Focus Media Holding (FMCN) 6-K Focus Media Reports Second Quarter 2008 Results

Exhibit 99.1

Focus Media Reports Second Quarter 2008 Results

SHANGHAI, China, August 17, 2008 – Focus Media Holding Limited (Nasdaq: FMCN), China’s leading multi- platform digital media company, today announced its unaudited financial results for the second quarter ended June 30, 2008.

Highlights for second quarter 2008:

*   Total revenues grew 106.8% year-over-year and 31.1% quarter-over-quarter to $211.7 million.

*   GAAP net income for the second quarter was $36.1 million or $0.28 per fully diluted ADS.

*   Focus Media provides gross margin, operating margin, net income and earnings per ADS on a non-GAAP basis that exclude non-cash share-based compensation expense, acquired intangible assets amortization expense and one-time items to enable investors to better assess the Company’s operating performance. The non-GAAP measures are described below and reconciled to the corresponding GAAP measure in the section below titled “Use of non-GAAP Financial Measures”. Net income excluding non-cash share-based compensation expenses, amortization of acquired intangible assets resulting from acquisitions and one-time charges relating to our discontinued operations (non-GAAP) for the second quarter was $57.5 million or $0.44 per fully diluted ADS, exceeding company guidance of $54 million to $55 million.

*   In the second quarter of 2008, digital out-of-home advertising revenue was $135.4 million, up 76.2% year-over-year and 24.4% quarter-over-quarter.

• Advertising service revenue from our commercial location network, grew 58.9% year-over-year and 29.9% quarter-over-quarter to $81.1 million.

• Advertising service revenue from our in-store network, including revenues from CGEN Digital Media Company Limited (“CGEN”), was $17.0 million, an increase of 135.0% year-over-year and a slight decrease from $17.3 million in the previous quarter, as we continued to make effort to optimize the combined in-store network coverage during the integration of CGEN acquisition.

• Advertising service revenue from our in-elevator poster frame network grew 101.2% year-over-year and 27.9% quarter-over-quarter to $37.3 million.

*   Internet advertising revenue was $76.1 million in the second quarter of 2008, up 201.7% year-over-year and 53.6% quarter-over-quarter.

“We saw strong revenue and earnings growth in the second quarter of 2008. As a result of our focus on core businesses, o0ur operating cash flow increased significantly from the previous quarter. Although our business was negatively impacted by the earthquake in May, business conditions rebounded quickly in June. In addition, we expanded our network capacity significantly in the second quarter. For example, the total installed base of digital poster frames exceeded 25,000 units as of June 30, 2008 and is well on its way towards our goal of a 50,000 to 60,000 installation base by the year end,” said Dr. Tan Zhi, CEO of Focus Media. “While we continue to see strong advertising demand from consumer goods advertisers in China, in particular, non-Olympic-sponsor advertisers are increasing their advertising spending in the later half of the year after the Olympic Games. Our large scale and highly effective media coverage of high-end urban consumers in China differentiates us from competition. Our outlook for the remainder of 2008 and 2009 is getting stronger.”

Second Quarter Financial Results

For the second quarter of 2008, Focus Media reported total revenues from continuing operations of $211.7 million, an increase of 106.8% compared to $102.4 million for the second quarter of 2007, and an increase of 31.1% compared to $161.6 million for the first quarter of 2008.

Our total digital out-of-home advertising revenue was $135.4 million in the second quarter of 2008, an increase of 76.2% from $76.9 million in the second quarter of 2007, and a sequential increase of 24.4% from $108.9 million in the first quarter of 2008. In the second quarter of 2008, commercial location advertising revenue was $81.1 million, contributing 59.9% of total digital out-of-home advertising revenue. Advertising service revenue from our in-store network was $17.0 million, or 12.6% of total digital out-of-home advertising revenue. Advertising service revenue from our in-elevator poster frame network placed primarily in the elevators of residential buildings was $37.3 million in the second quarter of 2008, or 27.5% of total digital out-of-home advertising revenue.

