Quantcast
Last updated on April 21, 2014 at 5:04 EDT

VisionChina Media Inc. Announces Second Quarter 2012 Results

August 20, 2012

BEIJING, Aug. 20, 2012 /PRNewswire-Asia/ — VisionChina Media Inc. (“VisionChina Media” or the “Company”) (Nasdaq: VISN), one of China’s largest out-of-home digital television advertising networks on mass transportation systems, today announced its unaudited financial results for the quarter ended June 30, 2012.

Key Quarterly Financial and Operating Data for the Second Quarter of 2012

Total revenues, consisting entirely of advertising service revenue, in the second quarter of 2012 were $28.1 million.

Gross loss in the second quarter of 2012 was $5.4 million.

Operating loss in the second quarter of 2012 was $200.8 million, primarily due to a non-cash impairment charge of $178.8 million, as the result of a write-down of goodwill and intangible assets associated with the Company’s acquisitions of the six advertising agency businesses in 2008 and the Company’s acquisition of Digital Media Group Company Limited (“Digital Media Group”), which was completed in 2010.

Net loss attributable to VisionChina Media shareholders in the second quarter of 2012 was $193.5 million.

In the second quarter of 2012, the Company’s non-GAAP financial measure, net loss attributable to VisionChina Media shareholders, excluding share-based compensation expenses, amortization of intangible assets, provision for contingent loss in connection with litigation, impairment loss and income tax credit in connection with the impairment loss was $20.7 million.

Basic and diluted net loss per share attributable to VisionChina Media shareholders in the second quarter of 2012 was $1.91 and $1.91, respectively (each ADS representing one common share).

The Company had cash and cash equivalents of $74.7 million as of June 30, 2012. Net cash provided by operating activities was $0.9 million in the second quarter of 2012.

Total broadcasting hours in the Company’s network in the second quarter of 2012 were 41,012 hours.

As of June 30, 2012, the Company’s network covered 20 cities secured either by exclusive agency agreements or joint venture contracts, and included 136,075 digital displays on mass transit systems.

Average advertising revenue per broadcasting hour in the Company’s network in the second quarter of 2012 was $658.

The Company sold an average of 6.56 advertising minutes per broadcasting hour in its network in the second quarter of 2012.

Mr. Limin Li, VisionChina Media’s chairman and chief executive officer, commented, “Lingering macroeconomic uncertainty in China has impacted advertiser spending and subsequently our second quarter revenues. In addition, continuous increases in media cost also negatively impacted our company’s profitability. To combat these challenges, we are striving to improve our execution capabilities and efficiencies by fully leveraging the government’s support on cost reduction, enhancing team organization, optimizing our incentive scheme for sales staff, improving program content, as well as recruiting experienced salespeople from the traditional TV sector to expand our customer verticals. Furthermore, we are in the process of negotiation for early termination or cost reduction of certain exclusive agency agreements unfavorable to our profitability. Our underlying business development pipeline remains strong and we remain confident in our ability to capitalize on opportunities for our company’s long-term growth.”

Second Quarter 2012 Results

VisionChina Media’s total revenues were $28.1 million in the second quarter of 2012, representing a decrease of 37.7% from $45.0 million in the second quarter of 2011 and a decrease of 0.8% from $28.3 million in the first quarter of 2012. Several factors led to the Company’s decrease in total revenues in the second quarter of 2012, including further declining revenue contribution from the internet-based businesses sector, a slower-than-expected recovery in advertising spending by small- and medium-sized clients in reaction to rate-card increases across the Company’s network in the fourth quarter of 2011, and the cautious sentiment of the current advertising market.

Total broadcasting hours in the second quarter of 2012 were 41,012 hours, compared to 44,379 hours in the second quarter of 2011 and 41,012 hours in the first quarter of 2012.

Average advertising revenue per broadcasting hour was $658 in the second quarter of 2012, compared to $1,003 in the second quarter of 2011 and $679 in the first quarter of 2012.

In the second quarter of 2012, the Company sold a total of 269,234 advertising minutes in its network, compared to 382,895 advertising minutes in the second quarter of 2011 and 258,827 advertising minutes in the first quarter of 2012.

The Company sold an average of 6.56 advertising minutes per broadcasting hour in the second quarter of 2012, compared to 8.63 advertising minutes per broadcasting hour in the second quarter of 2011 and 6.31 advertising minutes per broadcasting hour in the first quarter of 2012.

