Xinhua Finance Media Ltd - Report of Foreign Issuer (6-K)

 

 

FORM 6-K

 

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report: May 12, 2008

Commission File Number: 001-33328

 

XINHUA FINANCE MEDIA
LIMITED

 

2201, Tower D, Central International Trade Center,
6A Jian Wai Avenue, Chaoyang District,
Beijing 100022, People’s Republic of China
(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover 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 by furnishing the information contained in this Form, the registrant 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-                     

 

 

 

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XINHUA FINANCE MEDIA LIMITED

Form 6-K

Xinhua Finance Media Limited (“XFML”) is furnishing, under the cover of Form 6-K, the press release issued by XFML on May 12, 2008 regarding its financial results for the fiscal quarter ended March 31, 2008.

 

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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.

	XINHUA FINANCE MEDIA LIMITED
	By:	/s/ Fredy Bush
	Name:	Fredy Bush
	Title:	Chief Executive Officer

Date: May 12, 2008

 

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[FOR IMMEDIATE RELEASE]

XFMedia announces financial results for the first quarter 2008

BEIJING, May 13, 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 first quarter ended March 31, 2008.

First Quarter 2008 Highlights

•		Net revenue for the first quarter exceeded mid-point guidance by 33.5% to $36.7 million
•		Strong y-o-y performance in adjusted EBITDA (non-GAAP) 1 growing by 70% to $3.1 million
•		Adjusted net income 1 per diluted ADS for the first quarter of 2008 was $0.02
•		Continued expansion in Broadcast, Print, and Outdoor, our higher margin businesses
•		Full year 2008 net revenue forecast increased to range from $195 million to $205 million and full year 2008 adjusted net income per diluted ADS estimated to range from $0.31 to $0.33
•		Second quarter 2008 net revenue estimated to range from $48 million to $50 million and adjusted net income per diluted ADS to range from $0.07 to $0.09

“We are pleased to report a great start to the year,” said Ms Fredy Bush, XFMedia’s Chief Executive Officer, “with strong year-over-year growth for the first quarter and overall results ahead of management forecasts. We focused on expanding our higher margin businesses such as Broadcast, Print and Outdoor. Integration has also been proceeding smoothly, with Production integrated into the Broadcast Group and Research integrated into the Advertising Group, giving us three business groups from five before. Current ranking for the NMTV satellite station reached a high of 23rd out of 35 provincial satellite stations in April 2008, boosted by the growing popularity of our Fortune China TV programs and the launch of “The Scene”, a daily lifestyle program for the upwardly mobile. “

“In line with our promised expansion in Print, we announced the launch of Investor Journal, a weekly newspaper aimed at informing the growing retail investor market. We also formed the Xinhua Media Entertainment subsidiary and partnered with China Film Group to focus on Sino-US film development, production, and pre-production. Capitalizing on these opportunities, we continue to solidify our market position as a leading media group in China,” Ms Bush added.

1.

In this quarter, the definitions of adjusted EBITDA and adjusted net income have been revised to better reflect the Company’s underlying financial and operational performance. Please refer to Chart 8 for detailed calculations of adjusted EBITDA and adjusted net income.

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First Quarter 2008 Financial Results

The following is a summary of our financial results for the first quarter of 2008:

Chart 1: Summary of financial results

		3 months ended				3 months ended				3 months ended				08Q1 vs 07Q1				08Q1 vs 07Q4
In US millions		Mar 31, 2008				Mar 31, 2007				Dec 31, 2007				growth %				growth %
Net revenue			36.7				16.7				48.5				120	%			-24	%
Adjusted EBITDA 1			3.1				1.8				9.9				70	%			-69	%
Net income (loss) 2			(8.3	)			12.6				4.2				N/A				N/A
Net income per ADS — diluted 4		$	(0.13	)		$	0.23			$	0.06				N/A				N/A
Adjusted net income 1,3			1.4				1.9				8.6				-23	%			-83	%
Adjusted net income per ADS - diluted 4		$	0.02			$	0.04			$	0.12				-50	%			-83	%

 