As of June 30, 2008, the total installed base of LCD displays and digital frames in our commercial location network was 123,140 nationwide, including 117,440 displays through our directly owned networks, and 5,700 displays through our regional distributors. The total number of displays installed in our in-store network including CGEN was 58,493 as of June 30, 2008, decreasing slightly from 61,420 as of March 31, 2008 due to our continuing effort to optimize the combined in-store network coverage during the integration of CGEN following our acquisition of it. The total number of non-digital frames available for sale on our poster frame network was 250,966 as of June 30, 2008 and in addition, as of June 30, 2008, we had 25,019 digital frames installed in our poster frame network.

Internet advertising service revenue was $76.1 million in the second quarter of 2008, an increase of 201.7% compared to $25.2 million for the second quarter of 2007, and an increase of 53.6% compared to $49.6 million for the first quarter of 2008.

Gross profit for the second quarter of 2008 was $89.4 million, representing an increase of 61.5% compared to $55.3 million in the second quarter of 2007 and a 36.5% increase compared to $65.5 million in the first quarter of 2008. In the second quarter 2008, GAAP gross margin for the company was 42.2%, increasing from 40.5% in the first quarter of 2008. Excluding non-cash share-based compensation expense of $0.4 million and acquisition-related intangible asset amortization expense of $7.2 million in the cost of revenues, gross margin (non-GAAP) was 45.8% in the second quarter of 2008. In the second quarter of 2008, excluding non-cash share-based compensation expense and acquisition-related intangible asset amortization expense, our digital out-of-home gross margin (non-GAAP) improved to 56.4% from 53.5% in the first quarter of 2008, and our Internet advertising gross margin (non-GAAP) improved to 26.9% from 26.3% in the previous quarter.

In the second quarter of 2008, operating expenses totaled $46.1 million, including $3.3 million in acquired intangible asset amortization resulting from acquisitions and non-cash share-based compensation expense of $10.0 million. Selling and marketing expenses in the second quarter totaled $27.4million, including $3.3 million in acquired intangible asset amortization and $4.6 million in share compensation expense. General and administrative expense in the second quarter was $20.7 million, including $5.4 million in share compensation expense. Our operating margin in the second quarter of 2008 was 20.4% compared to 16.3% in the previous quarter. Excluding non-cash share-based compensation expense and acquired intangible asset amortization expense, our operating margin (non-GAAP) was 30.3% in the second quarter 2008 compared to 28.2% in the first quarter of 2008.

Total intangible amortization expense in the second quarter of 2008 resulting from historical acquisitions was $10.4 million. Non-cash share-based compensation expense was $10.4 million in the second quarter of 2008. Total income tax expense was $8.8 million. We incurred an additional $0.6 million net expenses relating to the restructuring of our mobile handset advertising business.

Net income for the second quarter of 2008 was $36.1 million. Net income excluding non-cash share-based compensation expense, acquired intangible assets amortization expense resulting from acquisitions and the non-recurring impairment charge resulted from the restructuring of mobile handset advertising business in the second quarter of 2008 (non-GAAP) was $57.5 million, or $0.44 per fully diluted ADS.

Second quarter 2008 operating cash flow was $45.3 million. Our capital expenditure was $29.9 million, mostly for purchase of digital frames and our LED equipments in Beijing Central Business District (CBD) area. In the second quarter of 2008, we incurred $11.7 million in cash outflow, representing the cash held by our wireless subsidiaries upon disposal, which amount has been fully provided in the impairment charges resulting from wireless handset advertising business in the first quarter of 2008. Day sales outstanding (“DSO”) was 124 days in the second quarter. As of June 30, 2008, the company had cash and cash equivalents of $361.5 million.