During the second quarter of 2012, 558 advertisers purchased advertising time on the Company’s advertising network, either directly or through advertising agents, compared to 997 advertisers in the second quarter of 2011 and 490 advertisers in the first quarter of 2012.

Media cost, the most significant component of advertising service cost, was $27.2 million in the second quarter of 2012, representing 81.4% of total advertising service cost, compared to $25.6 million, or 80.5% of total advertising service cost, in the second quarter of 2011, and $26.7 million, or 82.7% of total advertising service cost, in the first quarter of 2012.

Gross loss in the second quarter of 2012 was $5.4 million, compared to gross profit of $13.2 million in the second quarter of 2011 and gross loss of $4.0 million in the first quarter of 2012.

Advertising service gross margin was negative 19.2% in the second quarter of 2012, compared to gross margin of 29.3% in the second quarter of 2011 and negative gross margin of 14.2% in the first quarter of 2012.

Selling and marketing expenses were $10.8 million in the second quarter of 2012, representing an increase of 20.2% from $9.0 million in the second quarter of 2011 and a decrease of 18.6% from $13.3 million in the first quarter of 2012. Selling and marketing expenses accounted for 38.6% of the Company’s advertising service revenue in the second quarter of 2012, compared to 20.0% in the second quarter of 2011 and 47.0% in the first quarter of 2012. The year-over-year increase in selling and marketing expenses was primarily attributable to increased promotional expenses and spending in market research incurred by the sales and marketing department.

General and administrative expenses were $4.2 million in the second quarter of 2012, representing an increase of 14.8% from $3.6 million in the second quarter of 2011 and an increase of 6.8% from $3.9 million in the first quarter of 2012.

The Company recorded a contingent loss of $1.4 million in the first quarter of 2012 and $1.4 million in the second quarter of 2012 in connection to the pending litigation with the selling shareholders and former management of Digital Media Group. The Company did not incur any contingent loss in the second quarter of 2011.

Share of loss from equity method investments amounted to $0.2 million in the second quarter of 2012, compared to share of profits of $0.2 million in the second quarter of 2011 and share of profits of $0.1 million in the first quarter of 2012.

Operating loss was $200.8 million in the second quarter of 2012, compared to operating profit of $0.7 million in the second quarter of 2011 and operating loss of $22.5 million in the first quarter of 2012. The operating loss in the second quarter of 2012 was primarily attributable to a non-cash impairment charge of $178.8 million as the result of a write-down of goodwill and intangible assets in connection with the Company’s acquisitions consummated in 2008 and 2010. The lingering cautious sentiment in the advertising market, which resulted in the Company’s modification of its 2012 second quarter revenue guidance in early July 2012 and indicated the uncertainty in the Company’s future revenue growth, and the continuous decrease in the Company’s market capitalization in the second quarter of 2012 triggered this impairment charge. To date, the impairment assessments are in process and have not been finalized. Management believes that the impairment loss on goodwill of $142.4 million and impairment loss on intangible assets of $36.4 million are probable and represent management’s best estimate.

The Company recorded net interest expense of $0.4 million in the second quarter of 2012, compared to net interest expense of $0.6 million in the second quarter of 2011 and net interest expense of $0.2 million in the first quarter of 2012.

The Company recorded income tax benefits of $8.0 million in the second quarter of 2012, including tax credit of $9.1 million in connection with the impairment loss on intangible assets, compared to income tax expenses of $0.8 million in the second quarter of 2011 and income tax benefits of $1.4 million in the first quarter of 2012. No tax credit in connection with the impairment loss was recorded in the second quarter of 2011 or in the first quarter of 2012.

Net loss attributable to VisionChina Media shareholders (GAAP) was $193.5 million in the second quarter of 2012, compared to net loss attributable to VisionChina Media shareholders of $0.4 million in the second quarter of 2011 and net loss attributable to VisionChina Media shareholders of $21.1 million in the first quarter of 2012. The net loss in the second quarter of 2012 was, as mentioned previously, primarily attributable to the non-cash impairment charge of $178.8 million as the result of a write-down of goodwill and intangible assets in connection with the Company’s acquisitions consummated in 2008 and 2010.

Basic and diluted net loss per share (GAAP) was $1.91 and $1.91, respectively, in the second quarter of 2012.

Net loss attributable to VisionChina Media shareholders, excluding share-based compensation expenses, amortization of intangible assets, provision for contingent loss in connection with litigation, impairment loss and income tax credit in connection with the impairment loss (non-GAAP) was $20.7 million in the second quarter of 2012, compared to non-GAAP net income of $0.9 million in the second quarter of 2011 and non-GAAP net loss of $18.0 million in the first quarter of 2012.

