XFMedia Announces Financial Results for the Fourth Quarter and Full Year 2008

BEIJING, Feb. 23 /PRNewswire-Asia-FirstCall/ -- XFMedia ("the Company;" Nasdaq: XFML), a leading media group in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2008.

  Fourth Quarter 2008 Highlights
  -- Net revenue was $49.4 million
  -- Adjusted EBITDA was $5.2 million
  -- Diluted adjusted net income per ADS was $0.04
  -- The Company recorded one-time charges of $245.6 million


  Full Year 2008 Highlights
  -- Net revenue was $186.0 million
  -- Adjusted EBITDA was $28.4 million
  -- Diluted adjusted net income per ADS was $0.25




The Company recorded one-time charges of $245.6 million, driven primarily by a one-time non-cash impairment charge on goodwill and intangible assets of $206.4 million in connection with its annual impairment testing conducted in the fourth quarter. The Company also recorded certain one-time asset impairment charges, loss on disposal of subsidiaries, and other one-time items. Please refer to Chart 13 for details of these one-time charges.  These one-time items were largely the result of the economic downturn and the Company's repositioning to sports and entertainment.

"The recent economic downturn has turned out to be much more severe than we had originally expected. 2008 was an eventful year in China, with the snow storms in Q1, earthquakes in Q2, Olympics in Q3 and the economic turmoil in Q4 all impacting the media sector. This seems to have set the stage for a challenging environment ahead in 2009. In anticipation of this, we are utilizing our resources more efficiently for cost containment and reduction of overhead expenses throughout this year," said Fredy Bush, XFMedia's CEO.

Ms. Bush added, "We have taken steps to sharpen our focus towards sports and entertainment which is a logical extension of our business model. Following board approval of our new strategy in December, and the subsequent repositioning of the Company, in January our shareholders approved the change of the Company's name to Xinhua Sports & Entertainment Limited. We will use this new name in all of our future announcements. As a part of this repositioning, we recently divested 85% of Convey Advertising, our Hong Kong based outdoor business. We have expanded our content and media platform of TV, radio, internet, and mobile phones, providing our advertising clients exceptional access to the young, upwardly mobile demographic in China.

"While we continue to see challenges in the year ahead, we are excited to build the best sports and entertainment media company in China," concluded Ms. Bush.

  Fourth Quarter and Full Year 2008 Financial Results

  Chart 1: Summary of 2007 fourth quarter and 2008 fourth and third quarter
           results
                                3 months 3 months 3 months 08Q4 vs 08Q4 vs
                                   ended    ended    ended    07Q4    08Q3
                                  Dec 31,  Dec 31,  Sep 30, Growth  Growth
                                    2008     2007     2008      %      %
  In US millions
  Net revenue                       49.4    48.5     51.1       2%      -3%
  Adjusted EBITDA*                   5.2     9.9      9.5     -47%     -45%
  Net income(loss)                (251.5)    4.2    (15.9)     N/A  -1,484%
  One-time items **               (245.6)     --    (17.0)     N/A  -1,343%
  Net income (loss) before
   one-time items                   (5.9)    4.2      1.1      N/A      N/A
  Adjusted net income*               3.3     8.6      7.4     -61%     -55%

  * Please refer to Chart 12 for details of calculation of adjusted EBITDA
    (non-GAAP) and adjusted net income (non-GAAP).
  ** Please refer to Chart 13 for detailed breakdown



  Chart 2: Summary of full year 2008 and 2007 results

                                       12 months   12 months
                                           ended       ended
                                          Dec 31,     Dec 31,
                                            2008        2007     Growth %
  In US millions
  Net revenue                              186.0       134.8        38%
  Adjusted EBITDA*                          28.4        27.4         4%
  Net Income (loss)                       (274.9)       28.0        N/A
  One-time items **                       (263.3)       16.9        N/A
  Net income (loss) before one-time items  (11.6)       11.1        N/A
  Adjusted net income*                      19.8        29.1       -32%

  * Please refer to Chart 12 for details of calculation of adjusted EBITDA
    (non-GAAP) and adjusted net income (non-GAAP).
  ** Please refer to Chart 13 for detailed breakdown


  Net Revenue


Net revenue for the fourth quarter of 2008 was $49.4 million, up 2% year-on-year from $48.5 million in the fourth quarter of 2007 or down 3% sequentially from $51.1 million in the third quarter of 2008. Net revenue for full year 2008 was $186.0 million, up 38% from $134.8 million in full year 2007.

