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Focus Media Reports Second Quarter 2010 Results
Aug 23, 2010 (05:08 PM EDT)


SHANGHAI, Aug. 23 /PRNewswire-Asia-FirstCall/ -- Focus Media Holding Limited (Nasdaq: FMCN), China's leading digital media group, today announced its unaudited financial results for the second quarter ended June 30, 2010.

    Highlights for Second Quarter 2010:

    -- Total net revenue for the second quarter of 2010 was $158.2 million,
       representing an increase of 27% from $124.9 million for the first
       quarter of 2010 and an increase of 22% from $129.5 million for the
       second quarter of 2009, of which:

       - aggregate net revenue from the LCD display network, in-store network
         and poster frame network was $108.6 million, which exceeded by
         approximately 8% the mid-point of the Company's guidance range of
         $99-101.5 million. It represented an increase of 31% from $82.6
         million for the first quarter of 2010 and an increase of 22% from
         $89.8 million for the second quarter of 2009;

       - aggregate net revenue from the movie theater and traditional outdoor
         billboard network and Internet advertising services was $49.5 million,
         which exceeded by approximately 13% the mid-point of the guidance
         range of $43-45 million. It also represented an increase of 17% from
         $42.2 million for the first quarter of 2010 and an increase of 25%
         from $39.7 million for the second quarter of 2009.

    -- GAAP net income attributable to Focus Media was $25.3 million, compared
       to net loss attributable to Focus Media of $1.0 million for the first
       quarter of 2010, and net loss attributable to Focus Media of $23.0
       million for the second quarter of 2009.
    -- Non-GAAP net income attributable to Focus Media for the second quarter
       of 2010 was $44.3 million, also exceeding the mid-point of Company's
       guidance range of $35.5-$37.5 million by 21%, compared to non-GAAP net
       income attributable to Focus Media of $23.2 million for the first
       quarter of 2010 and non-GAAP net income attributable to Focus Media of
       $28.2 million for the second quarter of 2009. Please see below section
       on "Use of non-GAAP financial measures" for more information about the
       non-GAAP measures referred to within this announcement.
    -- GAAP net income per ADS was $0.17, compared to a loss of $0.01 per ADS
       for the first quarter of 2010 and a loss of $0.18 per ADS in the second
       quarter of 2009.
    -- Non-GAAP net income per fully diluted ADS was $0.30, compared to $0.16
       per fully diluted ADS for the first quarter of 2010, and $0.22 per
       fully diluted ADS for the second quarter of 2009.

    Highlights for Balance Sheet and Cash Flow Results of Second Quarter 2010:

    -- Cash, cash equivalents and short-term investment was $588.3 million as
       of June 30, 2010, slightly declining from $598.6 million as of March 31,
       2010 primarily due to cash spending in share repurchases.
    -- Net accounts receivable for the LCD display network, in-store network
       and poster frame network was $128.7 million as of June 30, 2010, an
       increase of 31% from $98.4 million as of March 31, 2010. Days sales
       outstanding on a rolling basis was 86 days in the second quarter of
       2010 versus 96 days for the first quarter of 2010.
    -- Net accounts receivable for the Internet advertising services,
       traditional outdoor billboard network, and movie theater network was
       $73.4 million as of June 30, 2010, an increase of 9% from $67.4 million
       as of March 31, 2010 primarily due to higher net revenue in the second
       quarter of 2010 versus that in the first quarter of 2010.
    -- Net cash flow from operations in the second quarter of 2010 was $37.8
       million, significantly increasing by 627% from $5.2 million for the
       first quarter of 2010.
    -- Capital expenditures were $3.8 million for the second quarter of 2010.
    -- Earn-out payments related to historical acquisitions paid in the second
       quarter of 2010 were $7.3 million, primarily attributable to the poster
       frame network.

Jason Jiang, the Chairman and the Chief Executive Officer of the Company said, "The first half of 2010 has seen a broad based recovery of the advertising market from the first half of 2009. According to Nielsen Research, the Chinese advertising market grew 15% year on year during the first half of 2010. The Company managed to grow the core business 24% year over year during the same period, indicating that we continue to gain market share in the Chinese advertising market. We are confident that as we further stabilize and strengthen our core business, we can strive to continue our market share gain in the second half of 2010."

