China Mass Media Reports Third Quarter 2009 Unaudited Financial Results

China Mass Media Reports Third Quarter 2009 Unaudited Financial Results

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.

Source: China Mass Media Corp.

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

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

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Profile: International Entertainment