  Net Revenue by type and business group

  Chart 3: Net revenue by type and business group for the fourth quarter of
  2008

  In US millions                      Advertising  Broadcast  Print    Total
  Net revenue:
    Advertising services                  27.6        4.5      0.3     32.4
    Content production                      --        1.1       --      1.1
    Advertising sales                      5.3        6.9      3.7     15.9
    Publishing services                     --         --       --       --
  Total net revenue                       32.9       12.5      4.0     49.4


  Chart 4: Net revenue by type and business group for full year 2008

  In US millions                     Advertising  Broadcast  Print    Total
  Net revenue:
    Advertising services                 92.3        13.1     2.5     107.9
    Content production                     --        12.4      --      12.4
    Advertising sales                    21.9        29.8    13.6      65.3
    Publishing services                    --          --     0.4       0.4
  Total net revenue                     114.2        55.3    16.5     186.0


  Advertising Group


Net revenue for the Advertising Group for the fourth quarter of 2008 was $32.9 million, up 9% year-on-year from $30.2 million in the fourth quarter of 2007 or up 10% sequentially from $30.0 million in the third quarter of 2008. Net revenue for the Advertising Group for full year 2008 was $114.2 million, up 44% from $79.1 million in full year 2007.

  Chart 5: Revenue breakdown of the Advertising Group

                                       3 months    3 months       Growth
                                          ended       ended            %
                                         Dec 31,     Dec 31,
                                           2008        2007
  In US millions
  Advertising:
   Television (1)                            --         4.6        -100%
   Print/Online                             9.8        12.8         -23%
   Outdoor/Other (2)                        7.5         6.1          24%
   BTL Marketing                           14.0         5.5         155%
   Research                                 1.6         1.2          34%
    Subtotal:                              32.9        30.2           9%


                                       3 months    3 months       Growth
                                          ended       ended            %
                                         Dec 31,     Sep 30,
                                           2008        2007
  In US millions
  Advertising:
   Television (1)                            --          --           --
   Print/Online                             9.8        15.5         -37%
   Outdoor/Other (2)                        7.5         7.4           2%
   BTL Marketing                           14.0         5.6         149%
   Research                                 1.6         1.5           5%
    Subtotal:                              32.9        30.0          10%


                                      12 months   12 months       Growth
                                          ended       ended            %
                                         Dec 31,     Dec 31,
                                           2008        2007
  In US millions
  Advertising:
   Television (1)                            --        14.1        -100%
   Print/Online                            44.0        33.1          33%
   Outdoor/Other (2)                       29.4        17.0          73%
   BTL Marketing                           34.9         9.9         252%
   Research                                 5.9         5.0          17%
    Subtotal:                             114.2        79.1          44%

  (1) Television represents buying and selling of television advertising
      airtime in certain television channels. This business was moved to
      Broadcast Group in 2008.
  (2) The Company divested its Hong Kong based outdoor advertising business,
      Convey Advertising Company, Ltd. ("Convey"), which contributed $21.4
      million net revenue in full year 2008.


  Broadcast Group


Net revenue for the Broadcast Group for the fourth quarter of 2008 was $12.5 million, down 3% year-on-year from $12.9 million in the fourth quarter of 2007 or down 31% sequentially from $18.1 million in the third quarter of 2008. The sequential decrease in Broadcast Group is mainly due to the economic downturn and seasonality of the drama business within Production. Net revenue for the Broadcast Group for full year 2008 was $55.3 million, up 54% from $35.9 million in full year 2007.

  Chart 6: Revenue breakdown of the Broadcast Group

                 3     3             3       3            12     12
              months months Growth months months Growth months months Growth
               ended  ended   %    ended   ended   %     ended  ended   %
              Dec 31, Dec 31,      Dec 31, Sep 30,      Dec 31, Dec 31,
               2008   2007          2008    2008         2008   2007
  In US
   millions
  Broadcast:
  Television    5.1    3.7   38%    5.1     6.1  -16%    23.5   13.3   76%
  Radio         2.5    2.1   17%    2.5     2.7   -9%     9.5    5.6   71%
  Mobile        4.5    5.3  -15%    4.5     3.3   37%    13.1    9.3   41%
  Production    0.4    1.8  -75%    0.4     6.0  -92%     9.2    7.7   20%
    Subtotal:  12.5   12.9   -3%   12.5    18.1  -31%    55.3   35.9   54%


  Print Group


Net revenue for the Print Group for the fourth quarter of 2008 was $4.0 million, down 26% year-on-year from $5.4 million in the fourth quarter of 2007 or up 34% sequentially from $3.0 million in the third quarter of 2008. Net revenue for the Print Group for full year 2008 was $16.5 million, down 17% from $19.8 million in full year 2007.