Kit Low, the Chief Financial Officer of the Company added, "In the second quarter of 2010, the Company achieved aggregate net revenue year on year growth in our LCD display, in-store and poster frame business of 22%, and quarter on quarter growth of 31%. GAAP net income and Non-GAAP net income for the second quarter of 2010 are $25.3 million and $44.3 million, respectively. The Company has improved its free cash flow generation, defined as operating plus investing cash flows, as compared to the first quarter of 2010. In the second quarter of 2010, the Company generated a net cash flow from operating cash flow and investing cash flow of $26.6 million. We will continue our focus to improve our free cash flow generation going forward."

Second Quarter 2010 financial results

Advertising net revenue from the LCD display network was $72.5 million for the second quarter of 2010, representing an increase of 44% from $50.2 million for the first quarter of 2010 and an increase of 34% from $54.3 million for the second quarter of 2009.

Advertising net revenue from the poster frame network was $25.2 million for the second quarter of 2010, representing a slight increase of 2% from $24.8 million for the first quarter of 2010 and a slight decrease of 5% from $26.5 million for the second quarter of 2009.

Advertising net revenue from the in-store network was $10.9 million for the second quarter of 2010, increasing by 42% from $7.7 million from the first quarter of 2010 and by 21% from $9.0 million for the second quarter of 2009.

As of June 30, 2010, the total installed base of LCD displays in our LCD display network was 142,305 nationwide, including 137,071 displays through our directly owned networks, and 5,234 displays through our regional distributors, as compared to total LCD displays of 132,485 as of March 31, 2010. The total number of non-digital frames available for sale in our poster frame network was 238,689 as of June 30, 2010, as compared to 235,160 as of March 31, 2010. In addition, as of June 30, 2010, we had 35,835 digital frames installed in our poster frame network, as compared to 35,599 as of March 31, 2010. The total number of displays installed in our in-store network was 45,686 as of June 30, 2010, as compared to 40,848 as of March 31, 2010.

Internet advertising service net revenue was $35.7 million in the second quarter of 2010, increasing by 27% from $28.1 million for the first quarter of 2010 and by 43% from $25.0 million for the second quarter of 2009.

Advertising net revenue from the traditional outdoor billboard network and movie theater was $13.9 million for the second quarter of 2010, on par with $14.1 million for the first quarter of 2010 but decreasing by 6% from $14.8 million for the second quarter of 2009, primarily due to lower seasonal revenue from the movie theater network.

Non-GAAP gross profit from the LCD display network for the second quarter of 2010 was $59.3 million, representing an increase of 63% from $36.3 million for the first quarter of 2010 and an increase of 34% from $44.3 million for the second quarter of 2009.

Non-GAAP gross profit from the poster frame network for the second quarter of 2010 was $7.6 million, representing a decrease of 5% from $8.0 million for the first quarter of 2010, and a decrease of 44% from $13.6 million for the second quarter of 2009.

Non-GAAP gross profit from the in-store network for the second quarter of 2010 was $4.7 million, representing an increase of 96% from $2.4 million for the first quarter of 2010 and an increase of 62% from $2.9 million for the second quarter of 2009.

Non-GAAP gross profit from our Internet advertising services for the second quarter of 2010 was $10.1 million, representing an increase of 77%, from $5.7 million for the first quarter of 2010 and an increase of 166% from $3.8 million for the second quarter of 2009.

Non-GAAP gross profit from the traditional outdoor billboard network and movie theater network for the second quarter of 2010 was $3.5 million, representing a 26% decline, from $4.7 million for the first quarter of 2010 and from $4.7 million for the second quarter of 2009.

Non-GAAP operating expense for the second quarter of 2010 was $34.9 million, an increase of 22% from $28.7 million for the first quarter of 2010 and a decline of 11% from $39.1 million for the second quarter of 2009 primarily due to higher sales and marketing costs (resulted from higher advertising revenue).

Provision for income tax for the second quarter of 2010 was $5.7 million, which benefited from a downward adjustment of approximately $1.8 million from the first quarter of 2010 as the Company completed the application process and commenced the public announcement in the second quarter for High/New Technology Enterprise ("HNTE") for one of its subsidiaries.

