Focus Media Reports Third Quarter 2011 Results

SHANGHAI, Nov. 17, 2011 /PRNewswire-Asia/ -- Focus Media Holding Limited (Nasdaq: FMCN), China's largest out-of-home lifestyle interactive targeted digital media group, today announced its unaudited financial results for the third quarter ended September 30, 2011.

Highlights for Third Quarter 2011:

• Total net revenue for the third quarter of 2011 was $210.7 million, of which
• Aggregate net revenue from the LCD display network (including the movie theater network), in-store network and poster frame network was $196.1 million, which exceeded by approximately 11% the mid-point of the Company's guidance range of $175-177 million. This represented year-on-year growth of 53% from $128.4 million for the third quarter of 2010 and quarter-on-quarter growth of 18% from $166.1 million for the second quarter of 2011.
• Net revenue from the traditional outdoor billboard network for the third quarter of 2011 was $14.6 million, which exceeded by approximately 22% the midpoint of the Company's guidance of $11-13 million. This represented year-on-year growth of 64% from $8.9 million for the third quarter of 2010 and quarter-on-quarter growth of 13% from $12.9 million for the second quarter of 2011.
• GAAP net income attributable to Focus Media for the third quarter of 2011 was $62.2 million, representing an increase of 45% from $42.8 million for the second quarter of 2011 and compared to $112.7 million for the third quarter of 2010 (which included one-off income of $79.0 million resulting from the sale of our Internet business).
• Non-GAAP net income attributable to Focus Media for the third quarter of 2011 was $82.7 million, exceeding the mid-point of the Company's guidance range of $68-$70 million by 20%, representing year-on-year growth of 60% from non-GAAP net income attributable to Focus Media of $51.8 million for the third quarter of 2010 and quarter-on-quarter growth of 31% from non-GAAP net income attributable to Focus Media of $62.9 million for the second quarter of 2011. Please see the sections on "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to non-GAAP" elsewhere in this announcement for more information about the non-GAAP measures referred to within this announcement.
• GAAP net income attributable to Focus Media per fully diluted ADS for the third quarter of 2011 was $0.44, comparing to $0.76 per fully diluted ADS in the third quarter of 2010 which was boosted by one-off income of $79.0 million resulting from the sale of our Internet business and representing a growth of 47% from $0.30 per fully diluted ADS for the second quarter of 2011.
• Non-GAAP net income attributable to Focus Media per fully diluted ADS for the third quarter of 2011 was $0.59, representing year-on year growth of 69% from $0.35 per fully diluted ADS for the third quarter of 2010 and quarter-on-quarter growth of 34% from $0.44 for the second quarter of 2011.

Highlights for Balance Sheet and Cash Flow Results of Third Quarter 2011:

• Cash, cash equivalents and short-term investments were $639.9 million as of September 30, 2011, increasing by 8% from $590.9 million as of June 30, 2011.
• Short term bank loan was $30 million as of September 30 2011 which was used to finance a portion of the Company's share repurchases during the quarter. Operationally, the Company generates cash inflow in Renminbi onshore and offshore bank loans are used to increase our offshore USD base cash resources.
• Net cash inflow from operating activities in the third quarter of 2011 was $86.3 million, an increase of 71% from $50.6 million for the second quarter of 2011 and more than doubled the $34.2 million for the third quarter of 2010.
• Net accounts receivable for the LCD display network (including the movie theater network), in-store network and poster frame network was $215.3 million as of September 30, 2011, an increase of 17% from $184.8 million as of June 30, 2011 as a result of sequential increase of revenues. Days sales outstanding were 85 days in the third quarter of 2011 versus 87 days for the second quarter of 2011.
• Capital expenditures were $6.1 million for the third quarter of 2011, mostly attributable to upgrading our LCD screens into interactive screens in seven major cities in China.
• Cash used in the purchase of subsidiaries in the third quarter of 2011 was $4.1 million, primarily attributable to acquisitions in the poster frame network and the traditional outdoor billboard network as part of our ongoing strategy to expand into additional cities for poster frame network and increasing media resources in the traditional outdoor billboard network.
• Cash used for repurchasing shares in the third quarter of 2011 was $66.1 million.

Jason Jiang, Chairman and Chief Executive Officer of Focus Media said, "We reached two important historical milestones in the third quarter of 2011. Not only did we achieve record high total revenue in our core business, but we also opened up a new chapter in the history of the Company whereby we have taken our media into an interactive age. Driven by positive secular domestic consumption trend in the PRC, we believe for the rest of the year and 2012 advertising demand for our media will continue to be healthy and robust. Over the next several years, leveraging our media interactive capability, we will strive to retain our brand advertising leadership in the industry as well as endeavor to become one of the key default promotional media platforms in the PRC."

