UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: November 18, 2008
Commission File Number: 001-33328
XINHUA FINANCE MEDIA LIMITED
(Translation of registrants name into English)
2201, Tower D, Central International Trade Center,
6A Jian Wai Avenue, Chaoyang District,
Beijing 100022, Peoples Republic of China
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F or Form 40-F.
Form 20-F
þ
Form 40-F
o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1):
o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7):
o
Indicate by check mark whether the registrant by furnishing the information contained in this Form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes
o
No
þ
If Yes is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b):
82-
N/A
XINHUA FINANCE MEDIA LIMITED
FORM 6-K
TABLE OF CONTENTS
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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XINHUA FINANCE MEDIA LIMITED
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By:
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/s/ Fredy Bush
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Name:
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Fredy Bush
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Title:
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Chief Executive Officer
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Date: November 18, 2008
Exhibit 99.1
[FOR IMMEDIATE RELEASE]
XFMedia announces financial results for the third quarter 2008
BEIJING, November 18, 2008
Xinhua Finance Media Limited (XFMedia or the Company; NASDAQ:
XFML), a leading media group in China, today announced its unaudited financial results for the
third quarter ended September 30, 2008.
Third Quarter 2008 Highlights
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Steady revenue growth up 25% year over year in the midst of a challenging operating environment.
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Broadcast business continues to contribute the highest growth of 68% year over year and 30% quarter over quarter.
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Company provides fourth quarter guidance and revises full year guidance.
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Ms. Fredy Bush, Chief Executive Officer, commented Our Broadcast business proceeds to contribute
the largest growth as well as the highest margins. We continue to sharpen our focus toward
exclusive sports programs and the proper access to showcase this programming. The China media
industry is still very fragmented and nascent, but there is a significant and growing demand for a
broad range of quality American sports programs. In China, to be successful, one must have both
the programs and access. Programming is becoming king and access as key.
Ms. Bush added, During the quarter, as the Beijing Olympics took place, it was especially
challenging for most of the non-official Olympic media and non-Olympic sponsors. The recent global
economic downturn poses further challenges, and we will not be immune to the impact of these
circumstances. However, by leveraging our strong, fundamental platform, we continue to integrate
ourselves to achieve streamlined cost savings across our various operating units.
Page 1 of 17
Third Quarter 2008 Financial Results
The following is a summary of our financial results for the third quarter of 2008:
Chart 1: Summary of financial results
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3 months
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3 months
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3 months
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ended
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ended
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ended
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08Q3 vs
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08Q3 vs
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Sep 30,
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Sep 30,
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Jun 30,
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07Q3
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08Q2
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In US millions
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2008
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2007
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2008
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growth %
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growth %
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Net revenue
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51.1
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40.7
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48.9
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25
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%
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4
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%
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Adjusted EBITDA
1,
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9.5
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10.3
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10.7
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-8
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%
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-11
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%
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Net income (loss)
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(15.9
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)
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9.0
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0.8
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N/A
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N/A
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Net income (loss) per ADS diluted
2
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($
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0.24
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)
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$
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0.13
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N/A
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N/A
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Adjusted net income
1
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7.4
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12.3
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7.6
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-40
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%
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-3
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%
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Adjusted net income per ADS diluted
2
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$
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0.10
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$
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0.17
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$
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0.10
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-41
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%
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0
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%
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1.
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Please refer to Chart 8 for a detailed calculation of adjusted EBITDA and adjusted net
income.
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2.
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Please refer to Chart 9 for weighted average number of ADS on a diluted basis.
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Net Revenue
Net revenue for the third quarter of 2008 was $51.1 million, up 25% year-over-year from $40.7
million in the third quarter of 2007, or up 4% sequentially from $48.9 million in the second
quarter of 2008.
Net Revenue by business group
The following is a summary of net revenue by business group for the third quarter of 2008.
Chart 2: Revenue breakdown by type and business group
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In US millions
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Advertising
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Broadcast
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Print
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Total
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Net revenue:
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Advertising services
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24.1
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3.3
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0.1
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27.5
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Content production
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7.8
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7.8
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Advertising sales
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5.9
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7.0
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2.8
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15.7
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Publishing services
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0.1
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0.1
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Total net revenue:
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30.0
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18.1
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3.0
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51.1
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Page 2 of 17
Advertising Group
Net revenue for the Advertising Group for the third quarter of 2008 was $30.0 million, up 25%
year-over-year from $24.0 million in the third quarter of 2007, or up sequentially from $29.9
million in the second quarter of 2008.