Net cash provided by operating activities for the second quarter of 2010 was $37.8 million.

Net cash used in investing activities for the second quarter was $11.2 million. In the second quarter of 2010, the Company incurred capital expenditures of $3.8 million and earn-out payments of $7.3 million.

Net cash used in financing activities for the second quarter was $39.3 million. In the second quarter of 2010, the Company transferred the cash deposit of $43.0 million to a broker for share repurchase, of which $36.7 million has been spent to repurchase the shares of the Company with the remaining $6.3 million for future share repurchase.

Business Outlook for Third Quarter 2010

Prior to the start of the third quarter of 2010, the core business of the Company consisted of the LCD display network, poster frame network and in-store network. The non-core business consisted of the traditional outdoor billboard network, Internet advertising services and the movie theater network. From the third quarter of 2010, the Company re-categorized the movie theater network from non-core business to core business and grouped it into the LCD display network when reporting. Following the re-categorization, the core business of the Company consists of the LCD display network, movie theater network, poster frame network and In-store network, and the non-core business of the Company consists of the traditional outdoor billboard network only (the Internet advertising services have been sold in the early part of third quarter of 2010).

On that basis, the Company provides the following guidance with respect to the third quarter ending September 30, 2010:

The net revenues for the core business (inclusive of movie theater network of $5 million for the third quarter of 2010 as compared to the net revenues of $3.5 million for the second quarter of 2010) are expected to be in the range of $120-$123 million, the mid-point of which would represent quarter-on-quarter growth of 8% and year-on-year growth of 37%, or quarter-on-quarter growth of 7% and year-on-year growth of 36% excluding movie theater network's assumed contribution. Net revenues for the non-core business (contribution through to the date of disposal of Internet advertising services of approximately $10 million) are expected to be in the range of $20-$22 million. The Company's non-GAAP net income is expected to be in the range of $48-$49 million. The Company estimates the weighted average fully diluted ADS count for the quarter at 147 million, assuming no further share repurchases during the quarter.

In the second quarter of 2010, the Company completed the application process for HNTE for one of the Company's subsidiaries. The subsidiary has commenced the public announcement in the second quarter. As of second quarter's press release date, the subsidiary successfully passed the 15 announcement days, and is currently waiting to receive the certificate. The Company believes the subsidiary will obtain the certificate in 2010 and thus be eligible for a tax holiday (i.e. two-year tax exemption followed by a three-year 50% tax reduction). With the application of 0% tax rate to that particular subsidiary effective from January 1, 2010, the expected effective tax rate for fiscal year 2010 for the Company will be 15%-16%.

The Company incurred cumulative earn-out payments of $22.5 million in the first half of 2010. Based on the existing business outlook, the Company expects earn-out payments remaining in the second half of 2010 to be no more than $15 million versus our previous guidance of cumulatively no more than $40 million for 2010.

Announced Share Repurchase Program

On August 3, 2010, Focus Media announced its intention to increase the size of its previously announced share repurchase program from $200 million to $300 million and to extend the termination date of the repurchase plan to June 2011 from February 2011. As of August 23, 2010, the Company has cumulatively spent $36.7 million in share repurchases.

Foreign Currency Translation

Assets and liabilities are translated at the exchange rate as of June 30, 2010, which was $1 to RMB 6.7909. Equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the second quarter of 2010, which was $1 to RMB 6.8335. 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 EPS, all excluding share-based compensation expenses, amortization of acquired intangible assets, loss from disposal of previously acquired subsidiaries and equity affiliates, impairment charges of long-lived assets and goodwill, write-off of receivables from ex-shareholders of disposed business and charges from expensing IPO expenditures as a result of termination of the IPO process of Allyes. 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 the same consistent method from quarter to quarter. 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.