Kit Low, the Company Executive Director and Chief Financial Officer added, "In the third quarter of 2011, the Company achieved aggregate net revenue year on year growth in our LCD display (including the movie theater network), in-store and poster frame businesses of 53%. GAAP net income attributable to Focus Media and non-GAAP net income attributable to Focus Media for the third quarter of 2011 was $62.2 million and $82.7 million, respectively. We achieved a positive net cash inflow from operating activities after deducting the purchase of equipment and subsidiaries of $76.1 million in the third quarter of 2011 as compared to a net cash inflow of $37.3 million in the second quarter of 2011 and a net cash inflow of $23.8 million in the third quarter of 2010. In the first three quarters of 2011, the Company cumulatively generated net cash inflow from operating activities net of capital expenditure and acquisitions of subsidiaries of $118.5 million."

Third Quarter 2011 financial results

Advertising net revenue from the LCD display network (including the movie theatre network) was $133.6 million for the third quarter of 2011, representing an increase of 54% from $86.8 million for the third quarter of 2010 and an increase of 18% from $113.0 million for the second quarter of 2011.

Advertising net revenue from the poster frame network was $46.6 million for the third quarter of 2011, representing an increase of 45% from $32.2 million for the third quarter of 2010 and an increase of 22% from $38.2 million for the second quarter of 2011.

Advertising net revenue from the in-store network was $15.9 million for the third quarter of 2011, representing an increase of 69% from $9.4 million for the third quarter of 2010 and an increase of 7% from $14.9 million for the second quarter of 2011.

As of September 30, 2011, the total installed base of LCD displays in our LCD display network was 178,382 nationwide, including 169,810 displays through our directly owned networks, and 8,572 displays through our regional distributors, as compared to total LCD displays of 169,798 as of June 30, 2011. The total number of non-digital frames available for use in our poster frame network was 391,304 as of September 30, 2011, as compared to 354,945 as of June 30, 2011. In addition, as of September 30, 2011, we had 34,711 digital frames installed in our poster frame network, a slight decrease from 35,217 as of June 30, 2011 due to optimization of the network. The total number of displays installed in our in-store network was 50,696 as of September 30, 2011, as compared to 50,129 as of June 30, 2011.

Advertising net revenue from the traditional outdoor billboard network was $14.6 million for the third quarter of 2011, representing an increase of 64% from $8.9 million for the third quarter of 2010 and an increase of 13% from $12.9 million for the second quarter of 2011.

Non-GAAP gross profit from the LCD display network (including the movie theatre network) for the third quarter of 2011 was $105.9 million, representing an increase of 61% from $65.6 million for the third quarter of 2010 and an increase of 18% from $89.7 million for the second quarter of 2011.

Non-GAAP gross profit from the poster frame network for the third quarter of 2011 was $19.6 million, representing an increase of 61% from $12.2 million for the third quarter of 2010 and an increase of 61% from $12.2 million for the second quarter of 2011.

Non-GAAP gross profit from the in-store network for the third quarter of 2011 was $10.0 million, almost tripling the $3.4 million for the third quarter of 2010 and an increase of 9% from $9.2 million for the second quarter of 2011.

Non-GAAP gross profit from the traditional outdoor billboard network for the third quarter of 2011 was $3.2 million, representing an increase of 39% from $2.3 million for the third quarter of 2010 and representing a decrease of 11% from $3.6 million for the second quarter of 2011.

Non-GAAP operating expense for the third quarter of 2011 was $46.9 million, representing an increase of 46% from $32.2 million for the third quarter of 2010,  which was mainly attributable to: 1) an increase of bad debt provision expenses in the amount of $3.6 million in the third quarter of 2011; 2) an increase of sales commission expenses resulted from revenue growth; and 3) an increase of employees' salary and welfare in the amount of $2.2 million in the third quarter of 2011; and 4) the Company incurred the disposal loss for fixed assets in the amount of $1.6 million in the third quarter of 2011 to prepare for upgrading most of the screens in seven major cities into the next generation interactive screens for the fourth quarter of 2011. It also represented a slight increase of 2% from $45.9 million for the second quarter of 2011.

Net cash inflow from operating activities in the third quarter of 2011 was $86.3 million, increasing by 71% from $50.6 million for the second quarter of 2011 and more than doubling the $34.2 million for the third quarter of 2010.

