China Mass Media Reports Second Quarter 2009 Unaudited Financial Results

China Mass Media Reports Second Quarter 2009 Unaudited Financial Results

BEIJING, 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. CCTV 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, CCTV has recently started to refocus the news content of its network. We believe CCTV-4, the Chinese international channel of CCTV, will benefit from such changes and allow us to improve the sales results of our CCTV-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, CCTV raised the CCTV-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 CCTV-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 CCTV for advertising and marketing services provided in connection with the 2008 Beijing Olympic Games. The Company was notified in writing by CCTV 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 CCTV-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 CCTV Channels 1, 2, 4, E and F. CCTV 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$1.00.  The       percentages stated are calculated based on RMB.     For further information, please contact:     For further information, contact:    China Mass Media Corp.   Julie Sun, +86-10-8809 1050   Vice President of Corporate Development   juliesun@chinammia.com    or    Christensen   Hong Kong:                      United States:   Roger Hu, +852 2117 0861        Linda Bergkamp, +1-480-614-3004   rhu@ChristensenIR.com           lbergkamp@christensenIR.com      CHINA MASS MEDIA CORP.   UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                       THREE MONTHS ENDED,                         June 30,      March 31,    June 30,     June 30,                           2008          2009         2009         2009                           RMB           RMB          RMB           US$    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 BALANCE SHEETS                                    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 ($0.001      par value; 900,000,000,000      shares authorized;      716,375,000 issued and      outstanding as of      December 31, 2008 and      June 30, 2009)                 4,893,500      4,893,500      716,450     Additional paid-in capital    330,214,330    332,243,336   48,643,281     Statutory reserves             25,000,000     25,000,000    3,660,215     Retained earnings              27,934,770     87,920,274   12,872,284   Total Shareholders' Equity      388,042,600    450,057,110   65,892,230    Total Liabilities and    Shareholder's Equity         1,207,819,185  1,299,880,429  190,313,671      CHINA MASS MEDIA CORP.   UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                          THREE MONTHS ENDED                        June 30,      March 31,       June 30,    June 30,                         2008           2009            2009        2009                         RMB            RMB             RMB          US$     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.   SELECTED OPERATING DATA                                               THREE MONTHS ENDED                                           June 30,    March 31,   June 30,                                             2008        2009        2009    Number of programs secured during    the period                                 9          41            41   Total advertising time obtained    (seconds)                            504,660   2,896,140     2,909,160(1)   Total advertising time sold    (seconds)                            242,055     694,985       389,786(2)    (1) Represents the total amount of time during regular television programs       secured through our contracts with CCTV, including 550,440 seconds       from CCTV-1, CCTV-2 and CCTV-4 and 2,358,720 seconds from CCTV-E and       CCTV-F. During the three-month period ended June 30, 2008, the company       was engaged in sales of advertising air time on CCTV-1, CCTV-2 and       CCTV-4.    (2) During the three-month periods ended June 30,2008, March 31, 2009 and       June 30, 2009, the company has sold nil, 451,080 seconds and 167,760       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                       June 30, 2008                    June 30, 2009                                    Non-GAAP                         Non-GAAP           GAAP Result  Adjustment  Result  GAAP Result  Adjustment  Result              RMB          RMB       RMB       RMB          RMB        RMB    Operating    income/    (loss)   7,793,992      -    7,793,992 (3,132,420)  1,085,726 (2,046,694)    Net    income  10,553,741     -    10,553,741    371,263   1,085,726  1,456,989    (*) 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/ (loss) 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.

First Call Analyst:
FCMN Contact:

Source: China Mass Media Corp.

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

Web Site: http://www.chinammia.com/

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Profile: International Entertainment