BUSINESS OUTLOOK

The Company estimates its total revenues for the third quarter of 2008 will range from $225 million to $235 million. Third quarter 2008 net income excluding share-based compensation expenses and amortization of intangible assets resulting from acquisitions (non-GAAP) is expected to be between $70 million and $72 million or $0.53 to $0.54 per fully diluted ADS based on 133 million average total ADS-equivalent-shares outstanding.

ANNOUCEMENTS

Diana Chen, our Chief Operating Officer, has recently left the company due to personal reasons. Diana was responsible for tier-II market development for our commercial locations network and has contributed tremendously to the growth of Focus Media during the last 3 years. Because we have recently appointed several regional managers to manage the operations in the tier-II markets, we will not seek to fill the COO vacancy in the near future.

Focus Media will hold an Investor Day meeting on Friday September 5, 2008 at theNew York Marriott Marquis, 1535 Broadway (between 45th and 46th Streets), New York City, to provide general updates on the Company’s business. Presentations by Focus Media’s management team are scheduled to begin at 9:00 a.m. and conclude by approximately 12:00 p.m. New York local time.

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, non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per fully diluted ADS, all excluding non-cash share-based compensation and acquired intangible asset amortization expense resulting from acquisitions. 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.

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

1. Reconciliation of GAAP gross profit, gross margin to non-GAAP gross profit and gross margin.

	Three months ended June 30, 2008												Three months ended March 31, 2008
	GAAP			(a)			(b)			Non-GAAP			GAAP			(a)			(b)			Non-GAAP
Gross profit
Commercial location network		50,658			420			1,900			52,978			35,240			304			1,962			37,506
In-store network		(1,408	)		—			882			(526	)		28			—			857			885
In-elevator poster frame network		21,647			—			2,348			23,995			17,533			—			2,348			19,881
Digital out-of-home		70,897			420			5,130			76,447			52,801			304			5,167			58,272
Internet Advertising		18,466			—			2,044			20,510			10,872			—			2,164			13,036
Others		9			—			—			9			1,787			—			—			1,787
Total		89,372			420			7,174			96,966			65,460			304			7,331			73,095
Gross margin
Commercial location network		62.5	%		0.5	%		2.3	%		65.3	%		56.4	%		0.5	%		3.1	%		60.1	%
In-store network		(8.3	%)		0.0	%		5.2	%		(3.1	%)		0.2	%		0.0	%		5.0	%		5.1	%
In-elevator poster frame network		58.0	%		0.0	%		6.3	%		64.3	%		60.1	%		0.0	%		8.0	%		68.1	%
Digital out-of-home		52.3	%		0.3	%		3.8	%		56.4	%		48.5	%		0.3	%		4.7	%		53.5	%
Internet Advertising		24.3	%		0.0	%		2.7	%		26.9	%		21.9	%		0.0	%		4.4	%		26.3	%
Others		5.3	%		0.0	%		0.0	%		5.3	%		57.8	%		0.0	%		0.0	%		57.8	%
Total		42.2	%		0.2	%		3.4	%		45.8	%		40.5	%		0.2	%		4.5	%		45.2	%

(a) To adjust share-based compensation expenses

(b) To adjust amortization of acquisition related intangible assets

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2. Reconciliation of net income, earnings per ADS and operating margin from GAAP to non-GAAP:

	Three months ended									Six months ended
	2008-6-30			2007-6-30			2008-3-31			2008-6-30				2007-6-30
GAAP net income / (loss)
attributable to shareholders	$	36,132		$	37,715		$	(53,810	)	$	(17,678	)	��	$	54,007
Amortization of acquired intangible assets		10,428			2,672			10,680			21,108				4,604
Share-based compensation		10,421			4,919			8,624			19,045				9,436
Net loss from discontinued operations		561			—			79,322			79,883				—
Non-GAAP net income	$	57,542		$	45,306		$	44,816		$	102,358			$	68,047
GAAP income/(loss) per ADS — basic	$	0.29		$	0.33		$	(0.42	)	$	(0.14	)		$	0.48
GAAP income/(loss) per ADS — diluted	$	0.28		$	0.32		$	(0.41	)	$	(0.13	)		$	0.47
Non-GAAP income per ADS — basic	$	0.45		$	0.39		$	0.35		$	0.80			$	0.61
Non-GAAP income per ADS — diluted	$	0.44		$	0.38		$	0.34		$	0.78			$	0.59
Shares used in calculating diluted GAAP / Non-GAAP income per ADS		128,339,961			115,701,282			128,049,333			128,193,487				112,102,181
Shares used in calculating diluted GAAP / Non-GAAP income per ADS		130,776,141			119,385,064			131,394,654			131,057,713				115,473,182
GAAP income from operations	$	43,290		$	32,518		$	26,310		$	69,600			$	52,608
Amortization of acquired intangible assets		10,428			2,336			10,680			21,108				4,604
Share-based compensation		10,421			4,919			8,624			19,045				9,436
Non-GAAP income from operations	$	64,139		$	39,773		$	45,614		$	109,753			$	66,648
Non-GAAP operating margin		30.3	%		38.8	%		28.2	%		29.4	%			39.0	%

TODAY’S CONFERENCE CALL

The Company will host a conference call to discuss the second quarter 2008 results at 9:00 p.m. U.S. Eastern Standard Time on August 17, 2008 (6:00 p.m. U.S. Pacific Time on August 17, 2008 and 9:00 a.m. Beijing/Hong Kong Time on August 18, 2008). The dial-in details for the live conference call are set forth below: U.S. Toll Free Number +1- 866-270-6057, Hong Kong dial-in number +852-3002-1672, International dial-in number +1-617-213-8891; Pass code: 41966091.

A replay of the call will be available from August 18, 2008 until August 25, 2008 (US Eastern Standard 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 74725216. A live and archived web cast of this call will be available on the Focus Media web site at http://ir.focusmedia.cn

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, and is also a leading provider of mobile handset advertising and Internet marketing solutions in China. 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, mobile handset advertising networks and Internet advertising platforms. As of June 30, 2008, Focus Media’s digital out-of-home advertising network had approximately 123,100 LCD display/digital frames in its commercial location network, approximately 58,500 LCD displays in its in-store network and approximately 275,900 advertising in-elevator poster and digital frames, installed in over 90 cities throughout China, and approximately 200 outdoor LED billboard displays in Shanghai. For more information about Focus Media, please visit our website at ir.focusmedia.cn.

SAFE HARBOR: FORWARD-LOOKING STATEMENTS

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the Business Outlook section and quotations from management in this press release, as well as Focus Media’s strategic and operational plans, contain forward-looking 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. 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, F-6 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.

Investor and Media contact:

Jie Chen

Tel: +86 21 32124661*6607

Email: ir@focusmedia.cn

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FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)

	2008-6-30		2007-12-31
ASSETS
Current assets
Cash and cash equivalents	$	361,515	$	450,416
Investment in equity securities and bank notes		48,476		90,145
Accounts receivables, net		321,361		206,102
Inventories		1,891		1,654
Prepaid expenses and other current assets		26,080		58,885
Deposit paid for acquisition of subsidiaries		43,815		40,402
Amount due from related parties		6,057		5,092
Rental deposits		38,524		28,763
Total current assets	$	847,719	$	881,459
Rental deposits		5,872		5,302
Equipment, net		156,175		95,478
Acquired intangible assets, net		190,609		155,717
Goodwill		1,123,414		943,398
Other long term assets		44,330		58,183
Total assets	$	2,368,119	$	2,139,537
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	97,592	$	50,379
Accrued expenses and other current liabilities		206,805		190,313
Income taxes payable		29,462		21,391
Amount due to related parties		22,767		12,977
Deferred tax liabilities		14,966		1,227
Total liabilities of discontinued operations		7,536		—
Total current liabilities	$	379,128	$	276,287
Deferred tax liabilities		9,807		6,393
Total liabilities	$	388,935	$	282,680
Minority interests		3,423		1,913
Shareholders’ equity
Ordinary shares		33		32
Additional paid in capital		1,679,870		1,581,580
Retained earnings		219,041		236,718
Accumulated other comprehensive income		76,817		36,614
Total shareholders’ equity	$	1,975,761	$	1,854,944
Total liabilities and shareholders’ equity	$	2,368,119	$	2,139,537