Net cash used in investing activities for the third quarter of 2011 was $28.1 million. In the third quarter of 2011, the Company incurred capital expenditures of $6.1 million, mostly attributable to upgrading our LCD screens into interactive screens in seven major cities in China, as well as consideration payments of $4.1 million for our poster frame and traditional outdoor billboard related acquisitions, and net investments of $14.9 million in short-term investments (as part of our ongoing effort to improve our interest income by depositing some cash into longer term dated deposits).

Business Outlook for Fourth Quarter 2011

The Company provides the following guidance with respect to the fourth quarter ending December 31, 2011:

Net revenues for the core business (inclusive of the LCD display network and other, the in-store network and the poster frame network) are expected to be in the range of $212-$214 million, the mid-point of which would represent year-on-year growth of 45% and quarter-on-quarter growth of 9%. Net revenues for the non-core business (the traditional outdoor billboard network) are expected to be in the range of $14-$16 million. The Company's non-GAAP net income is expected to be in the range of $88-$90 million. The Company estimates the weighted average ADS outstanding for the calculation of fully diluted earnings per ADS in the fourth quarter is 140 million, assuming no further share repurchases during the quarter.

Announced Share Repurchase Program

On October 3, 2011, Focus Media announced an increase in the size of its share repurchase program to US$650 million from $450 million. As of November 17, 2011, the Company has cumulatively spent approximately $355 million in share repurchases.

Foreign Currency Translation

The reporting currency of the Company is the US dollar. The financial records of the Company's subsidiaries are maintained in its local currency, the Renminbi ("RMB"), which is the functional currency. Assets and liabilities are translated at the exchange rate as of September 30, 2011, which was $1 to RMB6.3549. Equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the third quarter of 2011, which was $1 to RMB6.4132. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statement of equity and comprehensive income (loss).

Use of Non-GAAP Financial Measures

In addition to Focus Media's consolidated financial results under GAAP, the Company also provides non-GAAP financial measures, including non-GAAP gross profit (cumulatively and by segment), non-GAAP operating expenses, non-GAAP operating profit (loss), non-GAAP net income and non-GAAP fully-diluted earnings per ADS, all excluding share-based compensation expenses, amortization of acquired intangible assets, profit or loss from disposal of previously acquired subsidiaries, loss from equity method investee and impairment charges of goodwill. Management uses these non-GAAP financial measures to better assess operating performance of the Company. The Company believes that these non-GAAP financial measures provide investors with another method for assessing Focus Media's operating results in a manner that is focused on the performance of its ongoing operations. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results in the attached financial information. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Focus Media and when planning and forecasting future periods. The Company computes its non-GAAP financial measures using a consistent method from quarter to quarter and the reconciliation items mostly include share-based compensation expenses, amortization of acquired intangible assets, profit or loss from disposal of previously acquired subsidiaries, loss from equity method investee and goodwill impairment charges. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.

Conference Call

The Company will host a conference call to discuss the third quarter 2011 results at 8:00 p.m. U.S. Eastern Time on November 17, 2011 (5:00 p.m. U.S. Pacific Time on November 17, 2011 and 9:00 a.m. Beijing/Hong Kong Time on November 18, 2011). The dial-in details for the live conference call are set forth below:

A replay of the call will be available from November 17, 2011 23:00 until November 26, 2011 10:59pm (US Eastern Time). The dial-in details for the replay are set forth below:

Additionally, a live and archived web cast of this call will be available on the Focus Media web site at http://ir.focusmedia.cn.

Safe Harbor: Forward-Looking Statements

This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the 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. Focus Media may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K., 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 Focus Media's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in Focus Media's filings with the U.S. Securities and Exchange Commission, including its registration statements on Form F-1, F-3 and 20-F, in each case as amended. Focus Media does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

This release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.

About Focus Media Holding Limited

Focus Media Holding Limited (Nasdaq: FMCN) operates China's largest lifestyle targeted interactive digital media network. The Company offers one of the most comprehensive targeted interactive digital media platforms aimed at Chinese consumers at various urban locations. The increasingly fragmented and mobile lifestyle of Chinese urban consumers has created the need for more efficient media means to capture consumer attention. Focus Media's mission is to build an increasingly comprehensive and measurable interactive urban media network that reaches consumers at various out-of-home locations. As of September 30, 2011, Focus Media's out-of-home lifestyle interactive digital media network had approximately 178,000 LCD displays in about 100,000 commercial buildings that covered more than 100 cities, 426,000 in-elevator poster and digital picture frames in residential buildings that covered 35 cities, approximately 51,000 LCD displays in more than 2,800 hypermarkets, supermarkets and convenience stores and approximately 2,000 movie screens in about 300 movie theaters throughout China.

SOURCE Focus Media Holding Limited