Chart 3: Revenue breakdown of the Advertising Group
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3 months
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3 months
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3 months
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3 months
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ended
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ended
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Growth
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ended
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ended
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Growth
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In US millions
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Sep 30, 2008
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Sep 30, 2007
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%
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Sep 30, 2008
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Jun 30, 2008
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%
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Advertising:
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Television
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3.8
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-100
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%
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N/A
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Print/Online
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15.5
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9.5
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63
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%
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15.5
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12.2
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27
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%
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Outdoor/Other
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7.4
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5.7
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29
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%
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7.4
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8.2
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-10
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%
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BTL Marketing
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5.6
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3.6
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54
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%
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5.6
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7.9
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-29
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%
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Research
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1.5
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1.4
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3
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%
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1.5
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1.6
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-9
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%
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Subtotal:
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30.0
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24.0
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25
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%
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30.0
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29.9
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0
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%
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Broadcast Group
Net revenue for the Broadcast Group for the third quarter of 2008 was $18.1 million, up 68%
year-over-year from $10.8 million in the third quarter of 2007 or up 30% sequentially from $14.0
million in the second quarter of 2008.
Chart 4: Revenue breakdown of the Broadcast Group
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3 months
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3 months
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3 months
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3 months
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ended
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ended
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Growth
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ended
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ended
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Growth
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In US millions
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Sep 30, 2008
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Sep 30, 2007
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%
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Sep 30, 2008
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Jun 30, 2008
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%
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Broadcast:
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Television
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6.1
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3.5
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76
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%
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6.1
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6.5
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-5
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%
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Radio
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2.7
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1.9
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45
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%
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2.7
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2.7
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0
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%
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Mobile
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3.3
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3.3
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-1
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%
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3.3
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2.5
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32
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%
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Production
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6.0
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2.1
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187
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%
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6.0
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2.3
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166
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%
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Subtotal:
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18.1
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10.8
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68
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%
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18.1
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14.0
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30
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%
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Print Group
Net revenue for the Print Group for the third quarter of 2008 was $3.0 million, down 50%
year-over-year from $5.9 million in the third quarter of 2007, or down 41% sequentially from $5.0
million in the second quarter of 2008. The year-on-year and sequential decrease is mainly due to
the Beijing Olympics.
Page 3 of 17
Chart 5: Revenue breakdown of the Print Group
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3 months
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3 months
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3 months
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3 months
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ended
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ended
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Growth
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ended
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ended
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Growth
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In US millions
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Sep 30, 2008
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Sep 30, 2007
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%
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Sep 30, 2008
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Jun 30, 2008
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%
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Print:
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Newspaper
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1.5
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2.5
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-42
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%
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1.5
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2.7
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-46
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%
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Magazines
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1.5
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3.4
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-55
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%
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1.5
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2.3
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-35
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%
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Subtotal:
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3.0
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5.9
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-50
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%
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3.0
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5.0
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-41
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%
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Gross Profit
Gross profit for the third quarter of 2008 was $18.7 million, up 8% year-over-year from $17.4
million in the third quarter of 2007, or down 11% sequentially from $21.1 million in the second
quarter of 2008. Adjusted gross profit (non-GAAP), defined as gross profit before amortization of
intangible assets from acquisitions, for the third quarter of 2008 was $20.5 million, up 7%
year-over-year from $19.1 million in the third quarter of 2007 or down 11% sequentially from $22.9
million in the second quarter of 2008. We provide adjusted gross profit to break out the
amortization of intangible assets from acquisitions charged within the cost of revenue. Chart 6
provides a breakdown of adjusted gross profit by business group.
Chart 6: Reconciliation for adjusted gross profit by business group
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In US millions
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Advertising
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Broadcast
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Print
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Total
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Gross Profit
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12.2
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5.6
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0.9
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18.7
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Amortization of
intangible assets from
acquisitions
1
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0.3
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1.3
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0.2
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1.8
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Adjusted gross profit
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12.5
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6.9
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1.1
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20.5
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1.
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Amortization of intangible assets from acquisitions includes assets such as client database,
brand names, and production inventory.
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Operating Expenses
Operating expenses for the third quarter of 2008 were $15.8 million, up 42% year-over-year from
$11.1 million in the third quarter of 2007, or down 6% sequentially from $16.9 million in the
second quarter of 2008. The year-on-year increase is mainly due to share based compensation
expenses and costs for Sarbanes-Oxley compliance.
