net revenues of RMB 65 million (US$9.5 million) to RMB 75 million (US$ 11.0 million) for the third quarter of 2009. The range results in potential percentage change from the third quarter 2008 of a decrease of 11.1% to an increase of 2.5%. 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) (8:00 p.m., Beijing time) on Monday, August 31, 2009.

The dial-in details for the live conference call are as follows: U.S. toll free number: +1 800 573 4842 International dial-in number: +1 617 224 4327 China toll free number: +10 800 152 1490 China toll free number: 10-800 852 1490 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: 91019866

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 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 C CTV Channels 1, 2, 4, E and F. C CTV is the largest television network in China. The Company has also been the exclusive advertising agent for the most watched television program in China, the Chinese New Year Gala, since the Company's incorporation. Since 2003, the Company has produced over 300 advertisements and has won a number of prestigious awards in China.

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 exchange rate set forth in the statistical release issued by the Federal Reserve Board on June 30, 2009, which was RMB6.8302 to US$1.00. The percentages stated are calculated based on RMB.

For further information, please contact:

For further information, contact: China Mass Media Corp. Julie Sun, +86-10-8809 1050 Vice President of Corporate Development juliesun@chinammia.com or Christensen Hong Kong: United States: Roger Hu, +852 2117 0861 Linda Bergkamp, +1-480-614-3004 rhu@ChristensenIR.com lbergkamp@christensenIR.com