1.		In this quarter, the definitions of adjusted EBITDA and adjusted net income have been revised to better reflect the Company’s underlying financial and operational performance. Please refer to Chart 8 for detailed calculation of adjusted EBITDA and adjusted net income.
2.		The year-on-year decrease in net income is primarily due to a one-time tax gain of $12.3 million in the first quarter of 2007, and for the first quarter of 2008 increased share-based compensation expense and costs for Sarbanes-Oxley compliance. The sequential decrease in net income is primarily due to seasonality, share-based compensation expense, and costs for Sarbanes-Oxley compliance for the first quarter of 2008.
3.		The year-on-year decrease in adjusted net income is primarily due to increased tax provisions and costs for Sarbanes-Oxley compliance for the first quarter of 2008. The sequential decrease in adjusted net income is primarily due to seasonality and costs for Sarbanes-Oxley compliance for the first quarter of 2008.
4.		Please refer to Chart 9 for weighted average number of ADS on a diluted basis.

Net Revenue

Net revenue for the first quarter of 2008 was $36.7 million, up 120% year-over-year from $16.7 million in the first quarter of 2007 or down 24% sequentially from $48.5 million in the fourth quarter of 2007. The primary reason for quarter-on-quarter sequential decline is the seasonality of the media industry, which historically is impacted in the first quarter by the Chinese New Year holiday. This year’s first quarter slowdown in advertising was further impacted by the National People’s Congress of China held in March.

Net Revenue by type and business group

The following is a summary of net revenue by business group reconciled to types of revenue provided in the accompanying consolidated financial statements for the first quarter of 2008. Please note that as of first quarter 2008, our business groups have been integrated from five (Advertising, Broadcast, Print, Production, and Research) to three, with Production integrated into Broadcast and Research integrated into Advertising.

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Chart 2: Revenue breakdown by type and business group

In US millions		Advertising 1				Broadcast 2				Print				Total
Net revenue:
Advertising services			16.9				3.4				0.8				21.1
Content production			—				0.6				—				0.6
Advertising sales			4.6				6.8				3.4				14.8
Publishing services			—				—				0.2				0.2
Total net revenue:			21.5				10.8				4.4				36.7

 

1.		In the first quarter of 2008, the former Research Group was integrated into the Advertising Group.
2.		In the first quarter of 2008, the former Production Group was integrated into the Broadcast Group.

Advertising Group

Net revenue for the Advertising Group for the first quarter of 2008 was $21.5 million, up 159% year-over-year from $8.3 million in the first quarter of 2007. Net revenue for the first quarter of 2008 was down 29% sequentially from $30.1 million in the fourth quarter of 2007, primarily due to seasonality.

Chart 3: Revenue breakdown of the Advertising Group

		3 months				3 months								3 months				3 months
		ended				ended				Growth				ended				ended				Growth
In US millions		Mar 31, 2008				Mar 31, 2007				%				Mar 31, 2008				Dec 31, 2007				%
Advertising 1 :
Television			—				1.0				-100	%			—				4.6				-100	%
Print/Online			6.4				4.8				35	%			6.4				12.8				-50	%
Outdoor/Other			6.5				1.5				313	%			6.5				6.0				6	%
BTL Marketing			7.4				—				—				7.4				5.5				35	%
Research 2			1.2				1.0				28	%			1.2				1.2				5	%
Subtotal:			21.5				8.3				159	%			21.5				30.1				-29	%

 

1.		In the first quarter of 2008, the former Television business of the Advertising Group was migrated into the Broadcast Group.
2.		In the first quarter of 2008, the former Research Group was integrated into the Advertising Group. The 2007 comparative numbers are adjusted accordingly.

Broadcast Group

Net revenue for the Broadcast Group for the first quarter of 2008 was $10.8 million, up 116% year-over-year from $5.0 million in the first quarter of 2007 or down 17% sequentially from $12.9 million in the fourth quarter of 2007, primarily due to seasonality.

Chart 4: Revenue breakdown of the Broadcast Group

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		3 months				3 months								3 months				3 months
		ended				ended				Growth				ended				ended				Growth
In US millions		Mar 31, 2008				Mar 31, 2007				%				Mar 31, 2008				Dec 31, 2007				%
Broadcast:
Television 1			5.8				3.8				52	%			5.8				3.7				55	%
Radio			1.6				0.4				283	%			1.6				2.1				-24	%
Mobile			2.8				—				—				2.8				5.3				-47	%
Production 2			0.6				0.8				-26	%			0.6				1.8				-68	%
Subtotal:			10.8				5.0				116	%			10.8				12.9				-17	%

 

1.		In the first quarter of 2008, the former Television business of the Advertising Group was migrated into the Broadcast Group.
2.		In the first quarter of 2008, the former Production Group was integrated into the Broadcast Group. The 2007 comparative numbers are adjusted accordingly.