Total operating expenses were composed of selling and marketing expenses and general and
administrative expenses. Selling and marketing expenses for the third quarter of 2008 were $3.6
million, down 17% year-over-year from $4.3 million in the third quarter of 2007, or down 35%
sequentially from $5.6 million in the second quarter of 2008.
General and administrative expenses for the third quarter of 2008 were $12.2 million, up 79%
year-over-year from $6.8 million in the third quarter of 2007, or up 8% sequentially from $11.3
million in the second quarter of 2008.
Page 4 of 17
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA (non-GAAP), defined as earnings before one time items, other income, interest
income and expense, taxes, depreciation, amortization of intangible assets from acquisitions and
share-based compensation expenses, for the third quarter of 2008 was $9.5 million, down 8%
year-over-year from $10.3 million in the third quarter of 2007, or down 11% sequentially from $10.7
million in the second quarter of 2008. The year-on-year and sequential decrease is primarily due to
the Beijing Olympics. For reconciliation to adjusted EBITDA from income from operations, refer to
Chart 8.
Chart 7: Adjusted EBITDA by business group
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In US millions
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Advertising
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Broadcast
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Print
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Total
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Adjusted EBITDA by business group
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8.5
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5.2
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13.7
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Less: net head office expenses
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(4.2
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Adjusted EBITDA
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9.5
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Net Income and Adjusted Net Income (non-GAAP)
Net loss for the third quarter of 2008 was $15.9 million, down year-over-year from $9.0 million net
income in the third quarter of 2007, or down sequentially from $0.8 million net income in the
second quarter of 2008. The primary reason for the year-on-year decline is provision for impairment
of a principal protected note. This note is a $25.0 million principal protected note issued by
Lehman Brothers Holdings Inc. (Lehman Brothers), which matures in January 2009 (the Principal
Protected Note), and was purchased from UBS Financial Services, Inc. in October 2007. Considering
that Lehman Brothers filed for bankruptcy in mid-September of this year, the Company has taken a
provision of $16.5 million against the Principal Protected Note. The Company has no other
structured financial instruments.
Adjusted net income (non-GAAP), defined as net income before one-time items, amortization of
intangible assets from acquisitions, share-based compensation expenses and imputed interest, for
the third quarter of 2008 was $7.4 million, down 40% year-over-year from $12.3 million in the third
quarter of 2007 or down 3% sequentially from $7.6 million in the second quarter of 2008. The
year-on-year and sequential decrease is primarily due to the Beijing Olympics, an increase in net
interest expenses,
Page 5 of 17
costs for Sarbanes-Oxley compliance and tax expenses. For reconciliation from
net income to adjusted net income, please refer to Chart 8.
Outlook for fourth quarter and full year of 2008
XFMedia estimates its net revenue for the fourth quarter of 2008 will range from $48 million to $50
million. Fourth quarter adjusted net income per ADS is estimated to range from $0.04 to $0.06 per
diluted ADS.
Due to challenges in the current economic environment, XFMedia is revising its estimate of net
revenue for full year 2008 to range from $185 million to $187 million, from previously forecasted
range of $198 million to $208 million. Adjusted net income per ADS for full year 2008 is estimated
to range from $0.28 to $0.30 per diluted ADS, from previously forecasted range of $0.33 to $0.35
per diluted ADS.
This forecast reflects XFMedias current and preliminary view, which is subject to change.
Other Corporate Developments
In October 2007, the Company purchased from UBS Financial Services, Inc. a $25.0 million principal
protected note issued by Lehman Brothers, which matures in January 2009. In August 2008, the
Company borrowed $14.0 million from UBS AG using the Principal Protected Note as collateral (the
Loan). On September 15, 2008, Lehman Brothers filed for bankruptcy, and, after the Company
refused to post additional collateral for the Loan, on September 25, 2008, UBS AG filed a demand
for arbitration with the American Arbitration Association against the Company seeking repayment of
the Loan. On October 28, 2008, the Company filed its defense to the demand as well as a cross claim
against UBS Financial Services, Inc. for an amount in excess of $25.0 million. The Company has
taken a provision of $16.5 million against the Principal Protected Note.
In October 2008, the Company entered into a secured convertible loan facility for up to $80.0
million from affiliates of an existing large shareholder, Patriarch Partners. This is
Page 6 of 17
intended to fund investment in its broadcast business, with a focus on sports, while current cash on hand will
be used for daily operations and earn out payments.