  Chart 7: Revenue breakdown of the Print Group
                 3     3             3       3            12     12
              months months Growth months months Growth months months Growth
               ended  ended   %    ended   ended   %     ended  ended   %
              Dec 31, Dec 31,      Dec 31, Sep 30,      Dec 31, Dec 31,
               2008   2007          2008    2008         2008   2007
  In US
   millions
  Print:
   Newspaper    2.5    2.6   -5%    2.5     1.5   71%    9.0     9.3   -3%
   Magazines    1.5    2.8  -46%    1.5     1.5    0%    7.5    10.5  -29%
    Subtotal:   4.0    5.4  -26%    4.0     3.0   34%   16.5    19.8  -17%


  Gross Profit


Gross profit for the fourth quarter of 2008 was $18.6 million, compared to $18.6 million in the fourth quarter of 2007, or down 1% sequentially from $18.7 million in the third quarter of 2008. Gross profit for the full year 2008 was $71.5 million, up 36% from $52.7 million in full year 2007. Adjusted gross profit (non-GAAP), defined as gross profit before amortization of intangible assets from acquisitions, for the fourth quarter of 2008 was $20.4 million, down 1% year-on-year from $20.5 million in the fourth quarter of 2007 or down 1% sequentially from $20.5 million in the third quarter of 2008. Adjusted gross profit (non-GAAP), for the full year 2008 was $78.9 million, up 34% from $58.7 million in full year 2007. We provide adjusted gross profit to break out the amortization of intangible assets from acquisitions charged within the cost of revenue. Charts 8 and 9 provide the breakdown of adjusted gross profit by business group.

  Chart 8: Reconciliation for adjusted gross profit by business group for
           the fourth quarter of 2008

  In US millions                    Advertising    Broadcast  Print    Total
  Gross Profit                          13.4          1.7      3.5     18.6
  Amortization of intangible assets
   from acquisitions(1)                  0.2          1.4      0.2      1.8
  Adjusted gross profit                 13.6          3.1      3.7     20.4

  (1) Amortization of intangible assets from acquisitions includes assets
      such as client database and brand names.


  Chart 9: Reconciliation for adjusted gross profit by business group for
           full year 2008

  In US millions                    Advertising    Broadcast  Print    Total
  Gross Profit                          43.1         17.3      11.1     71.5
  Amortization of intangible assets
   from acquisitions(1)                  1.1          5.6       0.7      7.4
  Adjusted gross profit                 44.2         22.9      11.8     78.9

  (1) Amortization of intangible assets from acquisitions includes assets
      such as client database and brand names.

  Operating Expenses


Operating expenses were composed of selling and marketing expenses, general and administrative expenses, impairment charges and loss on disposal of subsidiaries ("disposal loss"). Operating expenses for the fourth quarter of 2008 including the impairment charges and disposal loss were $261.8 million. Excluding the impairment charges of $233.0 million and disposal loss of $4.7 million, operating expenses were $24.1 million (non-GAAP), up 92% year-on-year and 52% sequentially. The year-on-year and sequential increase is mainly due to an increase in selling and marketing expenses in line with increased revenue, an increase in share-based compensation expenses and costs for Sarbanes-Oxley compliance. Operating expenses for full year 2008 including the impairment charges and disposal loss were $313.7 million. Excluding the impairment charges of $233.0 million and disposal loss of $4.7 million, operating expenses were $76.0 million (non-GAAP), up 94% over full year 2007. The increase is mainly due to an increase in selling and marketing expenses in line with increased revenue, an increase in share-based compensation expenses and costs for Sarbanes-Oxley compliance.

Selling and marketing expenses for the fourth quarter of 2008 were $8.7 million, up 49% year-on-year from $5.8 million in the fourth quarter of 2007 or up 141% sequentially from $3.6 million in the third quarter of 2008. Selling and marketing expenses for full year 2008 were $22.9 million, up 54% from $14.9 million in full year 2007.

General and administrative expenses for the fourth quarter of 2008 were $15.4 million, up 128% year-on-year from $6.7 million in the fourth quarter of 2007, or up 26% sequentially from $12.2 million in the third quarter of 2008. General and administrative expenses for full year 2008 were $53.0 million, up 118% from $24.3 million in full year 2007. Included in the general and administrative expenses for the full year and fourth quarter 2008 were share-based compensation expenses of $12.3 million and $4.4 million respectively.

Due to repositioning of the business to sports and entertainment and the economic downturn, the Company has recorded one-time charges of $245.6 million in the fourth quarter of 2008. This is composed of asset impairment charges of $233.0 million, write down of principal protected note of $8.5 million and others of $4.1 million. Please refer to Chart 13 for details. The asset impairment charges are driven mainly by goodwill and intangible assets write down of $206.4 million in connection with the impairment test conducted at year-end. The fair value of the reporting units, calculated based on the future discounted cash flow, is less than their carrying values, including goodwill.

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 fourth quarter of 2008 was $5.2 million, down 47% year-on-year from $9.9 million in the fourth quarter of 2007 or down 45% sequentially from $9.5 million in the third quarter of 2008.