                              Focus Media Holding Ltd.
                        Reconciliation of GAAP to non-GAAP
     (U.S. Dollar in thousands, except percentages, share and per-share data)
                                   (Unaudited)

                                   Three months ended June 30, 2010
                               GAAP        (1)      (2)       (3)    Non-GAAP

    Gross Profit
    LCD display network       58,044       283    1,021        --     59,348
    Poster frame network       5,939        --    1,634        --      7,573
    In-store network           4,745        --       --        --      4,745
    Internet advertising       9,866        --      207        --     10,073
    Movie theater and
     outdoor billboard
     network                   3,040        --      443        --      3,483
    Total Gross Profit        81,634       283    3,305        --     85,222

    General and
     administrative           20,021   (11,400)      --        --      8,621
    Selling and marketing     31,962    (1,244)  (1,177)       --     29,541
    Other operating
     expenses (income), net   (1,719)       --       --    (1,524)    (3,243)
    Total operating
     expense                  50,264   (12,644)  (1,177)   (1,524)    34,919

    Operating profit          31,370    12,927    4,482     1,524     50,303

    Profit before tax         32,466    12,927    4,482     1,524     51,399

    Net income
     attributable to
     Focus Media              25,336    12,927    4,482     1,524     44,269

    Basic net income per
     ADS                        0.18                                    0.31
    Diluted net income
     per ADS                    0.17                                    0.30

    Shares used in
     calculating basic
     income per ADS      143,787,178                             143,787,178
    Shares used in
     calculating
     diluted income
     per ADS             148,162,497                             148,162,497


    (1). Share-based compensation.
    (2). Amortization of acquired intangible assets.
    (3). Loss from disposal of previously acquired subsidiaries, all
         attributable to poster frame business.



                                  Three months ended March 31, 2010
                             GAAP       (1)    (2)     (3)     (4)   Non-GAAP

    Gross Profit
    LCD display network     35,210      280    839      --            36,329
    Poster frame network     6,351       --  1,639      --             7,990
    In-store network         2,443       --     --      --             2,443
    Internet advertising     5,452       --    207      --             5,659
    Movie theater and
     outdoor billboard
     network                 4,216       --    442      --             4,658
    Total Gross Profit      53,672      280  3,127      --            57,079

    General and
     administrative         23,780  (11,290)    --      --      --    12,490
    Selling and marketing   23,294   (1,232)(1,187)     --      --    20,875
    Impairment loss          5,736       --     --  (5,736)     --        --
    Other operating
     expenses
     (income), net          (4,675)      --     --      --      --    (4,675)
    Total operating
     expense                48,135  (12,522)(1,187) (5,736)     --    28,690

    Operating profit         5,537   12,802  4,314   5,736      --    28,389

    Profit before tax        6,087   12,802  4,314   5,736   1,288    30,227

    Net income (loss)
     attributable
     to Focus Media           (954)  12,802  4,314   5,736   1,288    23,186

    Basic and diluted net
     income
    (loss) per ADS           (0.01)                                     0.16

    Shares used in
     calculating basic
    loss per ADS       145,055,601                               145,055,601
    Shares used in
     calculating
     diluted loss
     per ADS           145,055,601                               148,482,403


    (1). Share-based compensation.
    (2). Amortization of acquired intangible assets.
    (3). Impairment charges of goodwill as a result of earn-out payments in
         poster frame business.
    (4). Loss from disposal in investment of equity affiliate.



                                  Three months ended June 30, 2009
                          GAAP    (1)     (2)     (3)    (4)      (5) Non-GAAP
    Gross Profit
    LCD display
     network         43,668     667      --      --       --       --   44,335
    Poster frame
     network         13,641      --      --      --       --       --   13,641
    In-store
     network          2,942      --       6      --       --       --    2,948
    Internet
     advertising      2,462      --     817      --      561       --    3,840
    Movie theater
     and outdoor
     billboard
     network          3,877      --     868      --       --       --    4,745
    Total Gross
     Profit          66,590     667   1,691      --      561       --   69,509

    General and
     administrative  27,578  (3,721)     --      --       --       --   23,857
    Selling and
     marketing       26,380  (6,309) (1,130)     --     (247)      --   18,694

    Impairment loss  25,773      --      --      --  (25,773)      --       --
    Other operating
     expenses
    (income), net       244      --      --  (1,212)      --   (2,528)  (3,496)
    Total operating
     Expense          79,975 (10,030) (1,130) (1,212) (26,020) (2,528)  39,055

    Operating (loss)
     profit          (13,385) 10,697   2,821   1,212   26,581   2,528   30,454