Print Group

Net revenue for the Print Group for the first quarter of 2008 was $4.4 million, up 31% year-over-year from $3.4 million in the first quarter of 2007 or down 18% sequentially from $5.4 million in the fourth quarter of 2007, primarily due to seasonality.

Chart 5: Revenue breakdown of the Print Group

		3 months				3 months								3 months				3 months
		ended				ended				Growth				ended				ended				Growth
In US millions		Mar 31, 2008				Mar 31, 2007				%				Mar 31, 2008				Dec 31, 2007				%
Print:
Newspaper			2.3				1.9				21	%			2.3				2.6				-11	%
Magazines			2.1				1.5				44	%			2.1				2.8				-25	%
Subtotal:			4.4				3.4				31	%			4.4				5.4				-18	%

Gross Profit

Gross profit for the first quarter of 2008 was $13.1 million, up 161% year-over-year from $5.0 million in the first quarter of 2007 or down 29% sequentially from $18.6 million in the fourth quarter of 2007. Adjusted gross profit (non-GAAP), defined as gross profit before amortization of intangible assets from acquisitions, for the first quarter of 2008 was $15.1 million, up 147% year-over-year from $6.1 million in the first quarter of 2007 or down 26% sequentially from $20.5 million in the fourth quarter of 2007. We provide adjusted gross profit to break out the amortization of intangible assets from acquisitions charged within 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

In US millions		Advertising				Broadcast				Print				Total
Gross Profit			6.1				4.0				3.0				13.1
Amortization of intangible assets from acquisitions 1			0.4				1.4				0.2				2.0
Adjusted gross profit			6.5				5.4				3.2				15.1

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1.		Amortization of intangible assets from acquisitions includes assets such as client database, brand names, and production inventory.

Operating Expenses

Operating expenses for the first quarter of 2008 were $19.3 million, up 194% year-over-year from $6.6 million in the first quarter of 2007 or up 54% sequentially from $12.5 million in the fourth quarter of 2007. The year-on-year and sequential increases are mainly due to an increase in selling and marketing expenses in line with increased revenue, increased share based compensation expense, 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 first quarter of 2008 were $5.1 million, up 225% year-over-year from $1.6 million in the first quarter of 2007 or down 11% sequentially from $5.8 million in the fourth quarter of 2007.

General and administrative expenses for the first quarter of 2008 were $14.1 million, up 183% year-over-year from $5.0 million in the first quarter of 2007 or up 110% sequentially from $6.7 million in the fourth quarter of 2007. Included in general and administrative expenses was $4.9 million of share based compensation expenses.

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 first quarter of 2008 was $3.1 million, up 70% year-over-year from $1.8 million in the first quarter of 2007 or down 69% sequentially from $9.9 million in the fourth quarter of 2007. The primary reasons for sequential decline in adjusted EBITDA are seasonality and the Sarbanes-Oxley compliance process. For a reconciliation from income from operations to adjusted EBITDA, refer to Chart 8.

Chart 7: Adjusted EBITDA by business group

In US millions		Advertising				Broadcast				Print				Total
Adjusted EBITDA by business group			2.9				3.1				1.7				7.7
Less: net head office expenses															(4.6	)
Adjusted EBITDA															3.1

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Net Income and Adjusted Net Income (non-GAAP)

Net loss for the first quarter of 2008 was $8.3 million, down by $20.9 million year-over-year from net income of $12.6 million in the first quarter of 2007 or down by $12.5 million sequentially from net income of $4.2 million in the fourth quarter of 2007. The net income of $12.6 million for first quarter of 2007 included a one-time tax gain of $12.3 million. The primary reasons for the year-on-year decline are the one-time tax gain, increased share based compensation expense, and higher costs to support Sarbanes-Oxley compliance. The primary reasons for the sequential decline in net income are seasonality, increased share based compensation expense, and costs for Sarbanes-Oxley compliance for the first quarter of 2008.