CHINA MASS MEDIA CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THRE E MONTHS ENDED, June 30, March 31, June 30, June 30, 2008 2009 2009 2009 RMB RMB RMB US$ Revenues: Advertising agency services 66,266,445 138,577,218 61,838,249 9,053,651 Special events services - - 14,600,000 2,137,566 Advertisement production and sponsorship services 4,285,676 19,270,539 2,879,443 421,575 Total revenues 70,552,121 157,847,757 79,317,692 11,612,792 Less: Business tax (2,470,312) (8,086,432) (1,942,304) (284,370) Total net revenues 68,081,809 149,761,325 77,375,388 11,328,422 Operating costs and expenses: Cost of revenues (52,300,715) (73,384,387) (64,383,133) (9,426,244) Sales and marketing expenses (1,425,087) (3,668,251) (5,237,281) (766,783) General and administrative expenses (6,562,015) (7,671,858) (10,887,394) (1,594,008) Total operating costs and expenses (60,287,817) (84,724,496) (80,507,808) (11,787,035) Operating income 7,793,992 65,036,829 (3,132,420) (458,613) Interest and investment income 4,470,533 3,410,939 3,345,142 489,758 Other expense, net (1,638) 34,229 228,942 33,519 Income before tax 12,262,887 68,481,997 441,664 64,664 Income tax expense (1,709,146) (8,867,756) (70,401) (10,307) Net income 10,553,741 59,614,241 371,263 54,357 Net income allocated to participating preferred shares (1,849,015) - - - Net income available to ordinary shareholders 8,704,726 59,614,241 371,263 54,357 Earnings per ordinary share, basic and diluted 0.02 0.08 0.001 0.0001 Earnings per ADS, basic and diluted 0.63 2.50 0.02 0.002 Shares used in calculating earnings per ordinary share, basic and diluted 412,400,000 716,375,000 716,375,000 716,375,000 Shares used in calculating earnings per ADS, basic and diluted 13,746,667 23,879,167 23,879,167 23,879,167 CHINA MASS MEDIA CORP. UNAUDITED CONDENSED CONSOLIDATED B ALANC E SHE ETS December 31, June 30, June 30, 2008 2009 2009 RMB RMB US$ Assets Current assets: Cash and cash equivalents 566,889,261 1,126,941,402 164,993,910 Short-term investments 500,000,000 30,000,000 4,392,258 Accounts receivable, net of allowance for doubtful accounts of RMB 4,319,808 and RMB 7,867,898 as of December 31, 2008 and June 30, 2009 14,367,193 4,483,739 656,458 Prepaid expenses and other current assets 68,301,523 81,097,070 11,873,308 Deposit paid to a related party 1,000,000 1,391,664 203,752 Total current assets 1,150,557,977 1,243,913,875 182,119,686 Non-current assets: Property and equipment, net 57,261,208 55,966,554 8,193,985 Total non-current assets 57,261,208 55,966,554 8,193,985 Total Assets 1,207,819,185 1,299,880,429 190,313,671 Liabilities and Shareholder's Equity Current liabilities: Accounts payable 330,085,426 475,537,469 69,622,774 Customer advances 75,422,483 29,957,331 4,386,011 Dividend payable 96,335,115 - - Accrued expenses and other current liabilities 13,765,090 19,412,293 2,842,127 Taxes payable 51,958,677 65,710,333 9,620,558 Amount due to related parties 252,209,794 259,205,893 37,949,971 Total current liabilities 819,776,585 849,823,319 124,421,441 Total Liabilities 819,776,585 849,823,319 124,421,441 Commitments and Contingencies Shareholders' equity: Ordinary shares ($0.001 par value; 900,000,000,000 shares authorized; 716,375,000 issued and outstanding as of December 31, 2008 and June 30, 2009) 4,893,500 4,893,500 716,450 Additional paid-in capital 330,214,330 332,243,336 48,643,281 Statutory reserves 25,000,000 25,000,000 3,660,215 Retained earnings 27,934,770 87,920,274 12,872,284 Total Shareholders' Equity 388,042,600 450,057,110 65,892,230 Total Liabilities and Shareholder's Equity 1,207,819,185 1,299,880,429 190,313,671 CHINA MASS MEDIA CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF C ASH FLOWS THRE E MONTHS ENDED June 30, March 31, June 30, June 30, 2008 2009 2009 2009 RMB RMB RMB US$ Cash flows from operating activities: Net income 10,553,741 59,614,241 371,263 54,356 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 233,515 754,671 757,596 110,919 Investment income (4,042,911) (1,926,395) (2,408,306) (352,597) Exchange (gain)/ loss - (37,491) 161,392 23,629 Share-based compensation - 943,280 1,085,726 158,960 Changes in assets and liabilities: Notes receivable 202,800 (250,000) 250,000 36,602 Accounts receivable 12,965,126 (12,490,400) 22,373,853 3,275,725 Prepaid expense and other current assets (6,068,951) 4,009,075 (1,021,315) (149,529) Amount due from a related party - - (391,664) (57,343) Accounts payable (34,437,690) 139,758,683 5,693,360 833,557 Customer advances (293,964) (41,518,831) (3,946,321) (577,775) Accrued expenses and other current liabilities (1,007,705) 1,839,760 3,807,441 557,442 Taxes payable (7,612,248) 11,051,580 (13,701,311) (2,005,990) Amount due to related parties 51,857,957 70,720,013 (26,535,415) (3,885,013) Net cash provided by/ (used in) operating activities 22,349,670 232,468,186 (13,503,698) (1,977,057) Cash flows from investing activities: Redemption of short-term investments - 400,000,000 70,000,000 10,248,602 Proceed from sale of long-term investment held on behalf of shareholder 55,000,000 - - - Purchase of property and equipment (157,423) (22,232,998) (158,508) (23,207) Proceeds from investment income 1,829,877 2,465,079 2,487,704 364,221 Net cash provided by investing activities 56,672,454 380,232,081 72,329,196 10,589,616 Cash flows from financing activities: Proceeds from issuance of ordinary shares 2,847 - - - Proceeds from issuance of preferred shares 605 - - - Distribution made to shareholder in connection with the reorganization - - (15,000,000) (2,196,129) Dividends distributed (29,194,814) (96,335,115) - - Net cash used in financing activities (29,191,362) (96,335,115) (15,000,000) (2,196,129) Effect of foreign currency exchange - 22,883 (161,392) (23,629) Net increase in cash and cash equivalents 49,830,762 516,388,035 43,664,106 6,392,801 Cash and cash equivalents at beginning of the period 163,455,470 566,889,261 1,083,277,296 158,601,109 Cash and cash equivalents at end of the period 213,286,232 1,083,277,296 1,126,941,402 164,993,910 CHINA MASS MEDIA CORP. SELE CTED OPER<

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China Mass Media Reports Second Quarter 2009 Unaudited Financial Results