    Profit (loss)
     before tax      (12,093) 10,697   2,821   1,212   26,581   2,528   31,746

    Net income (loss)
     attributable to
     Focus Media     (22,971) 10,697   4,280   1,212   32,447   2,528   28,193

    Basic and
     diluted
     net income
    (loss) per ADS     (0.18)                                             0.22

    Shares used in
     calculating
     basic loss
     per ADS     129,223,942                                       129,223,942
    Shares used in
     calculating
     diluted loss
     per ADS     129,223,942                                       129,282,527


    (1). Share-based compensation
    (2). Amortization of acquired intangible assets.
    (3). Loss from disposal of previously acquired subsidiaries.
    (4). Impairment charges of goodwill and other long-lived assets.
    (5). Write-off of receivables from ex-shareholders of disposed business.



                             Focus Media Holding Ltd.
                       Reconciliation of GAAP to non-GAAP
               (U.S. Dollar in thousands, except percentages, share
                                and per-share data)
                                   (Unaudited)

                                    Six months ended June 30, 2010
                             GAAP       (1)    (2)      (3)    (4)   Non-GAAP

    Gross Profit
    LCD display network     93,254      562  1,860       --     --    95,676
    Poster frame network    12,290       --  3,273       --     --    15,563
    In-store network         7,189       --     --       --     --     7,189
    Internet advertising    15,318       --    414       --     --    15,732
    Movie theater and
     outdoor
     billboard network       7,255       --    885       --     --     8,140
    Total Gross Profit     135,306      562  6,432       --     --   142,300

    General and
     administrative         43,802  (22,691)    --       --     --    21,111
    Selling and marketing   55,256   (2,475)(2,364)      --     --    50,417
    Impairment loss          5,736       --     --   (5,736)    --        --
    Other operating
     (income), net          (6,394)      --     --       -- (1,524)   (7,918)
    Total operating
     expense                98,400  (25,166)(2,364)  (5,736)(1,524)   63,610

    Operating profit        36,906   25,728  8,796    5,736  1,524    78,690

    Profit before tax       38,553   25,728  8,796    5,736  2,812    81,625

    Net income
     attributable to
     Focus Media            24,382   25,728  8,796    5,736  2,812    67,454

    Basic net income per
     ADS                      0.17                                      0.47
    Diluted net income
     per ADS                  0.16                                      0.45

    Shares used in
     calculating basic
     income per ADS    144,705,951                               144,705,951
    Shares used in
     calculating
     diluted income
     per ADS           149,081,270                               149,081,270


    (1). Share-based compensation.
    (2). Amortization of acquired intangible assets.
    (3). Impairment charges of goodwill as a result of earn-out payments in
         poster frame business.
    (4). Loss from disposal of previously acquired business.




                                    Six months ended June 30, 2009
                                 GAAP       (1)         (2)       (3)

    Gross Profit
    LCD display network        66,368       913          --        --
    Poster frame network       24,833        --          --        --
    In-store network            5,019        --          15        --
    Internet advertising        6,336        --       1,638        --
    Movie theater and
     outdoor billboard
     network                    8,925        --       1,840        --
    Total Gross Profit        111,481       913       3,493        --

    General and
     administrative            51,300    (8,480)         --        --
    Selling and marketing      45,820    (9,426)     (2,340)       --
    Impairment loss            35,044        --          --        --
    Other operating
     (income), net             (3,105)       --          --    (1,212)
    Total operating
     Expense                  129,059   (17,906)     (2,340)   (1,212)

    Operating (loss)
     profit                   (17,578)   18,819       5,833     1,212

    Profit (loss)
     before tax               (14,711)   18,819       5,833     1,212

    Net income (loss)
     attributable to
     Focus Media              (28,666)   18,819       8,742     1,212

    Basic and diluted
     net income (loss)
     per ADS                    (0.22)

    Shares used in
     calculating basic
     income per ADS       129,216,342
    Shares used in
     calculating
     diluted income
     per ADS              129,216,342


                                    Six months ended June 30, 2009
                                  (4)       (5)        (6)    Non-GAAP