  Chart 10:  Adjusted EBITDA by business group for the fourth quarter of
  2008

  In US millions                    Advertising    Broadcast  Print    Total
  Adjusted EBITDA by
   business group                        8.3          0.9      1.3     10.5
  Less: net head office expenses                                       (5.3)
  Adjusted EBITDA                                                       5.2




Adjusted EBITDA (non-GAAP), for full year 2008 was $28.4 million, up 4% from $27.4 million in full year 2007.

  Chart 11:  Adjusted EBITDA by business group for full year 2008

  In US millions                    Advertising    Broadcast  Print    Total
  Adjusted EBITDA by
   business group                       28.0         14.0      5.7     47.7
  Less: net head office expenses                                      (19.3)
  Adjusted EBITDA                                                      28.4


  Net Income and Adjusted Net Income (non-GAAP)


Net loss for the fourth quarter of 2008 including one-time items was $251.5 million. Excluding the one-time items of $245.6 million, net loss was $5.9 million (non-GAAP). Net loss for the full year 2008 including one-time items was $274.9 million. Excluding the one-time items of $263.3 million, net loss was $11.6 million (non-GAAP).

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 fourth quarter of 2008 was $3.3 million, down 61% year-on-year from $8.6 million in the fourth quarter of 2007 or down 55% sequentially from $7.4 million in the third quarter of 2008.

Adjusted net income (non-GAAP), for full year 2008 was $19.8 million, down 32% from $29.1 million in full year 2007.

Outlook for 2009

We expect to issue full year guidance at or before the first quarter report.

  Other Corporate Development
  Repositioning and Name Change


Since the Company has been growing its media capabilities beyond finance with a particular focus on sports and entertainment, on December 5, 2008, the Board of Directors made a decision to reposition the Company and change its name to Xinhua Sports & Entertainment Limited. On January 15, 2009, the name change was approved by shareholders at an Extraordinary General Meeting, and the name change became effective following registration with the Company Registry of the Cayman Islands on February 15, 2009. The Company is also changing its trading symbol on NASDAQ from "XFML" to "XSEL" effective March 2, 2009.

Conference Call Information

Following the earnings announcement, XFMedia's senior management will host a conference call on February 23, 2009 at 8:00pm (New York) / February 24, 2009 at 9:00am (Beijing) to review the results and discuss recent business activities.

  Interested parties may dial into the conference call at:
  (US) [phone] or [phone] (UK) [phone]
  (Mainland China) + 86 10 800 130 0399
  (Asia Pacific) [phone]
  Passcode: 64854718



A telephone replay will be available two hours after the call for one week at:

  (US Toll Free) [phone]
  (International) [phone]
  Passcode: 63418060

  A real-time webcast and replay will be also available at:
  http://www.xfmedia.cn/earnings-webcast


  For more information, please contacts:

  Media Contact
   Ms. Joy Tsang
   XFMedia
   Tel:   [phone]
   Email: 

   Ms. Lindsay Koval
   AGG International
   Tel:   [phone]
   Email: 

  IR Contact
   Mr. Edward Liu
   XFMedia
   Tel:   [phone]
   Email: 

   Mr. Howard Gostfrand
   American Capital Ventures
   Tel:       [phone]
   Toll free: [phone]
   Email:     

  About XFMedia


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 http://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 first quarter and full year 2009 and quotations from management in this announcement, as well as XFMedia's 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 XFMedia's 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 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 XFMedia's 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 one-time items, amortization of intangible assets from acquisitions, share-based compensation expenses and imputed interest. XFMedia believes that these non- GAAP financial measures provide investors with another method for assessing XFMedia's 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 12 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 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 12: Reconciliation of non-GAAP financial results

                                           3      3      3      12     12
                                         months months months months months
                                         ended  ended  ended  ended  ended
                                          Dec    Dec    Sep     Dec    Dec
                                           31,    31,    30,    31,    31,
                                          2008   2007   2008   2008   2007
  In US millions
  Income (loss) from operations         (242.2)  6.0     3.5  (240.6) 15.8
  One time items*                        238.7    --     0.5   239.8  (2.3)
  Depreciation                             0.7   0.6     0.8     2.8   1.7
  Amortization of intangible assets from
   acquisitions                            3.6   2.7     3.4    14.1   9.1
  Share-based compensation expenses        4.4   0.6     1.3    12.3   3.1
  Adjusted EBITDA                          5.2   9.9     9.5    28.4  27.4

  Net income (loss)                     (251.5)  4.2   (15.9) (274.9) 28.0
  One time items*                        245.6    --    17.0   263.3 (16.9)
  Amortization of intangible assets from
   acquisitions                            3.6   2.7     3.4    14.1   9.1
  Share-based compensation expenses        4.4   0.6     1.3    12.3   3.1
  Imputed interest                         1.2   1.1     1.6     5.0   5.8
  Adjusted net income                      3.3   8.6     7.4    19.8  29.1

  * Please refer to Chart 13 for the breakdown.