As of June 30, 2012, the Company had 136,075 digital television displays in its network, compared to 136,522 as of June 30, 2011 and 135,762 as of March 31, 2012.

As of June 30, 2012, the Company had 803 employees, compared to 860 employees as of June 30, 2011 and 845 employees as of March 31, 2012.

As of June 30, 2012, the Company had cash and cash equivalents of $74.7 million, compared to $75.9 million as of March 31, 2012. The Company’s net cash provided by operating activities was $0.9 million in the second quarter of 2012.

Depreciation and amortization was $2.8 million and capital expenditures were $0.3 million in the second quarter of 2012.

Recent Developments

Litigation with the Selling Shareholders and Former Management of Digital Media Group

On August 13, 2012, VisionChina Media and its subsidiary Vision Best Limited (“Vision Best”) received a written order from the New York court dated July 31, 2012 (the “August 13 Order”) requiring VisionChina Media and Vision Best, on or before August 21, 2012, (a) to transfer $60 million in assets readily convertible into U.S. currency into New York State, to be held in the custody of the New York City Sheriff’s Office, (b) to deposit $60 million into an escrow account controlled by the Sheriff or (c) to make other arrangements satisfactory to the plaintiffs in the litigation for security with respect to the final judgment plaintiffs seek in that amount. VisionChina Media and Vision Best are in the process of seeking to comply with the August 13 Order to the fullest extent possible. Because a majority of the assets of VisionChina Media and Vision Best are located in the People’s Republic of China (“the PRC”), however, the Company believes that transfer of such assets are subject to approval of the relevant PRC authorities, which is outside the control of VisionChina Media or Vision Best. Accordingly, VisionChina Media and Vision Best are seeking to appeal the August 13 Order and to obtain a stay of its enforcement. An emergency application for a stay was denied by a single judge of the appellate court in New York on August 17, 2012, but that application will be submitted to a five-judge panel on August 27, 2012, and VisionChina Media and Vision Best plan to perfect their appeal from the August 13 Order by September 4, 2012.

Business Outlook

The Company estimates its advertising service revenue in the third quarter of 2012 to be between $33.0 million and $35.0 million.

These estimates are based on an exchange rate of RMB6.3089 per $1.00.

The Company noted that its guidance is based on its current network that, as of the date of this press release, has already been secured by exclusive agency agreements or joint venture contract and based on management’s current assessment of the possible outcome of pending litigation with the selling shareholders and former management of Digital Media Group. If the number of cities in the Company’s network expands or contracts, or if there is any progress in the pending litigation that affects management’s assessment of the possible outcome, management’s forecast could be affected.

Conference Call

VisionChina Media’s management will hold an earnings conference call at 8:00 p.m. U.S. Eastern Time on August 20, 2012 (8:00 a.m. Beijing/Hong Kong Time on August 21, 2012).

Dial-in details for the earnings conference call are as follows:

    US Toll Free:                   +1-866-519-4004
    US Toll:                        +1-718-354-1231
    Hong Kong Toll:                 +852-2475-0994
    International Toll:             +65-6723-9381

    Passcode for all regions:       VisionChina Earnings Call

A replay of the conference call may be accessed by phone at the following numbers until August 27, 2012.

    US Toll Free:                   +1-866-214-5335
    US Toll:                        +1-718-354-1232
    International Toll:             +61-2-8235-5000

    Passcode for all regions:                         18900133

Additionally, a live and archived webcast of this conference call will be available on the Investor Relations section of VisionChina Media’s website at http://www.visionchina.cn.

About VisionChina Media Inc.

VisionChina Media Inc. (Nasdaq: VISN) operates an out-of-home advertising network on mass transportation systems, including buses and subways. As of June 30, 2012, VisionChina Media’s advertising network included 136,075 digital television displays on mass transportation systems in 20 of China’s economically prosperous cities, including Beijing, Shanghai, Guangzhou and Shenzhen, as secured by exclusive agency agreements or joint venture contract. VisionChina Media has the ability to deliver real-time, location-specific broadcasting, including news, stock quotes, weather and traffic reports, and other entertainment programming. For more information, please visit http://www.visionchina.cn.