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 first quarter of 2008 was $1.4 million, down 23% year-over-year from $1.9 million in the first quarter of 2007 or down 83% sequentially from $8.6 million in the fourth quarter of 2007. The primary reasons for year-over-year decline in adjusted net income are increased tax provisions and costs for Sarbanes-Oxley compliance. The primary reasons for sequential decline in adjusted net income are seasonality and costs for Sarbanes-Oxley compliance. For a reconciliation from net income to adjusted net income, please refer to Chart 8.

Outlook for second quarter and full year of 2008

XFMedia estimates its net revenue for the second quarter of 2008 will range from $48 million to $50 million. Second quarter adjusted net income per ADS is estimated to range from $0.07 to $0.09 per diluted ADS based on 81.8 million total ADS equivalent average shares outstanding.

XFMedia is raising its estimate of net revenue for full year 2008 to range from $195 million to $205 million from previously forecasted range of $190 million to $200 million. Full year adjusted net income per ADS for 2008 is estimated to range from $0.31 to $0.33 per diluted ADS based on 82.7 million total ADS equivalent average shares outstanding.

XFMedia also expects that for the full year 2008, share-based compensation expense will be approximately $10 million, amortization of intangible assets from acquisitions approximately $13 million, and imputed interest approximately $4 million. This forecast reflects XFMedia’s current and preliminary view, which is subject to change.

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Other Corporate Developments

Over the first quarter of 2008, the Company continued to implement its share buyback program, buying back $2.9 million for 1,017,118 ADSs. These shares will be canceled in accordance with Cayman company law.

We also issued $30 million in convertible preferred shares to Yucaipa in February, increasing Yucaipa’s total ownership of our shares from around 6% to 12% assuming full conversion. The convertible preferred shares are subject to a one year lock-up period before they can be converted into common shares or ADSs at a conversion price of $6.00 per ADS. The increased investment from a world-class, long-term investor like Yucaipa is a vote of confidence in both the fundamentals and growth prospects of our Company.

Conference Call Information

Following the earnings announcement, XFMedia’s senior management will host a conference call on May 12, 2008 at 8:00pm (New York) / May 13, 2008 at 8:00am (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]
(Asia Pacific) [phone]
Passcode: XFML

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

(US Toll Free) [phone]
(International) [phone]
Passcode: 68168556

A real-time webcast and replay will be also available at:

http://www.xinhuafinancemedia.com/earnings-webcast

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, Advertising, Broadcast, and Print, XFMedia offers a total solution

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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.xinhuafinancemedia.com .

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 second quarter and full year 2008 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 registration statement on Form F-1, as amended, 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

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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 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 8 of this release.

To provide investors with a better understanding of our underlying operational and financial performance, starting from this quarter, XFMedia has adopted the measure “adjusted gross profit”, defined as gross profit excluding amortization of intangible assets from acquisitions, and has changed the methodology of presenting “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 these non-GAAP financial measures are useful to management and investors in assessing the performance of the Company and assists 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 8: Reconciliation of non-GAAP financial results

3 months

3 months ended

ended

3 months ended

In US millions

Mar 31, 2008

Mar 31, 2007

Dec 31, 2007

Income (loss) from operations

(6.2

)

0.7

6.0

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						3 months
		3 months ended				ended				3 months ended
In US millions		Mar 31, 2008				Mar 31, 2007				Dec 31, 2007
Interest income			0.6				0.5				1.5
Other income, net			0.3				—				0.8
Depreciation			0.8				0.4				0.6
Amortization of intangible assets from acquisitions			3.6				1.6				2.7
Amortization of intangible assets from long-term contracts			1.2				1.5				1.2
Share-based compensation expenses			4.9				1.4				0.6
Adjusted EBITDA (2007 definition)			5.2				6.1				13.4
Interest income			(0.6	)			(0.5	)			(1.5	)
Other income, net			(0.3	)			—				(0.8	)
One time items			—				(2.3	)			—
Amortization of intangible assets from long-term contracts			(1.2	)			(1.5	)			(1.2	)
Adjusted EBITDA (2008 definition)			3.1				1.8				9.9
Net income (loss)			(8.3	)			12.6				4.2
One time items 1			—				(15.5	)			—
Amortization of intangible assets from acquisitions			3.6				1.6				2.7
Amortization of intangible assets from long-term contracts			1.2				1.5				1.2
Share-based compensation expenses			4.9				1.4				0.6
Imputed interest			1.2				1.8				1.1
Adjusted net income (2007 definition)			2.6				3.4				9.8
Amortization of intangible assets from long-term contracts			(1.2	)			(1.5	)			(1.2	)
Adjusted net income (2008 definition)			1.4				1.9				8.6

1.		The one time items of $15.5 million in the first quarter of 2007 represent a $12.3 million one-time tax gain due to deferred tax effect arising from the reduction of income tax rate from 33% to 25%, which became effective on January 1, 2008, for all domestic companies and foreign invested enterprises in the People’s Republic of China; $2.3 million reimbursement of IPO-related expenses; and $1.0 million other income.

