CMM China Mass Media Corp American Depositary Shares (Each Representing 300 Ordinary Shares)

BEIJING, March 14, 2011 /PRNewswire-Asia-FirstCall/ -- China Mass Media Corp. ("China Mass Media" or the "Company") (NYSE: CMM), a leading television advertising company in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2010.

Fourth Quarter 2010 Highlights:

• Total net revenues were RMB75.8 million (US$11.5 million), a decrease of 35.3% from the fourth quarter of 2009 and an increase of 38.4% from the third quarter of 2010.
• Operating income was RMB28.4 million (US$4.3 million), a decrease of 22.5% from the fourth quarter of 2009 and an increase of 127.5% from the third quarter of 2010.
• Net income was RMB19.0 million (US$2.9 million), a decrease of 40.6% from the fourth quarter of 2009 and an increase of 195.4% from the third quarter of 2010.
• Net cash inflows from operating activities were RMB15.9 million (US$2.4 million), compared to with net cash outflows from operating activities of RMB171.9 million in the fourth quarter of 2009 and net cash inflows from operating activities of RMB54.5 million in the third quarter of 2010.

Fiscal Year 2010 Financial Highlights

• Total net revenues were RMB243.4 million (US$36.9 million) in 2010, a decrease of 40.9% from 2009.
• Operating income was RMB62.9 million (US$9.5 million) in 2010, a decrease of 30.7% from 2009.
• Net income was RMB39.9 million (US$6.0 million) in 2010, a decrease of 53.9% from 2009.
• Basic and diluted earnings per ADS were RMB1.52 (US$0.23) in 2010, a decrease of 53.8% from RMB3.29 in 2009.

Mr. Shengcheng Wang, Chairman and Chief Executive Officer of China Mass Media, commented, "We are pleased to report solid results for the fourth quarter of 2010.  Demand in the advertising market experienced a traditional seasonal increase during the quarter.  In addition, the intense price competition in the advertising market during the first three quarters of 2010 steadied and prices leveled off. In the fourth quarter, we secured a number of direct corporate customers and worked to take advantage of new market opportunities, which helped drive the significant increase in our top and bottom line performance during the period."

"The decline in our revenues from the same period last year was largely due to an unusual increase in market demand in the fourth quarter of 2009 following market expectation that CCTV planned to raise advertising prices in 2010.  In 2010, we also adopted a more selective media strategy. We reduced our investments in media resources on CCTV-4 from six programs to one program.  For the one remaining program, the 'Periodic China News Package,' which we felt offered a particularly promising opportunity, we strengthened our marketing efforts and it became an important source of revenue and profitability for us in 2010.  Sales of our 'Daytime Advertising Package' and 'Television Guide Package' were both subject to severe price competition for clients' limited budgets, and compared to last year, revenues from these segments declined sharply from 2009. We tried a variety of marketing strategies and methods to respond to this intense price competition, and we will continue our efforts to improve our sales rates in 2011."

"Despite this challenging environment, quarter-over-quarter revenues from our 'Daytime Advertising Package' and 'Television Guide Package' increased nearly 100%. The sales performance of our 'Periodic China News Package' on CCTV-4 continued to improve on the positive momentum generated in the previous quarter. Following September's success, time slots for the 'Periodic China News Package' were fully sold out in the fourth quarter. In addition, we were recently approved by CCTV to begin extending the length of our advertisements for no additional cost, which increased our utilization rate of 'Periodic China News Package' to 109% and led to further growth in our profits."

"We also successfully extended our contract as the exclusive advertising agency for the 'Daytime Advertising Package' and 'Television Guide Package' with CCTV to December 31, while the contract with CCTV in respect of Guang Er Gao Zhi program will not be renewed upon expiry on June 30, 2011.  The Company was informed by CCTV that this program shall be cancelled in the second half of 2011. Our presale of advertising resources was very well received by the market. So far, we have presold nearly 90% of our 2011 advertising time slots for the 'Television Guide Package' and more than half of our time slots for the 'Periodic China News Package' on CCTV-4."

"We captured a variety of opportunities related to advertising production. During the fourth quarter, we completed the production of a number of new commercial advertisements which led to a significant increase in revenues both on a year-over-year and quarter-over-quarter basis. It is a small but growing segment of our business."  

"Content production is an important element in our growth strategy, and we have started moving into the production of film and TV programs in 2011. We recently appointed Mr. Huo Zhenheng as vice president to expand further in this business. He has over 23 years of experience in the television industry.  Prior to joining the Company in January 2011, Mr. Huo was deputy director of CCTV-1 responsible for planning, producing and reviewing a number of popular television programs, including First Cartoon Park, Wonderful Moment, Man and Nature, Animal World, World Art, and Collection of Today's Stories.  Mr. Huo was also responsible for identifying, purchasing and broadcasting a number of programs on CCTV-1. With Mr. Huo's help, we are planning to produce a TV series and a TV program in 2011.  We will provide further details of such projects as they develop."