  Chart 13: Breakdown of one time items
                                           3      3      3      12     12
                                         months months months months months
                                         ended  ended  ended  ended  ended
                                          Dec    Dec    Sep     Dec    Dec
                                           31,    31,    30,    31,    31,
                                          2008   2007   2008   2008   2007
  In US millions
  Impairment charges:
   Goodwill and Intangible assets(1)     206.4    --     --   206.4    --
   Accounts receivable (2)                 9.4    --     --     9.4    --
   Content production costs                3.1    --     --     3.1    --
   Investments                             1.3    --     --     1.3    --
   Property and equipment                  2.4    --     --     2.4    --
   Other assets (3)                       10.4    --     --    10.4    --
  Total impairment charges               233.0    --     --   233.0    --
  Loss on disposal of subsidiaries (4)     4.7    --     --     4.7    --
  One-time legal and professional
   fees(income)                            1.0    --    0.5     2.1  (2.3)
  One time items recorded in
   adjusted EBITDA                       238.7    --    0.5   239.8  (2.3)
  Provision for principal
   protected note (5)                      8.5    --   16.5    25.0    --
  Deferred tax credit                     (2.0)   --     --    (2.0)(12.3)
  Others                                   0.4    --     --     0.5  (2.3)
  One time items recorded in adjusted
   net income                            245.6    --   17.0   263.3 (16.9)

  1. The impairment charges were mainly driven by the Company's
     repositioning in sports and entertainment and the economic downturn.
  2. The Company made specific provision on a majority of account
     receivables aged over 180 days as visibility for settlement is
     uncertain due to the economic downturn. As a result, specific provision
     for doubtful debts increased by $9.4 million in the fourth quarter of
     2008.
  3. Other assets mainly represent an $8.5 million write off of a promissory
     note issued by Sino Investment in connection with the acquisition of
     37% equity of Upper Step by the Company from Sino Investment in 2007.
     Challenging economic conditions have resulted in a slowdown in the
     economy and impaired the ability of the issuer to pay the principal and
     accrued interest. Sino Investment was in default of its interest
     payments as of December 31, 2008 and the Company recorded a provision
     for the full amount of the note.
  4. Loss on the disposal of subsidiaries represents a non-cash loss arising
     from disposal of 85% interests in Convey. On December 31, 2008, the
     Company disposed of 85% of its investment in Convey to its previous
     owner for approximately $85.0 million, retaining the remaining 15% as
     investment. Since the purchase price was to be paid by seven
     installments, the Company applied a discount rate to arrive at the
     present value of the cash flows. The actual sum of consideration
     receivable is contingent on the finalization of the 2008 earnout
     payable by the Company to the previous owner, based on a multiple of
     net income of Convey for the period from July 1, 2008 to June 30, 2009
     ("2008 Earn Out Period") and will be offset against the installment
     receivable in the third quarter of 2009 pursuant to the terms of the
     sales agreement. Should the actual net income of Convey for the 2008
     Earn Out Period be lower or higher than the one currently estimated by
     the Company, there would be favorable or unfavorable impact on the loss
     on disposal of Convey and the range of potential impact on such loss
     would be from a reduction of loss of approximately $11 million (i.e.
     become a gain on disposal of $7 million) to an additional loss of
     approximately $29 million.
  5. A partial provision of $16.5 million was taken in third quarter of 2008
     against the principal protected note based on a recovery analysis
     report on Lehman Brothers Holdings Inc ("LBHI") issued by a third
     party credit rating firm after the LBHI bankruptcy. In this quarter,
     the Company impaired the remaining value of $8.5 million of the
     principal protected note.


  Net income and adjusted net income per ADS are shown in Chart 14 and 15:


  Chart 14: Net income and adjusted net income per ADS(1) for 2007 fourth
            quarter and 2008 fourth and third quarter results

                                        3 months   3 months      3 months
                                         ended      ended         ended
                                         Dec 31,    Dec 31,       Sep 30,
  In US dollars                           2008       2007          2008

   Net income (loss) per ADS - basic     ($3.58)     $0.06        ($0.24)
   Net income (loss) per ADS - diluted   ($3.58)     $0.06        ($0.24)
   Weighted average number of ADS -
    basic                             70.4 million 64.8 million 68.2 million
   Weighted average number of ADS -
    diluted                           70.4 million 72.1 million 68.2 million

   Adjusted net income per ADS - basic    $0.04      $0.13        $0.10
   Adjusted net income per ADS - diluted  $0.04      $0.12        $0.10
   Weighted average number of ADS -
    basic                             70.4 million 64.8 million 68.2 million
   Weighted average number of ADS -
    diluted                           72.2 million 72.1 million 71.8 million

  1. For computation of the net income (loss) per ADS and adjusted net
     income per ADS, the amount attributable to holders of common shares
     should be used and accordingly, dividends on convertible preference
     shares of $0.6 million were taken into account.



