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) +1 800 510 0146 or +1 617 614
3449 (UK) +44 207 365 8426 (Mainland China) + 86 10 800 130 0399
(Asia Pacific) +852 3002 1672 Passcode: 64854718 A telephone replay
will be available two hours after the call for one week at: (US
Toll Free) +1 888 286 8010 (International) +1 617 801 6888
Passcode: 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: +86-21-6113-5999 Email: Ms. Lindsay Koval AGG International
Tel: +1-212-614-4170 Email: IR Contact Mr. Edward Liu XFMedia Tel:
+86-21-6113-5978 Email: Mr. Howard Gostfrand American Capital
Ventures Tel: +1-305-918-7000 Toll free: +1-877-918-0774 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
+86-21-6113-5999, 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 +1-305-918-7000, Toll free +1-877-918-0774, or , for
XFMedia Web site: http://www.xfmedia.cn/
http://www.xfmedia.cn/earnings-webcast
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