"Looking forward, 2011 should provide additional opportunities for growth.  We are confident the actions we took during 2010, including moving into the outdoor advertising business and the content production business, will allow us to capture further opportunities and drive growth in the coming years."

Fourth Quarter 2010 Financial Results

Revenues

Revenues from advertising agency services were RMB69.4 million (US$10.5 million) in the fourth quarter of 2010, a decrease of 40.7% from RMB117.0 million in the same period in 2009, and an increase of 49.0% from RMB46.6 million in the third quarter of 2010. Since the traditional peak season for the advertising market started in September 2010, demand in the advertising market has been increasing due to the impact of the National Day Holiday in October as well as strong consumption at the end of the year. The Company was able to capture market opportunities and actively developed a number of new clients across a broad range of industries, including food and beverage, medicine, clothing, financials and automotive.  The Company also offered more time slots to existing clients, resulting in a doubling of sales of the 'Daytime Advertising Package' and 'Television Guide Package' from the previous quarter. The sales performance of The Company's 'Periodic China News Package' on CCTV-4 continued to improve on the positive momentum generated during the previous quarter, and utilization rate of its time slots increased to 109%, a new record level.  The decrease in advertising revenues from the fourth quarter of 2009 was mainly due to pricing pressure related to sales of time slots for the Company's 'Daytime Advertising Package' and 'Television Guide Package,' along with the Company's decision to reduce its investments in media resources on CCTV-4 from six programs to one program.

Revenues from production and sponsorship services were RMB11.4 million (US$1.7 million) in the fourth quarter of 2010, an increase of 115.0% from RMB5.3 million in the fourth quarter of 2009, and an increase of 6.9% from RMB10.7 million in the third quarter of 2010. China Mass Media's efforts to improve production capabilities and proactively source new clients were successful in 2010. The substantial rise in revenues resulted from a number of new commercial advertisements for clients such as Alibaba, Yunnanbaiyao and Suning Appliance, and two CCTV commercial advertisements. Overall, revenues from production and sponsorship services increased significantly on both a year-over-year and quarter-over-quarter basis.

Operating Costs and Expenses

Cost of revenues was RMB33.7 million (US$5.1 million) in the fourth quarter of 2010, a decrease of 50.0% from RMB67.3 million in the fourth quarter of 2009 and an increase of 5.3% from RMB32.0 million in the third quarter of 2010. The significant decrease in cost of revenues from the fourth quarter of 2009 was because the Company secured fewer media resources on CCTV-4. The increase in cost of revenues compared with the third quarter of 2010 was mainly because the Company produced more commercial advertisements and public service announcements during the quarter.

Sales and marketing expenses were RMB4.1 million (US$0.6 million) in the fourth quarter of 2010, a decrease of 37.0% from RMB6.6 million in the fourth quarter of 2009 and an increase of 14.9% from RMB3.6 million in the third quarter of 2010.  The decrease from the fourth quarter of 2009 was due to a decrease in sales commissions paid to Company personnel as a result of lower sales of time slot for the "Daytime Advertising Package" and "Television Guide Package". The increase compared with the third quarter of 2010 was mainly attributable to an increase in sales commission as a result of the overall growth in sales revenues.

General and administrative expenses were RMB9.6 million (US$1.5 million) in the fourth quarter of 2010, an increase of 45.0% from RMB6.6 million in the fourth quarter of 2009 and an increase of 42.8% from RMB6.7 million in the third quarter of 2010. The increases from the fourth quarter of 2009 and the third quarter of 2010 were due to a write-back of bad debt provision after the Company successfully collected outstanding receivables amounting to RMB1.8 million in the fourth quarter of 2009 and RMB2.5 million in the third quarter of 2010, respectively, which reduced our overall general and administrative expenses in those quarters.

Other expenses included an exchange loss of RMB 2.8 million (US$0.4 million) in the fourth quarter of 2010, which compares with an exchange loss of RMB 3.3 million (US$0.5 million) in the third quarter of 2010.  The Company's functional currency, the RMB, continued to appreciate against the U.S. dollar, while the Company maintained significant U.S. dollar deposits.

Income tax expense was RMB8.6 million (US$1.3 million) in the fourth quarter of 2010, an increase of 93.5% from RMB4.5 million in the third quarter of 2010, and an increase of 39.8% from RMB6.2 million in the fourth quarter of 2009. The Company's effective tax rate was 16.2%, 41.0% and 31.3% for the three months ended December 31, 2009, September 30, 2010 and December 31, 2010, respectively. The effective tax rate for the fourth quarter of 2010 was higher than the PRC statutory tax rate, mainly due to an exchange loss of RMB2.8 million, which was not tax deductible.