    Gross Profit
    LCD display network            --        --         --     67,281
    Poster frame
     network                       --        --         --     24,833
    In-store network               --        --         --      5,034
    Internet advertising          561        --         --      8,535
    Movie theater and
     outdoor billboard
     network                       --        --         --     10,765
    Total Gross Profit            561        --         --    116,448

    General and
     administrative                --    (2,466)        --     40,354
    Selling and marketing        (247)       --         --     33,807
    Impairment loss           (35,044)       --         --         --
    Other operating
     (income), net                 --        --     (2,528)    (6,845)
    Total operating
     Expense                  (35,291)   (2,466)    (2.528)    67,316

    Operating (loss)
     profit                    35,852     2,466      2,528     49,132

    Profit (loss)
     before tax                35,852     2,466      2,528     51,999

    Net income (loss)
     attributable to
     Focus Media               41,718     2,466      2,528     46,819

    Basic and diluted
     net income
     (loss) per ADS                                              0.36

    Shares used in
     calculating basic
     income per ADS                                       129,216,342
    Shares used in
     calculating
     diluted income
     per ADS                                              129,277,356


    (1). Share-based compensation
    (2). Amortization of acquired intangible assets.
    (3). Loss from disposal of previously acquired subsidiaries.
    (4). Impairment charges of goodwill and other long-lived assets.
    (5). One-off charges from expensing IPO expenditures as a result of
         termination of IPO process of Allyes.
    (6). Write-off of receivables from ex-shareholders of disposed business.

CONFERENCE CALL

The Company will host a conference call to discuss the second quarter 2010 results at 9:00 p.m. U.S. Eastern Time on August 23, 2010 (6:00 p.m. U.S. Pacific Time on August 23, 2010 and 9:00 a.m. Beijing/Hong Kong Time on August 24, 2010). The dial-in details for the live conference call are set forth below: U.S. Toll Free Number +1.800.591.6923, Hong Kong dial-in number +852.3002.1672, International dial-in number +1.617.614.4907; Pass code: 61351600.

A replay of the call will be available from August 24, 2010 12:00 am until August 31, 2010 (US Eastern Time). The dial-in details for the replay are set forth below: U.S. Toll Free Number +1-888-286-8010, International dial-in number +1-617-801-6888; Pass code 43827029. 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) is China's leading multi-platform digital media company, operating the largest out-of-home advertising network in China using audiovisual digital displays, based on the number of locations and number of flat-panel television displays in our network. Through Focus Media's multi-platform digital advertising network, the company reaches urban consumers at strategic locations and point-of-interests over a number of media formats, including audiovisual television displays in buildings and stores, advertising poster frames and other new and innovative media, such as outdoor light-emitting diode or LED digital billboard and Internet advertising platforms. As of June 30, 2010, Focus Media's digital out-of-home advertising network had approximately 142,000 LCD displays in its LCD display network and approximately 275,000 advertising in-elevator poster and digital frames, installed in over 90 cities throughout China. For more information about Focus Media, please visit our website at http://ir.focusmedia.cn .



                           Focus Media Holding Limited
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                           (U.S. Dollars in Thousands)

                                                   2010-6-30       2010-3-31
    ASSETS
    Current assets
      Cash and cash equivalents                      588,252         598,561
      Accounts receivable, net                       202,059         165,830
      Prepaid expenses and other current
       assets                                         31,468          32,688
      Deposit paid for acquisition of
       subsidiaries                                    1,480           2,957
      Rental deposits                                 47,431          37,129
      Other current assets                             3,393           3,770
    Total current assets                             874,083         840,935
      Rental deposits, non-current                     7,924           7,772
      Equipment, net                                  69,464          71,913
      Acquired intangible assets, net                 43,188          47,471
      Goodwill                                       415,019         410,372
      Other long term assets                          14,806          14,485
    Total assets                                   1,424,484       1,392,948

    LIABILITIES AND EQUITY
    Current liabilities
      Accounts payable                                66,888          58,853
      Accrued expenses and other current
       liabilities                                    96,632          81,687
      Income taxes payable                            14,277          18,772
      Amount due to related parties                    5,362             175
      Deferred tax liabilities                        11,694          11,633
    Total current liabilities                        194,853         171,120
      Deferred tax liabilities, non-current            5,952           5,902
    Total liabilities                                200,805         177,022