In light of the global and PRC economic developments and conditions, the Company has evaluated its
goodwill and intangible assets for impairment and noted no impairment losses for the third quarter;
however, any further significant deterioration of the business environment in the fourth quarter
and after could affect the overall business outlook and may trigger potential material non-cash
impairment charges on goodwill and intangible assets.
Conference Call Information
Following the earnings announcement, XFMedias senior management will host a conference call on
November 17, 2008 at 8:00 pm (New York) / November 18, 2008 at 9:00 am (Beijing) to review the
results and discuss recent business activities.
Interested parties may dial into the conference call at:
(US) +1 866 578 5771 or +1 617 213 8055
(UK) +44 207 365 8426
(Asia Pacific) +852 3002 1672
Passcode: XFML
A telephone replay will be available two hours after the call for one week at:
(US Toll Free) +1 888 286 8010
(International) +1 617 801 6888
Passcode: 78412461
A real-time webcast and replay will be also available at:
www.xfmedia.cn/earnings-webcast
Contacts:
Media Contact
Ms. Joy Tsang, XFMedia, +86 21 6113 5999,
joy.tsang@xfmedia.cn
Ms. Lindsay Koval, AGG International, +1 212 614 4170,
lindsay@aggintl.com
IR Contact
Mr. Edward Liu, XFMedia, +86 21 6113 5978,
edward.liu@xfmedia.cn
Page 7 of 17
Mr. Howard Gostfrand, American Capital Ventures, +1 305-918-7000, toll free +1 877 918 0774,
info@amcapventures.com
About XFMedia
Xinhua Finance Media (XFMedia; NASDAQ: XFML) is a leading media group in China with nationwide
access to the upwardly mobile demographic. Through its synergistic business groups, Broadcast,
Print, and Advertising, XFMedia offers a total solution empowering clients at every stage of the
media process and connecting them with their target audience. Its unique platform covers a wide
range of media assets, including television, radio, newspaper, magazine, outdoor, online and other
media assets.
Headquartered in Beijing, the company has offices and affiliates in major cities of China including
Beijing, Shanghai, Guangzhou, Shenzhen and Hong Kong. For more information, please visit
www.xfmedia.cn.
Safe Harbor
This announcement contains forward-looking statements. These statements are made under the safe
harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as will, expects,
anticipates, future, intends, plans, believes, estimates and similar statements. Among
other things, the outlook for fourth quarter and full year 2008 and quotations from management in
this announcement, as well as XFMedias strategic and operational plans, contain forward-looking
statements. XFMedia may also make written or oral forward-looking statements in its periodic
reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in
press releases and other written materials and in oral statements made by its officers, directors
or employees to third parties. Statements that are not historical facts, including statements about
XFMedias beliefs and expectations, are forward-looking statements. Forward-looking statements
involve inherent risks and uncertainties. A number of factors could cause actual results to differ
materially from those contained in any forward-looking statement, including but not limited to the
following: our growth strategies; our future business development, results of operations and
financial condition; our ability to attract and
Page 8 of 17
retain customers; competition in the Chinese
advertising and media market; changes in our revenues and certain cost or expense items as a
percentage of our revenues; the outcome of ongoing, or any future, litigation or arbitration,
including those relating to copyright and other intellectual property rights; the expected growth
of the Chinese advertising and media market; and Chinese governmental policies relating to
advertising and media. Further information regarding these and other risks is included in our
annual report on Form 20-F and other documents filed with the Securities and Exchange Commission.
XFMedia does not undertake any obligation to update any forward-looking statement, except as
required under applicable law.
Non-GAAP Financial Measures
To supplement XFMedias consolidated financial results under U.S. GAAP, XFMedia also provides the
following non-GAAP financial measures: adjusted gross profit, adjusted
EBITDA and adjusted net income. XFMedia has adopted these measures adjusted gross profit, defined
as gross profit excluding amortization of intangible assets from acquisitions, adjusted EBITDA,
by defining adjusted EBITDA as earnings before one time items, other income, interest income and
expense, taxes, depreciation, amortization of intangible assets from acquisitions and share-based
compensation expenses, and adjusted net income, by defining adjusted net income as net income
before amortization of intangible assets from acquisitions, imputed interest, share-based
compensation expenses and one-time items. XFMedia believes that these non-GAAP financial measures
provide investors with another method for assessing XFMedias underlying operational and financial
performance. These non-GAAP financial measures are not intended to be considered in isolation or as
a substitute for the financial results under U.S. GAAP. For more information on these non-GAAP
financial measures, please refer to Chart 8 of this release.