4

FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. Dollar in thousands, except share data)

	Three months ended									Six months ended
	2008-6-30			2007-6-30			2008-3-31			2008-6-30			2007-6-30
Gross revenues (note 4):
Digital out-of-home:
Commercial locations	$	87,110		$	55,368		$	68,131		$	155,241		$	90,286
In-store network		18,797			7,998			19,077			37,874			15,324
In-elevator poster frame network		40,763			20,347			31,841			72,604			34,201
Internet advertising		78,858			26,418			51,450			130,308			26,418
Other revenue		171			305			3,090			3,261			686
Total gross revenues		225,699			110,436			173,589			399,288			166,915
Less: Sales taxes		13,956			8,043			12,026			25,982			13,190
Total revenues		211,743			102,393			161,563			373,306			153,725
Cost of revenues (note 5):
Digital out-of-home
Commercial locations		30,456			18,055			27,215			57,671			30,953
In-store network		18,428			5,187			17,243			35,671			10,214
In-elevator poster frame network		15,666			5,265			11,646			27,312			10,011
Internet advertising		57,659			18,405			38,696			96,355			18,405
Total advertising service costs		122,209			46,912			94,800			217,009			69,583
Other costs		162			138			1,303			1,465			303
Total cost of revenues		122,371			47,050			96,103			218,474			69,886
Gross profit		89,372			55,343			65,460			154,832			83,839
Operating expenses:
General and administrative (note 5)		20,702			11,290			18,568			39,270			19,868
Selling and marketing (note 5)		27,392			12,656			22,412			49,804			21,994
Other operating (income)/expenses, net		(2,012	)		(1,121	)		(1,830	)		(3,842	)		(2,377	)
Total operating expenses		46,082			22,825			39,150			85,232			39,485
Income from operations		43,290			32,518			26,310			69,600			44,354
Interest income, net		1,150			1,934			2,347			3,497			4,650
Other income (expenses), net		2,017			(55	)		223			2,240			15
Income before tax and minority interests		46,457			34,397			28,880			75,337			49,019
Income tax expense
- Current		9,647			2,472			5,749			15,396			3,437
- Deferred		(882	)		(500	)		(713	)		(1,595	)		(625	)
Total income taxes		8,765			1,972			5,036			13,801			2,812
Income before minority interests		37,692			32,425			23,844			61,536			46,207
Minority Interests		999			13			198			1,197			(18	)
Net income from continued operations		36,693			32,412			23,646			60,339			46,225
(Net loss)/income from discontinued operations		(616	)		5,649			(76,852	)		(77,468	)		8,256
Income tax		(55	)		346			604			549			474
Net income/(loss) from discontinued operations		(561	)		5,303			(77,456	)		(78,017	)		7,782
Net income/(loss) attributed to shareholders	$	36,132		$	37,715		$	(53,810	)	$	(17,678	)	$	54,007
Income from continued operations — basic	$	0.29		$	0.28		$	0.18		$	0.47		$	0.41
Income from continued operations — diluted	$	0.28		$	0.27		$	0.18		$	0.46		$	0.40
Income from discontinued operations — basic	$	(0.00	)	$	0.05		$	(0.60	)	$	(0.61	)	$	0.07
Income from discontinued operations — diluted	$	(0.00	)	$	0.05		$	(0.60	)	$	(0.60	)	$	0.07
Income per ADS — basic	$	0.28		$	0.33		$	(0.42	)	$	(0.14	)	$	0.48
Income per ADS — diluted	$	0.28		$	0.32		$	(0.41	)	$	(0.13	)	$	0.47
Shares used in calculating basic income per ADS		128,339,961			115,701,282			128,049,333			128,193,487			112,102,181
Shares used in calculating diluted income per ADS		130,776,141			119,385,064			131,394,654			131,057,713			115,473,182