    Equity
      Ordinary shares                                     36              36
      Additional paid in capital                   1,867,533       1,891,351
    Subscription receivable                           (1,266)         (3,082)
      Accumulated deficit                           (722,846)       (748,180)
      Accumulated other comprehensive income          63,554          60,209
    Total Focus Media equity                       1,207,011       1,200,334
      Noncontrolling interests                        16,668          15,592
      Total equity                                 1,223,679       1,215,926
    Total liabilities and equity                   1,424,484       1,392,948



                           Focus Media Holding Limited
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
         (U.S. Dollar in thousands, except earnings per ADS and ADS data)

                               Three months ended         Six months ended
                     2010-6-30   2010-3-31   2009-6-30   2010-6-30   2009-6-30
    Revenues
    LCD display
     network           80,056      55,428      59,943     135,484      98,256
    In-store
     network           11,997       8,488       9,900      20,485      16,915
    Poster frame
     network           27,623      27,413      29,254      55,036      55,062
    Movie theater
     and outdoor
     billboard
     network           14,379      14,672      15,030      29,051      34,876
    Internet
     advertising       37,131      29,440      26,397      66,571      48,883
    Total gross
     revenues         171,186     135,441     140,524     306,627     253,992
    Less: Sales
     taxes             13,019      10,562      10,983      23,582      19,745
    Total net
     revenue
     (note)           158,167     124,879     129,541     283,045     234,247

    Cost of revenues
    LCD display
     network           14,486      14,945      10,677      29,431      22,304
    In-store
     Network            6,123       5,219       6,025      11,341      10,292
    Poster frame
      network          19,298      18,448      12,858      37,746      25,203
    Movie theater
     and outdoor
     billboard
     network           10,833       9,922      10,886      20,755      25,048
    Internet
     advertising       25,793      22,673      22,505      48,466      39,919
    Total cost
     of revenues       76,533      71,207      62,951     147,739     122,766
    Gross profit       81,634      53,672      66,590     135,306     111,481

    Operating
     expenses
    General and
     administrative    20,021      23,780      27,578      43,802      51,300
    Selling and
     marketing         31,962      23,294      26,380      55,256      45,820
    Impairment loss        --       5,736      25,773       5,736      35,044
    Other operating
     expenses
     (income), net     (1,719)     (4,675)        244      (6,394)     (3,105)
    Total operating
     expenses          50,264      48,135      79,975      98,400     129,059

    Operating profit
     (loss)            31,370       5,537     (13,385)     36,906     (17,578)
    Interest income     1,096       1,838       1,292       2,935       2,867
    Non-operating
     expense               --      (1,288)         --      (1,288)         --
    Income (loss) from
     continuing
     operations
     before
     income taxes      32,466       6,087     (12,093)     38,553     (14,711)
    Provision for
     income
     taxes              5,665       6,678       5,849      12,343       8,832
    Net income
     (loss) from
     continuing
     operations        26,801        (591)    (17,942)     26,210     (23,543)

    Net loss from
     discontinued
     operations, net
     of tax                --          --      (4,806)         --      (4,880)
    Net income (loss)  26,801        (591)    (22,748)     26,210     (28,423)

    Less: Net income
     attributable to
     noncontrolling
     interests          1,465         363         223       1,828         243
    Net income (loss)
     attributable to
     Focus Media       25,336        (954)    (22,971)     24,382     (28,666)

    Net income
     (loss) per ADS
    -basic               0.18       (0.01)      (0.18)       0.17       (0.22)
    -diluted             0.17       (0.01)      (0.18)       0.16       (0.22)

    Shares used in
     calculating
     basic loss
     per ADS      143,787,178 145,055,601 129,223,942 144,705,951 129,216,342
    Shares used in
     calculating
     diluted loss
     per ADS      148,162,497 145,055,601 129,223,942 149,081,270 129,216,342


    Note: Details of net revenues by segment are as follows (U.S. Dollars in
          thousands):