XFMedia believes these non-GAAP financial measures are useful to management and investors in
assessing the performance of the Company and assist management in its financial and operational
decision making. A limitation of using non-GAAP measures which exclude share-based compensation
expenses is that share-based compensation expenses have been and will continue to be a significant
recurring expense in our business. A limitation of using non-GAAP adjusted gross profit, adjusted
EBITDA and adjusted net income is that they do not include all items that impact our net income for
the period. Management compensates for these limitations by providing specific information
regarding the GAAP amounts excluded from each non-GAAP measure. The
Page 9 of 17
accompanying tables have more
details on the reconciliations between GAAP financial measures that are most directly comparable to
non-GAAP financial measures.
The following is a reconciliation of our non-GAAP financial results:
Chart 8: Reconciliation of non-GAAP financial results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 months
|
|
3 months
|
|
3 months
|
|
|
ended
|
|
ended
|
|
ended
|
|
|
Sep 30,
|
|
Sep 30,
|
|
Jun 30,
|
In US millions
|
|
2008
|
|
2007
|
|
2008
|
Income from operations
|
|
|
3.5
|
|
|
|
6.2
|
|
|
|
4.3
|
|
One time items
1
|
|
|
0.5
|
|
|
|
|
|
|
|
0.6
|
|
Depreciation
|
|
|
0.8
|
|
|
|
0.6
|
|
|
|
0.6
|
|
Amortization of intangible assets from acquisitions
|
|
|
3.4
|
|
|
|
3.0
|
|
|
|
3.4
|
|
Share-based compensation expenses
|
|
|
1.3
|
|
|
|
0.5
|
|
|
|
1.8
|
|
|
|
|
Adjusted EBITDA
|
|
|
9.5
|
|
|
|
10.3
|
|
|
|
10.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(15.9
|
)
|
|
|
9.0
|
|
|
|
0.8
|
|
One time items
2
|
|
|
17.0
|
|
|
|
(1.3
|
)
|
|
|
0.6
|
|
Amortization of intangible assets from acquisitions
|
|
|
3.4
|
|
|
|
3.0
|
|
|
|
3.4
|
|
Share-based compensation expenses
|
|
|
1.3
|
|
|
|
0.5
|
|
|
|
1.8
|
|
Imputed interest
|
|
|
1.6
|
|
|
|
1.1
|
|
|
|
1.0
|
|
|
|
|
Adjusted net income
|
|
|
7.4
|
|
|
|
12.3
|
|
|
|
7.6
|
|
|
|
|
|
|
|
1.
|
|
There is a one-time adjustment of $0.6 million and $0.5 million for second and third quarter
of 2008, representing legal fees for class action lawsuit.
|
|
2.
|
|
There is a one-time adjustment of $17.0 million for third quarter of 2008, representing $0.5
million legal fee for class action lawsuit and $16.5 million provision for impairment of
principal protected note; $0.6 million for second quarter of 2008, representing legal fees for
class action lawsuit; $1.3 million for third quarter of
2007, representing reversal of the imputed interest taken in the first half of 2007 as a result
of clarification of terms of one of our exclusive radio advertising agreements.
|
Net income and adjusted net income per ADS and per share are as follows:
Chart 9: Net income and adjusted net income per ADS and per share
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 months
|
|
3 months
|
|
3 months
|
|
|
ended
|
|
ended
|
|
ended
|
|
|
Sep 30, 2008
|
|
Sep 30, 2007
|
|
Jun 30, 2008
|
Net income (loss) per ADS basic
|
|
|
(0.24
|
)
|
|
$
|
0.14
|
|
|
|
|
|
Net income (loss) per ADS diluted
|
|
|
(0.24
|
)
|
|
$
|
0.13
|
|
|
|
|
|
Weighted average number of ADS basic
|
|
68.2million
|
|
63.5 million
|
|
67.5 million
|
Weighted average number of ADS
diluted
|
|
68.2million
|
|
71.1 million
|
|
73.5 million
|
Page 10 of 17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 months
|
|
3 months
|
|
3 months
|
|
|
ended
|
|
ended
|
|
ended
|
|
|
Sep 30, 2008
|
|
Sep 30, 2007
|
|
Jun 30, 2008
|
Adjusted net income per ADS basic
|
|
$
|
0.10
|
|
|
$
|
0.19
|
|
|
$
|
0.10
|
|
Adjusted net income per ADS diluted
|
|
$
|
0.10
|
|
|
$
|
0.17
|
|
|
$
|
0.10
|
|
Weighted average number of ADS basic
|
|
68.2million
|
|
63.5million
|
|
67.5 million
|
Weighted average number of ADS
diluted
|
|
71.8million
|
|
71.1million
|
|
73.5 million
|
|
|
|
1.
