SHANGHAI, Sep. 18, 2009 (PRNewswire-Asia) -- Focus Media Holding Limited (Nasdaq: FMCN), China's largest digital media group, today announced its unaudited financial results for the second quarter ended June 30, 2009.
Basis of Presentation
On December 22, 2008, the Company announced that it entered into a definitive agreement with SINA Corporation ("SINA") to sell substantially all of the assets of Focus Media's digital out-of-home advertising networks, including the LCD display network, poster frame network and certain in-store networks. The transaction is subject to customary closing conditions and certain regulatory approvals described further under "Announced Merger" below. Under the terms of the agreement, upon closing, SINA will issue 47 million newly issued ordinary shares to the Company as the consideration for the acquired assets. The Company will then distribute the SINA shares to its shareholders shortly after the closing. As a result of the above transaction, these lines of business have been accounted for as discontinued operations in accordance with U.S. GAAP. The assets to be sold to SINA as a business held-for-sale in accordance with U.S. GAAP, are not depreciated or amortized nor are they subject to the same impairment analysis as assets held and used in continuing operations. Therefore, non-GAAP financial measure for the assets to be sold to SINA (which are defined as "discontinued operations" and measured at fair market value of the consideration to be paid by SINA) since the first quarter of 2009 excluded not only the non-cash share-based compensation, acquired intangible asset amortization expense resulting from acquisitions, impairment charges of goodwill, acquired intangible assets and fixed assets but also depreciation expenses of fixed assets.
Highlights for Second Quarter 2009:
-- Net revenue for continuing operations was $82.1 million, increasing 23%
from $66.7 million for the first quarter of 2009 but declining 23% from
$107.2 million for the second quarter of 2008 and surpassed the
Company's previous guidance of no less than $69.0 million.
-- Net revenue for discontinued operations was $89.2 million, a sequential
increase of 39% from $64.4 million for the first quarter of 2009 but a
decline of 15% from $104.5 million for the second quarter of 2008 and
surpassing the Company's previous guidance of no less than $81.5
million.
-- Net loss from continuing operations was $44.5 million, compared to net
loss from continuing operations of $17.7 million for the first quarter
of 2009 and net loss from continuing operations of $2.3 million for the
second quarter of 2008.
-- Non-GAAP net income from continuing operations was $2.8 million,
compared to non-GAAP net income from continuing operations of $3.2
million for the first quarter of 2009 and non-GAAP net income from
continuing operations of $7.7 million for the second quarter of 2008.
-- Net income from discontinued operations was $21.5 million, a sequential
increase of 79% from 12.0 million for the first quarter of 2009 and
compared to net loss of $33.9 million for the second quarter of 2008.
As explained in "Basis of Presentation" above, discontinued operations,
as the assets to be sold to SINA as a business held-for-sale in
accordance with U.S. GAAP, are not depreciated or amortized nor are
they subject to the same impairment analysis as assets held and used in
continuing operations. The Company historically recorded $8.8 million
of depreciation expenses of fixed assets for the fourth quarter of 2008
in discontinued operations.
-- Non-GAAP net income from discontinued operations was $25.4 million, a
sequential increase of 66% from $15.4 million for the first quarter of
2009 and compared to non-GAAP net loss of $23.0 million for the second
quarter of 2008. As explained in "Basis of Presentation" above,
discontinued operations, as the assets to be sold to SINA as a business
held-for-sale in accordance with U.S. GAAP, are not depreciated or
amortized nor are they subject to the same impairment analysis as
assets held and used in continuing operations. The Company
historically recorded $8.8 million of depreciation expenses of fixed
assets for the fourth quarter of 2008 in discontinued operations.
-- Net loss attributable to shareholders was $23.0 million or a loss of
$0.18 per fully diluted ADS, compared to net loss attributable to
shareholders of $5.7 million for the first quarter of 2009 or a loss of
$0.04 per fully diluted ADS and net income attributable to shareholders
of $36.1 million for the second quarter of 2008 or an income of $0.28
per fully diluted ADS.
-- Capital expenditures were $2.8 million, all attributable to
discontinued operations.
-- Cash earn-out payments paid for continuing operations and discontinued
operations were $19.2 million and $42.2 million respectively.
Second Quarter 2009 balance sheet results
-- Cash and cash equivalents for continuing operations were $96.2 million
as of June 30, 2009, a 27% decline from $131.9 million as of March 31,
2009.
-- Cash and cash equivalents for discontinued operations were $271.7
million as of June 30, 2009, nearly the same as the balance as of March
31, 2009.
-- Accounts receivable for continuing operations were $121.5 million as of
June 30, 2009, a slight increase of 3.6% from $117.3 million as of
March 31, 2009.
-- Accounts receivable for discontinued operations were $128.3 million as
of June 30, 2009, a slight increase of 5% from $122.1 million as of
March 31, 2009.
Second Quarter 2009 financial results
1) For Continuing operations:
Advertising revenue from the movie theater and outdoor traditional billboard network was $14.8 million in the second quarter of 2009, representing a decrease of 23% from $19.2 million for the first quarter of 2009 and a 26% decrease from $20.0 million for the second quarter of 2008.