  Chart 15: Net income and adjusted net income per ADS(1) for 2008 and 2007

                                         12 months ended   12 months ended
  In US dollars                            Dec 31, 2008      Dec 31, 2007
   Net income (loss) per ADS - basic         ($4.08)             $0.46
   Net income (loss) per ADS - diluted       ($4.08)             $0.42
   Weighted average number of ADS -
    basic                                  67.9 million       58.2 million
   Weighted average number of ADS -
    diluted                                67.9 million       68.2 million

   Adjusted net income per ADS - basic        $0.26              $0.48
   Adjusted net income per ADS - diluted      $0.25              $0.43
   Weighted average number of ADS -
    basic                                  67.9 million       58.2 million
   Weighted average number of ADS -
    diluted                                72.4 million       68.2 million

  1. For computation of the net income (loss) per ADS and adjusted net
     income per ADS, the amount attributable to holders of common shares
     should be used and accordingly, dividends on convertible preference
     shares of $2 million in the full year 2008 were taken into account.


  Condensed Consolidated Balance Sheet

  (In U.S. dollars)                        Dec 31, 2008      Dec 31, 2007
                                            Unaudited          (Note 1)
  Assets
  Current assets:                           54,088,842        44,436,087
     Cash and cash equivalents
     Short term deposit                      2,940,051                --
     Restricted cash (Note 2)               37,510,000        47,252,191
     Accounts receivable (Note 3)           44,762,902        45,706,766
     Prepaid program expenses                2,324,253         5,389,250
     Consideration receivable (Note 4)      36,970,590                --
     Other current assets                   14,902,170        16,272,798
  Total current assets                     193,498,808       159,057,092
  Content production costs, net                     --         8,855,896
  Property and equipment, net                6,590,790         9,191,959
  Intangible assets, net (Note 5)          200,528,583       233,505,913
  Goodwill (Note 6)                         46,992,724       180,125,488
  Investment (Note 7)                       13,508,239           500,000
  Principal protected note (Note 8)                 --        24,909,929
  Deposits for investments                  14,174,566        25,634,000
  Consideration receivable (Note 4)         28,285,035                --
  Other long-term assets                     4,671,591         9,021,936
  Total assets                             508,250,336       650,802,213

  Liabilities, mezzanine equity and
   shareholders' equity
  Current liabilities:
     Bank borrowings (Note 8)               36,374,198        33,780,188
     Bank overdrafts                                --           960,157
     Other current liabilities              69,900,342        44,473,366
  Total current liabilities                106,274,540        79,213,711
  Deferred tax liabilities                  31,679,491        37,741,579
  Long term payables, non-current
   portion                                 101,505,496        65,150,610
  Total liabilities                        239,459,527       182,105,900
  Minority Interests                         2,565,177         2,060,745

  Mezzanine equity:                         30,605,591                --
  Series B convertible preferred shares
  Shareholders' equity:                        104,302            90,061
  Class A common shares and nonvested
   shares
  Class B common shares                             --             7,442
  Additional paid-in capital               481,318,345       439,516,974
  (Deficits) retained earnings            (252,968,439)       23,903,560
  Accumulated other
   comprehensive income                      7,165,833         3,117,531
  Total shareholders' equity               235,620,041       466,635,568
  Total liabilities, mezzanine equity
   and shareholders' equity                508,250,336       650,802,213



  Condensed Consolidated Statement of Operations

                                        3 months     3 months     3 months
                                          ended        ended        ended
                                         Dec 31,      Dec 31,      Sep 30,
            (in U.S. Dollars)              2008         2007         2008
                                        Unaudited    Unaudited    Unaudited
  Net revenues:
     Advertising services               32,378,588  32,427,419   27,484,357
     Content production                  1,102,455   1,776,291    7,807,840
     Advertising sales                  15,913,009  13,834,490   15,696,762
     Publishing services                    39,732     436,503       61,757
  Total net revenues                    49,433,784  48,474,703   51,050,716
  Cost of revenues:
     Advertising services               20,905,713  22,137,944   19,349,359
     Content production                  1,826,626     593,496    4,192,846
     Advertising sales                   7,501,974   6,922,148    8,457,096
     Publishing services                   595,161     238,480      334,708
  Total cost of revenues                30,829,474  29,892,068   32,334,009
  Operating expenses:
     Selling and distribution            8,656,662   5,794,457    3,587,917
     General and administrative         15,387,212   6,740,401   12,186,200
     Impairment charges (Note 9)       232,987,157          --           --
     Loss on disposal of subsidiaries    4,720,705          --           --
  Total operating expenses             261,751,736  12,534,858   15,774,117
  Other operating income                   941,365          --      550,797
  (Loss) income from operations       (242,206,061)  6,047,777    3,493,387
  Other income (expenses) (Note 10)    (10,723,757)   (660,440) (18,578,516)