|
|
For computation of the net income (loss) per ADS and adjusted net income per ADS and per
share, dividends on convertible preference shares of $0.6 million in both second and third
quarter of 2008 were taken into account.
|
Page 11 of 17
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
(In U.S. dollars)
|
|
Sep 30,2008
|
|
Dec 31,2007
|
|
|
Unaudited
|
|
(Note 1)
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
|
45,335,004
|
|
|
|
44,436,087
|
|
Restricted cash (Note 2)
|
|
|
34,310,002
|
|
|
|
47,252,191
|
|
Principal protected note (Note 3)
|
|
|
8,458,793
|
|
|
|
|
|
Accounts receivable (Note 4)
|
|
|
57,848,423
|
|
|
|
45,706,766
|
|
Prepaid program expenses
|
|
|
4,189,661
|
|
|
|
5,389,250
|
|
Other current assets
|
|
|
21,673,497
|
|
|
|
16,272,798
|
|
|
|
|
Total current assets
|
|
|
171,815,380
|
|
|
|
159,057,092
|
|
Content production deposit and cost, net
|
|
|
3,876,164
|
|
|
|
8,855,896
|
|
Property and equipment, net
|
|
|
10,391,154
|
|
|
|
9,191,959
|
|
Intangible assets, net (Note 5)
|
|
|
243,990,560
|
|
|
|
233,505,913
|
|
Goodwill
|
|
|
285,210,951
|
|
|
|
180,125,488
|
|
Investment
|
|
|
2,500,000
|
|
|
|
500,000
|
|
Principal protected note (Note 3)
|
|
|
|
|
|
|
24,909,929
|
|
Deposits for acquisition of subsidiaries
|
|
|
4,806,863
|
|
|
|
25,634,000
|
|
Other long-term asset
|
|
|
9,863,982
|
|
|
|
9,021,936
|
|
|
|
|
Total assets
|
|
|
732,455,054
|
|
|
|
650,802,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, mezzanine equity and shareholders equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Bank borrowings (Note 3)
|
|
|
38,432,587
|
|
|
|
33,780,188
|
|
Bank overdrafts
|
|
|
667,899
|
|
|
|
960,157
|
|
Other current liabilities
|
|
|
97,560,471
|
|
|
|
44,473,366
|
|
|
|
|
Total current liabilities
|
|
|
136,660,957
|
|
|
|
79,213,711
|
|
Deferred tax liabilities
|
|
|
35,371,505
|
|
|
|
37,741,579
|
|
Long term payables, non-current portion
|
|
|
68,840,567
|
|
|
|
65,150,610
|
|
|
|
|
Total liabilities
|
|
|
240,873,029
|
|
|
|
182,105,900
|
|
|
|
|
Minority Interests
|
|
|
2,475,733
|
|
|
|
2,060,745
|
|
Page 12 of 17
|
|
|
|
|
|
|
|
|
(In U.S. dollars)
|
|
Sep 30,2008
|
|
Dec 31,2007
|
|
|
Unaudited
|
|
(Note 1)
|
Mezzanine equity:
|
|
|
|
|
|
|
|
|
Series B convertible preferred shares (par value
$0.001; 308,000 shares authorized, issued and
outstanding as of September 30, 2008)
|
|
|
30,250,000
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Class A common shares and nonvested shares (par value
$0.001; 143,822,874 as of December 31, 2007 and
September 30, 2008 shares authorized; 90,061,269 as
of December 31, 2007 and 92,860,049 as of September
30, 2008 shares issued and outstanding)
|
|
|
92,860
|
|
|
|
90,061
|
|
Class B common shares (par value $0.001; 50,054,619
as of December 31, 2007 and September 30, 2008
shares authorized; 50,054,618 as of December 31, 2007
and as of September 30, 2008 shares issued and
outstanding)
|
|
|
7,442
|
|
|
|
7,442
|
|
Additional paid-in capital
|
|
|
450,145,276
|
|
|
|
439,516,974
|
|
(Deficits) Retained earnings
|
|
|
(887,787
|
)
|
|
|
23,903,560
|
|
Accumulated other comprehensive income
|
|
|
9,498,501
|
|
|
|
3,117,531
|
|
|
|
|
Total shareholders equity
|
|
|
458,856,292
|
|
|
|
466,635,568
|
|
|
|
|
Total liabilities, mezzanine equity and shareholders
equity
|
|
|
732,455,054
|
|
|
|
650,802,213