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

	Three months ended						Six months ended
	2008-6-30			2007-6-30			2008-6-30			2007-6-30
Operating activities:
Net income/(loss)	$	36,132		$	37,715		$	(17,678	)	$	54,007
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Minority interest		999			13			1,197			(18	)
Impairment provisions for discontinued operations		(2,267	)		—			77,054			—
Bad debt provision		2,018			1,620			3,433			2,416
Share based compensation		10,421			4,919			19,045			9,436
Depreciation and amortization		7,081			4,269			13,563			8,108
Amortization of acquired intangible assets		10,428			2,672			21,109			4,604
Changes in assets and liabilities, net of effects of acquisitions		(19,533	)		(21,754	)		(64,828	)		(21,983	)
Net cash provided by operating activities		45,279			29,454			52,895			56,570
Investing activities:
Purchase of equipment and other long term assets		(29,947	)		(15,274	)		(48,742	)		(25,265	)
Acquisition of an intangible asset		—			(105	)		(1,767	)		(105	)
Purchase of subsidiaries, net of cash acquired		(19,155	)		(4,514	)		(104,145	)		(56,774	)
Disposal of subsidiaries		(11,694	)		—			(11,694	)		—
Deposits paid to acquire subsidiaries		—			(15,198	)		(13,369	)		(35,268	)
Sales /(purchase) of equity securities and bank notes		82,428			—			44,741			—
Investment in debt securities		—			(18,735	)		—			(40,715	)
Net cash provided /(used) in investing activities		21,632			(53,826	)		(134,976	)		(158,127	)
Financing activities:
Proceeds from issuance of ordinary shares, net of issuance costs		2,843			3,063			7,347			120,258
Proceeds from short-term debts		—			—			370			—
Capital injection from minority shareholders		—			—			214			97
Repayment of short-term debts		(370	)		(656	)		(30,412	)		(3,771	)
Net cash provided by/(used in) financing activities		2,473			2,407			(22,481	)		116,584
Effect of exchange rate changes		(3,837	)		4,994			15,661			7,955
Net (decrease) increase in cash and cash equivalents		65,547			(16,971	)		(88,901	)		22,982
Cash and cash equivalents, beginning of period		295,968			204,563			450,416			164,610
Cash and cash equivalents, end of period	$	361,515		$	187,592		$	361,515		$	187,592
Supplemental disclosure of cash flow information:
Income taxes paid	$	7,156		$	297		$	8,946		$	577
Interest paid	$	—		$	—		$	—		$	—

Supplemental disclosure of non-cash investing activity:
Acquisition of subsidiaries:
Value of ordinary share consideration	$	71,927	$	11,769	$	71,927	$	166,050
Accounts payable	$	17,401	$	1,129	$	17,401	$	1,129

Notes:

Note 1:  Basic income per ADS is computed by dividing income attributable to holders of ordinary shares by the weighted average number of ADS outstanding during the year/period. Diluted income per ADS reflects the potential dilution that could occur if securities or other contracts to issue ADS were exercised or converted into ADS.

Note 2:  The conversion of Renminbi (“RMB”) amounts into USD amounts is based on the rate of USD1 = RMB6.8591 on June 30, 2008 for balance sheet accounts which dominated in RMB.