Internet advertising service revenue was $66.7 million in the second quarter of 2009, a 42% increase from $47.1 million for the first quarter of 2009 and a decline of 12% from $76.1 million for the second quarter of 2008.
Non-GAAP gross profit for the movie theater and outdoor billboard networks for the second quarter of 2009 was $4.7 million, representing a 22% decline from $6.0 million for the first quarter of 2009 and a 11% increase from $5.3 million for the second quarter of 2008.
Non-GAAP gross profit from our Internet advertising services for the second quarter of 2009 was $10.7 million, substantially unchanged from $10.6 million for the first quarter of 2009 but a 48% decline from $20.5 million for the second quarter of 2008.
Non-GAAP operating expense for continuing operations for the second quarter of 2009 was $10.7 million, representing a 10% decline from $12.0 million for the first quarter of 2009 and a 17% decline from $12.9 million for the second quarter of 2008.
2) For Discontinued operations:
Advertising revenue from the LCD display network was $53.7 million for the second quarter of 2009, a 56% increase from $34.4 million for the first quarter of 2009 but a 12% decline from $61.0 million for the second quarter of 2008.
Advertising revenue from the in-elevator poster frame network was $26.5 million for the second quarter of 2009, a 13% increase from $23.5 million for the first quarter of 2009 but a 29% decline from $37.3 million for the second quarter of 2008.
Advertising revenue from the in-store network was $9.0 million for the second quarter of 2009, a 43% decline from $6.3 million for the first quarter of 2009 and a 45% increase from $6.2 million for the second quarter of 2008.
As of June 30, 2009, the total installed base of LCD displays in our commercial location network was 133,514 nationwide, including 128,089 displays through our directly owned networks, and 5,425 displays through our regional distributors, as compared to 131,219 as of March 31, 2009. The total number of non-digital frames available for sale on our in-elevator poster frame network was 246,095 as of June 30, 2009, as compared to 288,423 as of March 31, 2009. The decline was primarily attributable to disposal of a few subsidiaries in tier-II cities in poster frame division and continuing optimization of our network. In addition, as of June 30, 2009, we had 38,893 digital frames installed in our poster frame network. The total number of displays installed in our in-store network was 44,783 as of June 30, 2009.
Non-GAAP gross profit for the LCD display network for the second quarter of 2009 was $43.9 million, representing an 89% increase from $23.2 million for the first quarter of 2009 but a 7% decline from $47.2 million for the second quarter of 2008. As explained in "Basis of Presentation" above, discontinued operations, as the assets to be sold to SINA as a business held-for-sale in accordance with U.S. GAAP, are not depreciated or amortized nor are they subject to the same impairment analysis as assets held and used in continuing operations. The depreciation expense of fixed assets included in cost of sales for the LCD display network in the fourth quarter of 2008 was $4.8 million.
Non-GAAP gross profit for the in-elevator poster frame network for the first quarter of 2009 was $13.6 million, representing a 21% increase from $11.2 million for the first quarter of 2009 but a 43% decline from $24 million for the second quarter of 2008. As explained in "Basis of Presentation" above, discontinued operations, as the assets to be sold to SINA as a business held-for-sale in accordance with U.S. GAAP, are not depreciated or amortized nor are they subject to the same impairment analysis as assets held and used in continuing operations. The depreciation expense of fixed assets included in cost of sales for the in-elevator poster frame network in the fourth quarter of 2008 was $1.8 million.
Non-GAAP gross profit for the in-store network for the second quarter of 2009 was $3.1 million, representing a 35% increase from $2.3 million for the first quarter of 2009 and compared to gross loss of $2.7 million for the second quarter of 2008. As explained in "Basis of Presentation" above, discontinued operations, as the assets to be sold to SINA as a business held-for-sale in accordance with U.S. GAAP, are not depreciated or amortized nor are they subject to the same impairment analysis as assets held and used in continuing operations. The depreciation expense of fixed assets included in cost of sales for the in-store network in the fourth quarter of 2008 was $1.7 million.
Non-GAAP operating expense for discontinued operations for the second quarter of 2009 was $31.9 million, representing a 43% increase from $22.3 million for the first quarter of 2009 and a 64% increase from $19.5 million for the second quarter of 2008. As explained in "Basis of Presentation" above, discontinued operations, as the assets to be sold to SINA as a business held-for-sale in accordance with U.S. GAAP, are not depreciated or amortized nor are they subject to the same impairment analysis as assets held and used in continuing operations. The depreciation expense of fixed assets included in operating expense for discontinued operations in the fourth quarter of 2008 was $0.5 million.
The Company historically recorded $8.8 million of depreciation expenses of fixed assets for the fourth quarter of 2008 in discontinued operations.
Business Outlook for Third Quarter 2009
The Company provides the following guidance with respect to the third quarter ending September 30, 2009:
Net revenues from continuing operations are expected to be between $46 million and $47 million;
Net revenues from discontinued operations are expected to be between $80 million and $81.5 million.
Announced Merger
On December 22, 2008, the Company announced that it entered into a definitive agreement with SINA Corporation ("SINA") to sell substantially all of the assets of Focus Media's digital out-of-home advertising networks, including the LCD display network, poster frame network and certain in-store network. The transaction is subject to customary closing conditions and certain regulatory approvals.