|
|
|
|
|
Page 13 of 17
Condensed Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 months
|
|
3 months
|
|
3 months
|
|
|
ended
|
|
ended
|
|
ended
|
(in U.S. Dollars)
|
|
Sep 30, 2008
|
|
Sep 30, 2007
|
|
Jun 30, 2008
|
|
|
Unaudited
|
|
Unaudited
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising services
|
|
|
27,484,357
|
|
|
|
26,012,979
|
|
|
|
26,852,171
|
|
Content production
|
|
|
7,807,840
|
|
|
|
2,073,675
|
|
|
|
2,888,164
|
|
Advertising sales
|
|
|
15,696,762
|
|
|
|
12,346,672
|
|
|
|
19,006,987
|
|
Publishing services
|
|
|
61,757
|
|
|
|
291,072
|
|
|
|
108,924
|
|
|
|
|
Total net revenue
|
|
|
51,050,716
|
|
|
|
40,724,398
|
|
|
|
48,856,246
|
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising services
|
|
|
19,349,359
|
|
|
|
16,509,981
|
|
|
|
18,781,998
|
|
Content production
|
|
|
4,192,846
|
|
|
|
1,504,931
|
|
|
|
1,060,419
|
|
Advertising sales
|
|
|
8,457,096
|
|
|
|
5,048,937
|
|
|
|
7,644,880
|
|
Publishing services
|
|
|
334,708
|
|
|
|
283,714
|
|
|
|
254,844
|
|
|
|
|
Total cost of revenue
|
|
|
32,334,009
|
|
|
|
23,347,563
|
|
|
|
27,742,141
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and distribution
|
|
|
3,587,917
|
|
|
|
4,337,558
|
|
|
|
5,560,512
|
|
General and administrative
|
|
|
12,186,200
|
|
|
|
6,791,370
|
|
|
|
11,301,796
|
|
|
|
|
Total operating expenses
|
|
|
15,774,117
|
|
|
|
11,128,928
|
|
|
|
16,862,308
|
|
|
|
|
Other operating income
|
|
|
550,797
|
|
|
|
|
|
|
|
7,220
|
|
|
|
|
Income from operations
|
|
|
3,493,387
|
|
|
|
6,247,907
|
|
|
|
4,259,017
|
|
Other income (expenses) (Note 6)
|
|
|
(18,578,516
|
)
|
|
|
2,787,286
|
|
|
|
(1,136,041
|
)
|
|
|
|
Income (loss) before provision for income
taxes and minority interest
|
|
|
(15,085,129
|
)
|
|
|
9,035,193
|
|
|
|
3,122,976
|
|
Provision for income taxes (Note 7)
|
|
|
571,824
|
|
|
|
(232,016
|
)
|
|
|
1,989,097
|
|
|
|
|
Net income (loss) before minority interest
|
|
|
(15,656,953
|
)
|
|
|
9,267,209
|
|
|
|
1,133,879
|
|
Minority interest
|
|
|
217,192
|
|
|
|
229,467
|
|
|
|
370,913
|
|
|
|
|
Net income (loss)
|
|
|
(15,874,145
|
)
|
|
|
9,037,742
|
|
|
|
762,966
|
|
Dividend on convertible preferred shares
|
|
|
600,000
|
|
|
|
|
|
|
|
600,000
|
|
|
|
|
Net income (loss) attributable to holders
of common shares
|
|
|
(16,474,145
|
)
|
|
|
9,037,742
|
|
|
|
162,966
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Common Shares
|
|
|
(0.12
|
)
|
|
|
0.07
|
|
|
|
|
|
Basic American Depositary Shares
|
|
|
(0.24
|
)
|
|
|
0.14
|
|
|
|
|
|
Page 14 of 17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 months
|
|
3 months
|
|
3 months
|
|
|
ended
|
|
ended
|
|
ended
|
(in U.S. Dollars)
|
|
Sep 30, 2008
|
|
Sep 30, 2007
|
|
Jun 30, 2008
|
|
|
Unaudited
|
|
Unaudited
|
|
Unaudited
|
Diluted Common Shares
|
|
|
(0.12
|
)
|
|
|
0.06
|
|
|
|
|
|
Diluted American Depositary Shares
|
|
|
(0.24
|
)
|
|
|
0.13
|
|
|
|
|
|
Page 15 of 17
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 months
|
|
3 months
|
|
3 months
|
|
|
ended
|
|
ended
|
|
ended
|
(in U.S. Dollars)
|
|
Sep 30, 2008
|
|
Sep 30, 2007
|
|
Jun 30, 2008
|
|
|
Unaudited
|
|
Unaudited
|
|
Unaudited
|
Net cash provided by operating activities
|
|
|
3,196,632
|
|
|
|
1,550,989
|
|
|
|
7,603,264
|
|
|
|
|
Net cash used in investing activities
|
|
|
(10,874,537
|
)
|
|
|
(9,536,253
|
)
|
|
|
(19,234,247