Operating income was RMB28.4 million (US$4.3 million) in the fourth quarter of 2010, a decrease of 22.5% from RMB36.6 million in the fourth quarter of 2009 and an increase of 127.5% from RMB12.5 million in the third quarter of 2010. The significant decrease was mainly due to intense pricing pressure related to the sales of time slots on the 'Daytime Advertising Package' and 'Television Guide Package'.  The Company's operating margin was 31.3%, 22.8% and 37.5% for the three months ended December 31, 2009, September 30, 2010 and December 31, 2010, respectively.

Net income was RMB19.0 million (US$2.9 million) in the fourth quarter of 2010, a decrease of 40.6% from RMB32.0 million in the fourth quarter of 2009 and an increase of 195.4% from RMB6.4 million in the third quarter of 2010. The Company's net margin was 27.3%, 11.8% and 25.1% for the three months ended December 31, 2009, September 30, 2010 and December 31, 2010, respectively.

Basic and diluted earnings per ADS for the fourth quarter of 2010 were RMB0.73 (US$0.11), and RMB0.72 (US$0.11) respectively compared with basic earnings per ADS of RMB1.22 for the fourth quarter of 2009 and RMB0.24 for the third quarter of 2010. Each ADS represents 30 ordinary shares.

Fiscal Year 2010 Financial Results

Total Net Revenues

Total net revenues were RMB 243.4 million (US$36.9 million) in 2010, a decrease of 41.0% from RMB 412.0 million in fiscal year 2009. The significant decrease was primarily due to the Company's reduced investment in media resources on CCTV-4, and because the Company no longer holds the advertising rights to CCTV's Chinese New Year Gala show since the contract expired at the end of 2009.  The Advertising Department of CCTV decided to sell such time slots on its own.

Operating costs and expenses

Operating costs and expenses were RMB180.5 million (US$27.3 million) in 2010, a decrease of 43.9% from RMB320.8 million in 2009.  The year-over-year decrease in operating costs and expenses was mainly due to a decline in media costs because the Company secured fewer media resources on CCTV-4

Operating Income and Margin

As a result of the foregoing factors, operating income was RMB62.9 million (US$9.5 million) in 2010, a decrease of 30.7% from RMB90.8 million in 2009.  Operating margin was 25.9% in 2010 compared with 22.1 % in 2009.  

Net Income

Net income was RMB39.9 million (US$6.0 million) in 2010, a decrease of 53.9% from RMB 86.5 million in fiscal year 2009.  Basic and diluted earnings per ADS were RMB1.52 (US$0.23) in 2010, compared with basic and diluted earnings per ADS of RMB3.29 (US$0.48) in 2009.

Cash and cash equivalents

As of December 31, 2010, the Company had cash and cash equivalents of RMB 544.4 million (US$82.5 million) compared with RMB509.0 million as of December 31, 2009. The cash and cash equivalents remained consistent with the previous year.

Business Outlook

The Company currently expects to generate total net revenues of between RMB48.0 million ($7.27 million) and RMB 53.0 million ($8.03 million) for the first quarter of 2011, which represents a potential decrease of 14.3% to 5.4% compared with the first quarter of 2010 due to continuous price competition in the market.  

This forecast reflects the Company's current and preliminary estimate, 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) on March 14, 2011 (8:00 p.m. Beijing time on March 14, 2011).

The dial-in details for the live conference call are as follows:

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, beginning two hours after the conclusion of the conference call.  The dial-in details for the replay are as follows:

Non-GAAP Disclosure

In addition to the unaudited consolidated financial information presented in accordance with US GAAP, management uses a non-GAAP measure of 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 non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth below, which shall be read in conjunction with the preceding financial information presented in accordance with US GAAP.

Safe Harbor Statement

This document contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, Section 27A of the Securities Act of 1933, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about the Company's plans, objectives, expectations, strategies, intentions, or other characterizations of future events or circumstances and are generally identified by the words "anticipates", "believes", "could", "estimates", "expects", "intends", "may", "plans", "seeks", "would", and similar expressions.

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 under applicable 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 approximately 477 minutes of advertising time slots per day on CCTV Channels 1, 2, 4, E and F. CCTV is the largest television network in China. The Company has produced over 380 advertisements and has won a number of prestigious awards in China and across the world, including the "Gold World Medal" at The New York Festivals® International Television & Film Awards. For more information, please visit http://www.chinammia.com.

Non-GAAP Disclosure

In addition to the unaudited consolidated financial information presented in accordance with US GAAP, management uses a non-GAAP measure of 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 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.