Use of Non-GAAP Financial Measures

In addition to VisionChina Media’s consolidated financial results under GAAP, the Company also provides non-GAAP financial measures, including net income/(loss) excluding non-cash share-based compensation expenses, amortization of intangible assets, contingent loss in connection with a litigation, impairment loss and income tax credit in connection with the impairment loss. The Company believes that the non-GAAP financial measures provide investors with another method for assessing VisionChina 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. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of VisionChina Media’s liquidity and when planning and forecasting future periods. The Company computes its non-GAAP financial measures using the same consistent method from quarter to quarter.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in 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 quotations from management in this press release contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company’s filings with the U.S. Securities and Exchange Commission, including its registration statement on Form F-1 and its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

For investor and media inquiries, please contact:

In China:

Ms. Sharon Wu
VisionChina Media Inc.
Tel: +86-189-2677-2096
E-mail: sharon.wu@visionchina.cn

Mr. Colin Wang
Investor Relations Director
VisionChina Media Inc.
Tel: +86 135-1001-0107
Email: colin.wang@visionchina.cn

In the United States:

Ms. Jessica Barist Cohen
Ogilvy Financial, New York
Tel: +1-646-460-9989
E-mail: visn@ogilvy.com

                                                                                CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                                  (Amounts in thousand U.S. dollars)

                                                         June 30, 2012                                   March 31, 2012                                       December 31, 2011
                                                         -------------                                   --------------                                       -----------------
                                                          (Unaudited)                                     (Unaudited)                                              (Note 1)
    ASSETS
    Current Assets:
    Cash and cash
     equivalents                                                           74,724                                            75,889                                              80,310
    Restricted cash                                                        13,329                                             3,327                                               3,306
    Accounts receivable, net                                               47,420                                            58,027                                              66,284
    Amounts due from related
     parties                                                                1,507                                             2,268                                               2,444
    Prepaid expenses and
     other current assets                                                  32,622                                            33,032                                              34,278
                                                                           ------                                            ------                                              ------
    Total current assets                                                  169,602                                           172,543                                             186,622
                                                                          -------                                           -------                                             -------
    Non-current Assets:
    Fixed assets, net                                                      11,683                                            12,557                                              13,638
    Goodwill                                                                    -                                           142,305                                             141,406
    Intangible assets                                                         284                                            38,229                                              39,537
    Investments under equity
     method                                                                 7,143                                             7,383                                               7,201
    Other investments                                                       3,041                                             3,040                                               3,021
    Long-term prepayments
     and deposits                                                          21,231                                            20,001                                              19,896
    Restricted cash                                                         1,113                                             1,109                                               1,102
    Deferred tax assets                                                     2,323                                             3,753                                               2,718
    Total non-current assets                                               46,818                                           228,377                                             228,519
                                                                           ------                                           -------                                             -------
    TOTAL ASSETS                                                          216,420                                           400,920                                             415,141
                                                                          =======                                           =======                                             =======

    LIABILITIES AND EQUITY
    Current Liabilities:
    Short-term bank loans                                                  35,141                                            26,932                                              20,465
    Accounts payable                                                       22,683                                            13,785                                              16,149
    Amounts due to related
     parties                                                                1,739                                             1,365                                               1,416
    Consideration payable                                                  64,000                                            64,000                                              64,000
    Income tax payable                                                         25                                                46                                                 118
    Accrued expenses and
     other current
     liabilities                                                           20,457                                            19,760                                              18,814
                                                                           ------                                            ------                                              ------
    Total current
     liabilities                                                          144,045                                           125,888                                             120,962
                                                                          -------                                           -------                                             -------
    Non-current Liabilities:
    Deferred tax liabilities                                                    -                                             9,483                                               9,808
    Other non-current
     liabilities                                                              975                                               975                                                 969
                                                                              ---                                               ---                                                 ---
    Total non-current
     liabilities                                                              975                                            10,458                                              10,777
                                                                              ---                                            ------                                              ------
    Total liabilities                                                     145,020                                           136,346                                             131,739
                                                                          =======                                           =======                                             =======

    Equity:
    Common shares                                                              10                                                10                                                  10
    Additional paid-in
     capital                                                              342,352                                           342,178                                             341,963
    Accumulated deficit                                                  (308,346)                                         (114,825)                                            (93,729)
    Accumulated other
     comprehensive income                                                  37,227                                            37,025                                              34,940
                                                                           ------                                            ------                                              ------
    Total VisionChina Media
     Inc. shareholders'
     equity                                                                71,243                                           264,388                                             283,184
    Noncontrolling interest                                                   157                                               186                                                 218
                                                                              ---                                               ---                                                 ---
    Total equity                                                           71,400                                           264,574                                             283,402
    TOTAL LIABILITIES AND
     EQUITY                                                               216,420                                           400,920                                             415,141
                                                                          =======                                           =======                                             =======

    Note 1:  Information extracted from the audited consolidated financial statements included in the Company's 2011 annual report on Form 20-F filed with the Securities
     and Exchange Commission on April 26, 2012, and rounded to thousand of U.S. dollars.