|
)
|
|
|
|
Net cash provided by/(used in) financing
activities
|
|
|
(4,217,299
|
)
|
|
|
1,660,617
|
|
|
|
(1,506,267
|
)
|
|
|
|
Effect of exchange rate changes
|
|
|
156,411
|
|
|
|
263,683
|
|
|
|
666,271
|
|
|
|
|
Net decrease in cash
|
|
|
(11,738,793
|
)
|
|
|
(6,060,964
|
)
|
|
|
(12,470,979
|
)
|
Cash, as at beginning of the period
|
|
|
57,073,797
|
|
|
|
81,411,707
|
|
|
|
69,544,776
|
|
|
|
|
Cash, as at end of the period
|
|
|
45,335,004
|
|
|
|
75,350,743
|
|
|
|
57,073,797
|
|
|
|
|
Notes to Financial Information
1) 2007 condensed consolidated balance sheets
Information was extracted from the audited financial statements included in Form 20-F of the
Company filed with the Securities and Exchange Commission on May 19, 2008.
2) Restricted cash
Restricted cash is US dollar cash deposits pledged for the RMB loan facilities granted by banks for
RMB working capital purposes.
3) Principal protected note
In October 2007, the Company purchased from UBS Financial Services, Inc. a $25.0 million principal
protected note issued by Lehman Brothers Holdings Inc., which matures in January 2009. In August
2008, the Company borrowed $14.0 million from UBS AG using the Principal Protected Note as
collateral. On September 15, 2008, Lehman Brothers filed for bankruptcy, and, after the Company
refused to post additional collateral for the Loan, on September 25, 2008, UBS AG filed a demand
for arbitration with the American Arbitration Association against the Company seeking repayment of
the Loan. On October 28, 2008, the Company filed its defense to the demand as well as a cross claim
against UBS Financial Services, Inc. for an amount in excess of $25.0 million. The Company has
taken a provision of $16.5 million against the Principal Protected Note.
4) Accounts receivables and debtors turnover
Page 16 of 17
Debtors turnover for the second quarter and third quarter of 2008 were 90 days and 97 days
respectively. Our business groups generally granted 90 days to 180 days average credit period to
major customers, which is in line with the industry practices in the PRC.
5) Intangible assets
Net book value for intangible assets as of September 30, 2008 was $244.0 million. It mainly
represents the fair value of the long-term advertising agreements for the Broadcast and Print
Group. The net book value of the intangible assets were primarily composed of a $100.9 million
advertising license agreement for our TV business, a $74.8 million exclusive advertising agreement
for our newspaper business, and $9.1 million of exclusive advertising agreements we entered for
radio advertising operations in Shanghai, Beijing and Guangdong. We are in the process of obtaining
third-party valuations of certain identifiable intangible assets for the acquisitions and hence the
net book value for intangible assets is preliminary and subject to revision once we complete the
valuation exercise.
6) Other income (expenses)
Other income (expenses) includes net interest income (expenses) and net other income (expenses).
Other expenses for the third quarter of 2008 include a provision of $16.5 million against the
Principal Protected Note (see Note 3).
7) Provision for income taxes
Provision for income taxes includes deferred tax credits of $1.0 million and $0.7 million in the
second quarter and third quarter of 2008 respectively.
Page 17 of 17