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

		3 months ended		3 months ended		3 months ended
		Mar 31, 2008		Mar 31, 2007		Dec 31, 2007
Net income (loss) per ADS — basic		$(0.13)		$0.27		$0.06
Net income (loss) per ADS — diluted		$(0.13)		$0.23		$0.06
Weighted average number of ADS — basic		65.6 million		41.0 million		64.8 million
Weighted average number of ADS - diluted		65.6 million		57.0 million		72.1 million
Adjusted net income per ADS — basic		$0.02		$0.01		$0.13
Adjusted net income per ADS — diluted		$0.02		$0.04		$0.12
Weighted average number of ADS — basic		65.6 million		41.0 million		64.8 million
Weighted average number of ADS - diluted		72.3 million		57.0 million		72.1 million

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Contacts:

Media Contact

Ms. Joy Tsang, [phone], [e-mail]

IR Contact

Ms.  Jennifer Chan Lyman, [phone], [e-mail]

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Condensed Consolidated Balance Sheets

(In U.S. dollars)		Mar 31,2008				Dec 31,2007
		Unaudited				Unaudited
Assets
Current assets:
Cash			69,544,776				44,436,087
Restricted cash (Note 1)			46,080,000				47,252,191
Principal protected note (Note 2)			25,047,691				—
Accounts receivable (Note 3)			45,151,426				45,706,766
Prepaid program expenses			5,488,147				5,389,250
Other current assets			19,843,783				16,272,798
Total current assets			211,155,823				159,057,092
Content production deposit and cost, net			7,857,353				8,855,896
Property and equipment, net			9,129,706				9,191,959
Intangible assets, net (Note 4)			228,891,685				233,505,913
Goodwill			245,767,174				180,125,488
Investment			500,000				500,000
Principal protected note (Note 2)			—				24,909,929
Deposits for acquisition of subsidiaries			—				25,634,000
Other long-term asset			7,332,528				9,021,936
Total assets			710,634,269				650,802,213
Liabilities, mezzanine equity and shareholders’ equity
Current liabilities:
Bank borrowings			36,213,749				33,780,188
Bank overdrafts			499,342				960,157
Other current liabilities			79,536,992				40,542,213
Total current liabilities			116,250,083				75,282,558
Deferred tax liabilities			36,909,649				37,741,579
Long term payables, non-current portion			61,561,836				69,081,763
Total liabilities			214,721,568				182,105,900
Minority Interests			2,038,406				2,060,745

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(In U.S. dollars)		Mar 31,2008				Dec 31,2007
		Unaudited				Unaudited
Mezzanine equity:
Series B convertible preferred shares (par value $0.001; 300,000 shares authorized, issued and outstanding as of March 31, 2008)			29,450,000				—
Shareholders’ equity:
Class A common shares and nonvested shares (par value $0.001; 143,822,874 as of December 31, 2007 and as of March 31, 2008 shares authorized; 90,061,269 as of December 31, 2007 and as of March 31, 2008 shares issued and outstanding)			90,061				90,061
Class B common shares (par value $0.001; 50,054,619 as of December 31, 2007 and as of March 31, 2008 shares authorized; 50,054,618 as of December 31, 2007 and March 31, 2008 shares issued and outstanding)			7,442				7,442
Additional paid-in capital			443,784,465				439,516,974
Retained earnings			15,423,398				23,903,560
Accumulated other comprehensive income			5,118,929				3,117,531
Total shareholders’ equity			464,424,295				466,635,568
Total liabilities, mezzanine equity and shareholders’ equity			710,634,269				650,802,213

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Condensed Consolidated Statements of Operations