Note 3:  Following the restructuring of our mobile handset advertising business, we have disposed of, or have determined to dispose of, 9 subsidiaries, which were mainly focusing on the push-based mobile advertising business. Each of these subsidiaries represented a component of an entity as defined by SFAS No.144 “Accounting for the impairment or Disposal of Long-lived Assets”. As such, we have classified these subsidiaries as a discontinued operation for all periods presented. Revenue related to discontinued operations was approximately $0.4 million, $10.9 million and $11.3 million for each of the three months ended June 30, 2008, 2007 and March 31, 2008, respectively.

Note 4: Details of net revenues are as follows (U.S. Dollars in thousands):

	Three months ended						Six months ended
	2008-6-30		2007-6-30		2008-3-31		2008-6-30		2007-6-30
Gross revenues (note 4):
Gross Advertising Service Revenue:
Digital out-of-home:
Commercial locations
- Unrelated parties	$	86,452	$	55,321	$	67,754	$	154,206	$	87,734
- Related parties		658		47		377		1,035		2,552
Total Commercial Locations		87,110		55,368		68,131		155,241		90,286
In-store Network
- Unrelated parties		18,797		7,998		19,077		37,874		14,009
- Related parties		—		—		—		—		1,315
Total in-store network		18,797		7,998		19,077		37,874		15,324
In-elevator Poster Frame Network
- Unrelated parties		40,763		20,249		31,841		72,604		34,103
- Related parties		—		98		—		—		98
Total In-elevator Poster Frame Network		40,763		20,347		31,841		72,604		34,201
Internet advertising
- Unrelated parties		77,394		26,088		51,079		128,473		26,088
- Related parties		1,464		330		371		1,835		330
Total internet advertising		78,858		26,418		51,450		130,308		26,418
Gross Advertising Services Revenue:		225,528		110,131		170,499		396,027		166,229
Less: Sales taxes:
Digital out-of-home:
Commercial locations:		5,996		4,308		5,676		11,672		7,582
In-store Network		1,777		754		1,806		3,583		1,442
In-elevator Poster Frame Network		3,450		1,799		2,662		6,112		2,984
Internet advertising		2,733		1,182		1,882		4,615		1,182
Total sales taxes:		13,956		8,043		12,026		25,982		13,190
Net Advertising Service Revenue		211,572		102,088		158,473		370,045		153,039
Add: Other revenue:		171		305		3,090		3,261		686
Net revenues:	$	211,743	$	102,393	$	161,563	$	373,306	$	153,725

Note 5: Share-based compensation expense is comprised of the following (U.S. Dollars in thousands):

	Three months ended						Six months ended
	2008-6-30		2007-6-30		2008-3-31		2008-6-30		2007-6-30
Cost of revenues	$	420	$	284	$	304	$	724	$	565
Selling and marketing		4,573		2,084		4,577		9,150		4,145
General and administrative		5,428		2,551		3,743		9,171		4,726
Sub-total	$	10,421	$	4,919	$	8,624	$	19,045	$	9,436

Note 6:  The Company has performed a preliminary purchase price allocation on its acquisition of CGEN, which occurred in the first quarter of 2008 based on an internal valuation performed by management.  The purchase price allocation will be finalized once management has assessed the pending results of independent third party valuations.

Note 7:  Earnings per ADS is based on the new conversion ratio of 1 ADS to 5 ordinary shares, effective as of April 11, 2007. The comparative numbers haven been adjusted to reflect the conversion.

Note 8:  The $0.6 million loss from discontinued operations resulting from mobile handset advertising business restructuring includes 1) additional impairment loss of acquired intangibles and goodwill of $6.0 million resulting from our discontinue WAP advertising business; 2) loss from the operation of discontinued business in the second quarter of 2008 amounting to $4.9 million; 3) increase in estimated fair value of the recoverable amount by $2.4million; and 4) reduction in the estimated cost to sell by $ 7.7 million.