                                                           VISIONCHINA MEDIA INC.
                                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               (Amounts in thousand U.S. Dollars, except number of shares and per share data)

                                    For three months ended
                                    ----------------------
                                   June 30, 2012                                   March 31, 2012              June 30, 2011
                                   -------------                                   --------------              -------------
                                    (Unaudited)                                     (Unaudited)                 (Unaudited)

    Revenues:
      Advertising service
       revenue                                       28,069                                            28,292                    45,029
    Total revenues                                   28,069                                            28,292                    45,029
    Cost of revenues:
      Advertising service cost                      (33,462)                                          (32,303)                  (31,838)
    Total cost of revenues                          (33,462)                                          (32,303)                  (31,838)
                                                    -------                                           -------                   -------
    Gross (loss) profit                              (5,393)                                           (4,011)                   13,191
    Operating expenses:
      Selling and marketing
       expenses                                     (10,827)                                          (13,309)                   (9,006)
      General and
       administrative expenses                       (4,157)                                           (3,894)                   (3,620)
      Impairment loss on
       intangible assets and
       goodwill                                    (178,814)                                                -                         -
      Contingent loss in
       connection with a
       litigation                                    (1,410)                                           (1,410)                        -
                                                     ------                                            ------                       ---
    Total operating expenses                       (195,208)                                          (18,613)                  (12,626)
    Share of (loss) profits
     from equity method
     investees                                         (244)                                              137                       189
    Gain on disposal of
     equity interest in a
     subsidiary                                           -                                                 -                       (51)
                                                        ---                                               ---                       ---
    Operating (loss) profit                        (200,845)                                          (22,487)                      703
    Interest income                                     177                                               168                       633
    Interest expense                                   (545)                                             (399)                   (1,185)
    Other (expenses) income                            (385)                                              173                        97
                                                       ----                                               ---                       ---
    Net (loss) income before
     income taxes                                  (201,598)                                          (22,545)                      248
    Income tax benefits
     (expenses)                                       8,048                                             1,417                      (771)
                                                      -----                                             -----                      ----
    Net loss                                       (193,550)                                          (21,128)                     (523)
    Net loss attributable to
     noncontrolling interest                             29                                                32                        75
                                                        ---                                               ---                       ---
    Net loss attributable to
     VisionChina Media Inc.
     shareholders                                  (193,521)                                          (21,096)                     (448)
                                                   ========                                           =======                      ====

    Net loss per share:
      Basic                                           (1.91)                                            (0.21)                   (0.004)
      Diluted                                         (1.91)                                            (0.21)                   (0.004)

    Weighted average number
     of shares used in
     computation of net loss
     per share:
      Basic                                     101,366,554                                       101,362,345               102,321,796
      Diluted                                   101,366,554                                       101,362,345               102,321,796

    Share-based
     compensation expenses
     during the related
     periods included in:
      Cost of revenues                                  (13)                                              (13)                      (18)
      Selling and marketing
       expenses                                        (102)                                             (102)                     (116)
      General and
       administrative expenses                          (59)                                              (59)                      (80)
                                                        ---                                               ---                       ---
    Total                                              (174)                                             (174)                     (214)
                                                       ====                                              ====                      ====

    Reconciliation from GAAP
     net loss attributable
     to VisionChina Media
      Inc. shareholders to
       Adjusted Non-GAAP net
       (loss) income
       attributable to
      VisionChina Media Inc.
       shareholders:
    Net loss attributable to
     VisionChina Media Inc.
     shareholders (GAAP)                           (193,521)                                          (21,096)                     (448)
      Add back share-based
       compensation expenses                            174                                               174                       214
      Add back amortization of
       intangible assets                              1,554                                             1,554                     1,176
      Add back impairment loss
       on  intangible assets
       and goodwill                                 178,814                                                 -                         -
      Subtract tax credit in
       connection to
       impairment on
       intangible assets                             (9,101)                                                -                         -
      Add back contingent loss
       in connection with a
       litigation                                     1,410                                             1,410                         -
    Net (loss) income
     attributable to
     VisionChina Media Inc.
     shareholders (Non-
     GAAP)                                          (20,670)                                          (17,958)                      942
                                                    =======                                           =======                       ===

SOURCE VisionChina Media Inc.


Source: PR Newswire