  (Loss) Income before provision for
   income taxes and minority interest (252,929,818)  5,387,337  (15,085,129)
  Provision for income taxes
   (Note 11)                            (1,546,363)    719,289      571,824
  Net (loss) income before minority
   interest                           (251,383,455)  4,668,048  (15,656,953)
  Minority interest                         97,192     510,928      217,192
  Net (loss) income                   (251,480,647)  4,157,120  (15,874,145)
  Dividend on redeemable convertible
   preferred shares                       (600,000)         --     (600,000)
  Net (loss) income attributable
   to holders of common shares        (252,080,647)  4,157,120  (16,474,145)


  Net (loss) income per share:
     Basic - Common shares                   (1.79)       0.03        (0.12)
     Basic - American Depositary
      Shares                                 (3.58)       0.06        (0.24)
     Diluted - Common shares                 (1.79)       0.03        (0.12)
     Diluted - American Depositary
      Shares                                 (3.58)       0.06        (0.24)


  Condensed Consolidated Statement of Operations

                                           12 months ended   12 months ended
             (in U.S. Dollars)               Dec 31, 2008      Dec 31, 2007
                                               Unaudited          (Note 1)
  Net revenues:
     Advertising services                     107,891,719        86,681,143
     Content production                        12,371,911         7,680,580
     Advertising sales                         65,355,685        39,281,540
     Publishing services                          411,637         1,195,427
  Total net revenues                          186,030,952       134,838,690
  Cost of revenues:
     Advertising services                      74,735,032        58,047,996
     Content production                         7,521,948         3,707,062
     Advertising sales                         30,756,279        19,490,013
     Publishing services                        1,479,005           854,020
  Total cost of revenues                      114,492,264        82,099,091
  Operating expenses:
     Selling and distribution                  22,945,933        14,876,682
     General and administrative                53,012,487        24,348,827
     Impairment charges (Note 9)              232,987,157                --
     Loss on disposal of subsidiaries           4,720,705                --
  Total operating expenses                    313,666,282        39,225,509
  Other operating income                        1,499,381         2,261,788
  (Loss) income from operations              (240,628,213)       15,775,878
  Other income (expenses) (Note 10)           (31,248,876)        1,340,111
  (Loss) Income before provision for
   income taxes and minority interest        (271,877,089)       17,115,989
  Provision for income taxes (Note 11)          2,354,442       (12,225,650)
  Net (loss) income before
   minority interest                         (274,231,531)       29,341,639
  Minority interest                               640,468         1,302,634
  Net (loss) income                          (274,871,999)       28,039,005
  Dividend on redeemable convertible
   preferred shares                            (2,000,000)       (1,338,333)
  Net (loss) income attributable to
   Holders of common shares                  (276,871,999)       26,700,672


  Net (loss) income per share:
     Basic - Common shares                          (2.04)             0.23
     Basic - American Depositary Shares             (4.08)             0.46
     Diluted - Common shares                        (2.04)             0.21
     Diluted - American Depositary Shares           (4.08)             0.42



  Condensed Consolidated Statement of Cash Flow

                                        3 months     3 months     3 months
                                          ended        ended        ended
                                         Dec 31,      Dec 31,      Sep 30,
            (in U.S. Dollars)              2008         2007         2008
                                        Unaudited    Unaudited    Unaudited
  Net cash provided by operating
   activities                           5,736,274   14,696,170    3,196,632
  Net cash used in investing
   activities                         (22,449,084) (43,368,652) (10,874,537)
  Net cash provided by (used in)
   financing activities                25,826,648   (3,165,011)  (4,217,299)
  Effect of exchange rate changes        (360,000)     922,837      156,411
  Net increase (decrease) in cash and
   cash equivalents                     8,753,838  (30,914,656) (11,738,793)
  Cash and cash equivalents, as at
   beginning of the period             45,335,004   75,350,743   57,073,797
  Cash and cash equivalents, as at
   end of the period                   54,088,842   44,436,087   45,335,004


                                           12 months ended   12 months ended
             (in U.S. Dollars)               Dec 31, 2008      Dec 31, 2007
                                               Unaudited          (Note 1)
  Net cash provided by operating
   activities                                 14,981,597         20,293,223
  Net cash used in investing activities      (54,466,218)      (164,921,628)
  Net cash provided by (used in)
   financing activities                       46,521,449        151,258,756
  Effect of exchange rate changes              2,615,927          1,452,189
  Net increase (decrease) in cash and
   cash equivalents                            9,652,755          8,082,540
  Cash and cash equivalents, as at
   beginning of the period                    44,436,087         36,353,547
  Cash and cash equivalents, as at end
   of the period                              54,088,842         44,436,087


  Notes to Financial Information



1) 2007 condensed consolidated balance sheet, statement of operations and statement of cash flow

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) Accounts receivables and debtors turnover

Debtors turnover for the third quarter and fourth quarter of 2008 were 97 days and 95 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. Due to economic downturn, the Company made specific provision on a majority of account receivables aged over 180 days. As a result, specific provision for doubtful debts increased by $9.4 million in the fourth quarter of 2008.