5

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

1. Reconciliation of GAAP gross profit, gross margin to non-GAAP gross profit and gross margin.

	Three months ended June 30, 2008												Three months ended March 31, 2008
	GAAP			(a)			(b)			Non-GAAP			GAAP			(a)			(b)			Non-GAAP
Gross profit
Commercial location network		50,658			420			1,900			52,978			35,240			304			1,962			37,506
In-store network		(1,408	)		—			882			(526	)		28			—			857			885
In-elevator poster frame network		21,647			—			2,348			23,995			17,533			—			2,348			19,881
Digital out-of-home		70,897			420			5,130			76,447			52,801			304			5,167			58,272
Internet Advertising		18,466			—			2,044			20,510	��		10,872			—			2,164			13,036
Others		9			—			—			9			1,787			—			—			1,787
Total		89,372			420			7,174			96,966			65,460			304			7,331			73,095
Gross margin
Commercial location network		62.5	%		0.5	%		2.3	%		65.3	%		56.4	%		0.5	%		3.1	%		60.1	%
In-store network		(8.3	%)		0.0	%		5.2	%		(3.1	%)		0.2	%		0.0	%		5.0	%		5.1	%
In-elevator poster frame network		58.0	%		0.0	%		6.3	%		64.3	%		60.1	%		0.0	%		8.0	%		68.1	%
Digital out-of-home		52.3	%		0.3	%		3.8	%		56.4	%		48.5	%		0.3	%		4.7	%		53.5	%
Internet Advertising		24.3	%		0.0	%		2.7	%		26.9	%		21.9	%		0.0	%		4.4	%		26.3	%
Others		5.3	%		0.0	%		0.0	%		5.3	%		57.8	%		0.0	%		0.0	%		57.8	%
Total		42.2	%		0.2	%		3.4	%		45.8	%		40.5	%		0.2	%		4.5	%		45.2	%

(c) To adjust share-based compensation expenses

(d) To adjust amortization of acquisition related intangible assets

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2. Reconciliation of net income, earnings per ADS and operating margin from GAAP to non-GAAP:

	Three months ended									Six months ended
	2008-6-30			2007-6-30			2008-3-31			2008-6-30			2007-6-30
GAAP net income / (loss)
attributable to shareholders	$	36,132		$	37,715		$	(53,810	)	$	(17,678	)	$	54,007
Amortization of acquired intangible assets		10,428			2,672			10,680			21,108			4,604
Share-based compensation		10,421			4,919			8,624			19,045			9,436
Loss from impairment of discontinued operations (Note 8)		561			—			79,322			79,883			—
Non-GAAP net income	$	57,542		$	45,306		$	44,816			102,358		$	68,047
GAAP income/(loss) per ADS — basic	$	0.28		$	0.33		$	(0.42	)	$	(0.14	)	$	0.48
GAAP income/(loss) per ADS - diluted	$	0.28		$	0.32		$	(0.41	)	$	(0.13	)	$	0.47
Non-GAAP income per ADS — basic	$	0.45		$	0.39		$	0.35		$	0.80		$	0.61
Non-GAAP income per ADS — diluted	$	0.44		$	0.38		$	0.34		$	0.78		$	0.59
Shares used in calculating diluted GAAP / Non-GAAP income per ADS		128,339,961			115,701,282			128,049,333			128,193,487			112,102,181
Shares used in calculating diluted GAAP / Non-GAAP income per ADS		130,776,141			119,385,064			131,394,654			131,057,713			115,473,182
GAAP income from operations	$	43,290		$	32,518		$	26,310		$	69,600		$	52,608
Amortization of acquired intangible assets		10,428			2,336			10,680			21,108			4,604
Share-based compensation		10,421			4,919			8,624			19,045			9,436
Non-GAAP income from operations	$	64,139		$	39,773		$	45,614		$	109,753		$	66,648
Non-GAAP operating margin		30.3	%		38.8	%		28.2	%		29.4	%		39.0	%

7