		3 months ended				3 months ended				3 months ended
(in U.S. Dollars)		Mar 31, 2008				Mar 31, 2007				Dec 31, 2007
		Unaudited				Unaudited				Unaudited
Net revenue:
Advertising services			21,176,603				9,074,956				32,427,419
Content production			573,453				779,715				1,776,291
Advertising sales			14,738,927				6,622,955				13,834,490
Publishing services			201,224				202,430				436,503
Total net revenue			36,690,207				16,680,056				48,474,703
Cost of revenue:
Advertising services			15,697,961				7,326,871				22,137,944
Content production			442,057				266,850				593,496
Advertising sales			7,152,328				3,905,913				6,922,148
Publishing services			294,292				150,924				238,480
Total cost of revenue			23,586,638				11,650,558				29,892,068
Operating expenses:
Selling and distribution			5,140,842				1,579,456				5,794,457
General and administrative			14,137,279				4,988,225				6,740,401
Total operating expenses			19,278,121				6,567,681				12,534,858
Other operating income (Note 5)			—				2,261,788				—
Income (loss) from operations			(6,174,552	)			723,605				6,047,777
Other income (expenses) (Note 6)			(810,563	)			(716,367	)			(660,440	)
Income (loss) before provision for income taxes and minority interest			(6,985,115	)			7,238				5,387,337
Provision for income taxes (Note 7)			1,339,884				(12,915,380	)			719,289
Net income (loss) before minority interest			(8,324,999	)			12,922,618				4,668,048
Minority interest			(44,829	)			332,884				510,928
Net income (loss)			(8,280,170	)			12,589,734				4,157,120
Dividend on convertible preferred shares			200,000				—				—
Dividend declared on redeemable convertible preferred shares			—				1,338,333				—
Net income (loss) attributable to holders of common shares			(8,480,170	)			11,251,401				4,157,120
Net income (loss) per share:
Basic — Common Shares			(0.065	)			0.137				0.032
Basic — American Depositary Shares			(0.130	)			0.274				0.064

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		3 months ended				3 months ended				3 months ended
(in U.S. Dollars)		Mar 31, 2008				Mar 31, 2007				Dec 31, 2007
		Unaudited				Unaudited				Unaudited
Diluted — Common Shares			(0.065	)			0.113				0.029
Diluted — American Depositary Shares			(0.130	)			0.226				0.058

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Condensed Consolidated Statements of Cash Flows

		3 months				3 months
		ended				ended				3 months ended
(in U.S. Dollars)		Mar 31, 2008				Mar 31, 2007				Dec 31, 2007
		Unaudited				Unaudited				Unaudited
Net cash provided by/(used in) operating activities			(1,554,573	)			(7,460,850	)			14,696,170
Net cash provided by/(used in) investing activities			(1,908,350	)			(14,248,357	)			(43,368,652	)
Net cash provided by/(used in) financing activities			26,418,367				161,567,987				(3,165,011	)
Effect of exchange rate changes			2,153,245				(280,453	)			922,837
Net increase/(decrease) in cash			25,108,689				139,578,327				(30,914,656	)
Cash, as at beginning of the period			44,436,087				36,353,547				75,350,743
Cash, as at end of the period			69,544,776				175,931,874				44,436,087

Notes to Financial Information

1) Restricted cash

Restricted cash is US dollar cash deposits pledged for the RMB loan facilities granted by banks for RMB working capital purposes.

2) Principal protected note

Principal protected note of $25.0 million represents investment on 100% Principal Protection Barrier Notes due on January 30, 2009.

3) Accounts receivables and debtors turnover

Debtors turnover for the fourth quarter of 2007 and first quarter of 2008 were 87 days and 107 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.

4) Intangible assets

Net book value for intangible assets as of March 31, 2008 was $228.9 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 $97.2 million advertising license agreement for our TV business, $71.5 million exclusive advertising agreement for our newspaper business, and $7.8 million 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

 

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acquisitions we completed in 2007 and hence the net book value for intangible assets is preliminary and subject to revision once we complete the valuation exercise.

5) Other operating income

Other operating income of $2.3 million in the first quarter of 2007 represents reimbursement of IPO related expenses by Bank of New York. Those expenses, all of which had been recorded in the 2006 income statement as operating expenses because they were not considered to be directly related to the sale of securities, related primarily to audit fees and fees paid to consultants during the listing process.

6) Other income (expenses)

Other income (expenses) includes net interest income (expense) and net other income (expense).

7) Provision for income taxes

Provision for income taxes includes deferred tax credits of $1.0 million and $0.8 million in the fourth quarter of 2007 and first quarter of 2008.

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