4) Consideration receivable

As of December 31, 2008, the Company recorded current and non-current consideration receivable of $37.0 million and $28.3 million respectively. This represents the consideration receivable for the disposal of 85% shareholding of Convey due to the Company's repositioning in sports and entertainment.

On December 31, 2008, the Company disposed of 85% of its investment in Convey to its previous owner for approximately $85.0 million, retaining the remaining 15%. Since the purchase price is to be paid by seven installments, the Company applied a discount rate to arrive at the present value of the cash flows. The actual sum of consideration receivable is contingent on the finalization of the 2008 earnout payable by the Company to the previous owner, based on a multiple of net income of Convey for the period from July 1, 2008 to June 30, 2009 ("2008 Earn Out Period") and will be offset against the installment receivable in the third quarter of 2009 pursuant to the terms of the sales agreement. Should the actual net income of Convey for the 2008 Earn Out Period be lower or higher than the one currently estimated by the Company, there would be favorable or unfavorable impact on the loss on disposal of Convey and the range of potential impact on such loss would be from a reduction of loss of approximately $11 million (i.e. become a gain on disposal of $7 million) to an additional loss of approximately $29 million.

5) Intangible assets

Net book value on intangible assets as of December 31, 2008 was $200.5 million. It mainly represents the carrying value of the long-term advertising agreements for the Broadcast and Print Groups. The net book value of the intangible assets were primarily composed of a $99.1 million advertising license agreement for our TV business and a $74.3 million exclusive advertising agreement for our newspaper business. For the fourth quarter and full year 2008, the Company recorded an impairment charge of $25.6 million.

6) Goodwill

As of December 31, 2008, net book value of goodwill was $47.0 million. For the fourth quarter and full year 2008, the Company recorded an impairment charge of $180.8 million.

7) Investment

Net book value for investment as of December 31, 2008 was $13.5 million. It represents the remaining 15% interest in Convey upon disposal of our 85% shareholding. For the fourth quarter and full year 2008, the Company recorded an impairment charge of $1.3 million which is composed of $0.5 million and $0.8 million for impairment charge made on 19% and 15% shareholding in Hyperlink E-data International Limited and Convey respectively.

8) 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 matured 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. At December 31, 2008, the Company has taken full provision of $25.0 million against the principal protected note. (see note 10)

9) Impairment charges

Driven mainly by the Company's repositioning in sports and entertainment and the economic downturn, the Company recorded a one-time asset impairment charge of $233.0 million for the fourth quarter and full year 2008. The following table is a summary:

                                         US millions
  Accounts receivable                        9.4
  Goodwill & Intangible assets             206.4
  Content production costs                   3.1
  Investments                                1.3
  Property, plant and equipment              2.4
  Other assets                              10.4
                                           233.0

  10) Other income (expenses)


Other income (expenses) include net interest income (expenses) and net other income (expenses). Other income (expenses) for the fourth quarter include a provision of $8.5 million against the principal protected note driven mainly by the economic downtown. Other income (expenses) for full year 2008 include a provision of $25.0 million against the principal protected note.

A partial provision of $16.5 million was taken in third quarter of 2008 against the principal protected note based on a recovery analysis report on Lehman Brothers Holdings Inc ("LBHI") issued by a third party credit rating firm after the LBHI bankruptcy. In this quarter, the Company impaired the remaining value of $8.5 million of the principal protected note.

11) Provision for income taxes

Provision for income taxes include deferred tax credits of $0.7 million and $1.8 million in the third quarter and fourth quarter of 2008. For the fourth quarter and full year 2008, the Company recorded a deferred tax credit of $2.0 million relating to the impairment of certain assets. 

DATASOURCE: XFMedia



CONTACT: Media Contact: Ms. Joy Tsang of XFMedia at [phone], or

; or Ms. Lindsay Koval of AGG International at +1-212-614-

4170, or ; IR Contact: Mr. Edward Liu of XFMedia at +86-21-

6113-5978, or ; or Mr. Howard Gostfrand of American

Capital Ventures at [phone], Toll free [phone], or

, for XFMedia 



Web site: http://www.xfmedia.cn/

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