                              Three months ended          Six months ended
                         2010-6-30 2010-3-31 2009-6-30   2010-6-30  2009-6-30
    Gross revenues
    LCD display network    80,056    55,428    59,943     135,484     98,256
    In-store network       11,997     8,488     9,900      20,485     16,915
    Poster frame network   27,623    27,413    29,254      55,036     55,062
    Movie theater and
     outdoor billboard
     network               14,379    14,672    15,030      29,051     34,876
    Internet advertising   37,131    29,440    26,397      66,571     48,883
    Total gross revenues  171,186   135,441   140,524     306,627    253,992
    Less: Sales taxes
    LCD display network     7,526     5,273     5,597      12,799      9,584
    In-store network        1,129       826       933       1,955      1,604
    Poster frame network    2,386     2,614     2,755       5,000      5,026
    Movie theater and
     outdoor billboard
     network                  506       534       268       1,041        903
    Internet advertising    1,472     1,315     1,430       2,787      2,628
    Total sales tax        13,019    10,562    10,983      23,582     19,745
    Net revenues
    LCD display network    72,530    50,155    54,346     122,685     88,672
    In-store network       10,868     7,662     8,967      18,530     15,311
    Poster frame network   25,237    24,799    26,499      50,036     50,036
    Movie theater and
     outdoor billboard
     network               13,873    14,138    14,762      28,010     33,973
    Internet advertising   35,659    28,125    24,967      63,784     46,255
    Total net revenues    158,167   124,879   129,541     283,045    234,247



                           FOCUS MEDIA HOLDING LIMITED
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
                           (U.S. Dollar in thousands)

                                        Three months ended Six months ended
                                       2010-6-30 2009-6-30 2010-6-30 2009-6-30
    Operating activities:
    Net income (loss)                     26,801  (22,748)   26,210  (28,423)
    Adjustments to reconcile net
     loss to net cash provided by
     operating activities:
    Bad debt expenses                     (1,518)  11,240       337   18,520
    Share-based compensation              12,927   10,697    25,728   18,819
    Depreciation                           7,428      671    15,071    1,164
    Amortization of acquired
     intangible assets                     4,482    4,280     8,796    8,742
    Loss on disposal of equity interest
     of subsidiaries and impairment of
     other long-lived assets               1,545      115     2,833     (124)
    Gain on earn-out payment
     renegotiation                            --    1,052        --       --
    Impairment charges for goodwill,
     acquired intangible assets and
     equipment                                --   33,938     5,736   43,209
    Others                                    80      113       115      (41)
    Net changes in current assets and
     current liabilities, net of
     effects of acquisitions             (13,953) (11,544)  (41,845) (10,189)
    Net cash provided by operating
     activities                           37,792   27,814    42,981   51,677

    Investing activities:
    Purchase of equipment and other
     long-term assets                     (3,849)  (2,787)   (4,925)  (8,814)
    Earn-out payment paid to acquire
     subsidiaries                         (7,325) (61,446)  (22,538) (67,799)
    Proceeds received from the sale of
     short-term investments                   --       --    29,290      574
    Proceeds used in investment in
     short-term investments                   --     (146)       --  (29,290)
    Proceeds received from disposal
     fixed assets                            142      195       142      197
    Disposal of subsidiaries                (140)      --     2,789     (584)
    Net cash received from/(used in)
     investing activities                (11,172) (64,184)    4,758 (105,716)

    Financing activities:
    Cash used for share repurchase       (36,715)      --   (36,715)      --
    Cash deposit for share repurchase     (6,301)      --    (6,301)      --
    Capital injection from minority
     shareholders                          1,924       --    10,968       --
    Proceeds from issuance of ordinary
     shares, net of issuance costs         1,819       --     1,819      143
    Net cash provided by/(used in)
     financing activities                (39,273)      --   (30,229)     143
    Effect of exchange rate changes        2,344      672     2,583   (1,136)

    Net increase (decrease) in cash
     and cash equivalents                (10,309) (35,698)   20,093  (55,032)
    Cash and cash equivalents,
     beginning of period                 598,561  403,582   568,159  422,916

    Cash and cash equivalents, end
     of period                           588,252  367,884   588,252  367,884

    Supplemental disclosure of cash
     flow information:
    Income taxes paid                      9,367    3,728    23,940    8,581

    Supplemental disclosure of non-cash
     investing
    activity:
    Acquisition of subsidiaries:
      Accounts payable                     7,178    1,842     7,178    1,842

SOURCE Focus Media Holding Limited