updated 10/21/2010 2:16:08 PM ET 2010-10-21T18:16:08

BEIJING, Oct. 21, 2010 (GLOBE NEWSWIRE) -- China Networks International Holdings Ltd ("China Networks" or the "Company") (OTCBB:CNWHF), a leading and exclusive operator of television advertising networks in the People's Republic of China, announced today its unaudited financial results for the first half 2010.

Second Quarter 2010 Highlights:

  • Revenues of $5.1 million 
  • US GAAP net income of $13 million 
  • Adjusted net income of $0.8 million or $0.02 per common share based on 41,019,998 shares 
  • Adjusted EBITDA of $1.1 million

First Quarter 2010 Highlights:

  • Revenues of $5.1 million 
  • US GAAP net income of $0.1 million 
  • Adjusted net income of $1.0 million or $0.02 per common share based on 41,019,998 shares 
  • Adjusted EBITDA of $1.3 million

Six Months Ended June 30, 2010 Highlights:

  • Consolidated revenues were $10.2 million, up 7% compared to $9.5 million for the six months ended June 30, 2009 
  • US GAAP net income was $12.9 million, up 3,125% compared to $0.4 million for the six month ended June 30, 2009 
  • Adjusted net income of $1.8 million or $0.04 per common share based on 41,019,998 shares 
  • Adjusted EBITDA of $2.5 million 
  • In April 2010, the Company completed a $25.5 million debt restructuring of Senior Secured Notes 
  • Simultaneous to the restructuring, China Networks completed a $11 million financing through the sale of Senior Secured Convertible Debentures

Total common shares outstanding as of June 30 and March 31, 2010 were 41,019,998 and 12,927,888 respectively. Total adjusted shares outstanding as of March 31, 2010 following the Company's restructuring and debt-financing transactions on April 13, 2010 is 57,019,998 (see "About Non-GAAP Financial Measures" below).

Management's Comments

Commenting on the Company's financial results, the Company's Chairman and Chief Executive Officer, Mr. Shuangqing Li, said, "Our current progress this year has reinforced our expectations and optimism in the future and profitability of China's advertising markets. Our performance for the first six months exceeded our expectations as compared to the first six months of 2009. China Networks is poised for significant organic growth as the demand for our services, advertising budgets, and subscriber revenues continue to grow. We expect to focus on generating higher margins and are in discussions with other networks in tier 2 and tier 3 cities with attractive valuations that can further enhance our revenue streams. This year we witnessed the recovery of China's advertising market and as a result we are gaining better traction in capturing the increases and revenue opportunities with our network partners. We are confident that we can meet our targeted guidance for the year and remain on track for generating continued growth."

Management's Discussion and Analysis

Consolidated revenues for the six months ended June 30, 2010 were $10.2 million, up 7% compared to revenues of $9.5 million for the same period in 2009. Increases during the first half of 2010 reflect the optimization of higher quality TV programming which have resulted in an improvement in audience ratings. While we witnessed the recovery of China's advertising industry during the first half of 2010, we took advantage of the strengthened sales and "after-sales services" for 4A companies (American Association of Advertising Agencies). After-sales services is defined as organizing and revising advertising broadcasting schedules in accordance to customer orders and providing necessary statistic data such as audience rating, etc. As a result, the 4A companies have also increased their advertisement budgets.

Consolidated operating expenses for the six months ended June 30, 2010 were $2.0 million, down 20% compared to operating expenses of $2.4 million for the same period in 2009. The reduction in operating expenses was largely attributable to aggressive cost cutting initiatives made by the Company. As the cost of program procurement increased sharply, the Company has reduced operating expenses, with a focused approach on scaling back program promotion costs. In addition the program suppliers has assumed some of the program promotion costs resulting in a decrease in administrative expenses.

Overall increase in cost of sales during the first half of 2010 was due to increase in cost of programs as compared with the same period in last year. The significant increase was mainly due to the program fee charged by Yellow River TV Station, which had increased from RMB 800,000 to RMB 1,250,000 per month.

According to the agreement, following the first of year of business operations, Yellow River TV Station understated the total costs of the program fees. As a result, Yellow River TV Station has negotiated an increase of RMB 450,000 for the program fee per month.

For the Kunming TV station, costs of amortization of TV programs increased as compared with the same period last year. Purchases in cost of programs remained stable for the period as more premium TV programming inventories were purchased. Total costs subject to amortization combined with program costs, were amortized in full period (6 months) in accordance with their respective contract terms and led to significant increase in cost of sales.

Recent Company Highlights

In early April, China Networks reached an agreement with majority holders and holders of debt securities to restructure a $25.5 million in outstanding debt obligations. The Company's wholly-owned subsidiary, agreed to cancel the debentures in exchange for 23 million common shares and 16 million preferred shares of China Networks. At completion of restructuring, the outstanding capital of the Company consisted of 41,019,993 common shares, 16,000,000 preferred shares and a total debt of $11 million.

In connection with the restructuring, the Company completed a $11 million private placement through the sale of senior secured convertible debentures with a conversion price of $1.14.

Management's Outlook

For the full year 2010, China Networks reiterates its guidance estimates for adjusted EBITDA to be between $5.9-$6.2 million as announced in its fiscal year financial results ending December 31, 2009.

The company noted that its guidance is based on the current networks of two equity joint ventures with PRC TV stations that, as of the release date, have already been secured by contracts. If and when more TV stations are added to the operation networks or other adjustments are made, management's forecast will be impacted.

About Non-GAAP Financial Measures

The release includes non-GAAP financial measures. The presentation of these non-GAAP financial measures should be considered in addition to the Company's GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The Company's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain charges, gains and tax effects that may not be indicative of the Company's core business operating results. It also excludes a gain on cancellation of debt as a result of the Company's debt restructuring completed in April 2010. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance. The Company includes these non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making.

The following tables provide reconciliations of net income (US GAAP) to Adjusted EBITDA (Non-GAAP) and Adjusted net income (Non-GAAP):

About China Networks

China Networks International Holdings, Ltd., is a media advertising company focusing on providing international and domestic advertising to its exclusive networks in tier two and tier three cities in China., Currently the Company owns and operates a 50% interest in the Kunming Taishi Information Cartoon Co., Ltd. (Kunming) and Shanxi Yellow River & Advertising Networks Cartoon Technology Co., Ltd (Yellow River) Joint Ventures. Combined, Kunming and Yellow River represent coverage of 7 television channels and 1 radio station covering 36 million people. China Networks along with its joint venture partners seeks to add more television stations to its advertising network. For more information about China Networks, visit www.chinanetworks.com .

The China Networks International Holdings Ltd. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7329

Safe Harbor Statement

This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, our future operating results, as well as all our assumptions, expectations, predictions, intentions or beliefs about future events. Forward-looking statements can be identified by the use of forward-looking terminology such as "will," "believes," "expects" or similar expressions. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and based upon premises with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system at http://www.sec.gov.

© Copyright 2012, GlobeNewswire, Inc. All Rights Reserved


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