Shanda Games Reports Third Quarter 2012 Unaudited Results

          Shanda Games Reports Third Quarter 2012 Unaudited Results

PR Newswire

HONG KONG, Nov. 26, 2012

HONG KONG, Nov. 26, 2012 /PRNewswire/ -- Shanda Games Limited ("Shanda Games"
or the "Company") (NASDAQ: GAME), a leading online game developer, operator
and publisher in China, today announced its unaudited consolidated financial
results for the third quarter ended September 30, 2012.

Non-GAAP Financial Highlights

  oNet revenues were RMB1,080.5 million (US$170.4 million), down 20.1% YoY
    and 4.4% QoQ.
  oGross profit was RMB705.4 million (US$111.2 million), down 17.9% YoY and
    2.9% QoQ. Gross margin was 65.3%, up from 63.5% in Q3 2011 and 64.2% in Q2
    2012.
  oOperating income was RMB324.2 million (US$51.1 million), down 25.1% YoY
    and 17.0% QoQ. Operating margin was 30.0%, compared with 32.0% in Q3 2011
    and 34.6% in Q2 2012.
  oNet income attributable to ordinary shareholders was RMB289.9 million
    (US$45.7 million), down 28.2% YoY and 13.9% QoQ.
  oEarnings per diluted American Depositary Share ("ADS") were RMB1.04
    (US$0.17), compared with RMB1.42 in Q3 2011 and RMB1.20 in Q2 2012.

GAAP Financial Highlights

  oNet revenues were RMB1,080.5 million (US$170.4 million), down 20.1% YoY
    and 4.4% QoQ.

       oOnline game revenues generated in China were RMB1,015.1 million
         (US$160.1 million), down 20.7% YoY and 2.4% QoQ.
       oOther revenues were RMB65.4 million (US$10.3 million), down 9.3% YoY
         and 27.4% QoQ.

  oGross profit was RMB684.5 million (US$107.9 million), down 17.5% YoY and
    2.9% QoQ. Gross margin was 63.4%, up from 61.3% in Q3 2011 and 62.4% in Q2
    2012.
  oOperating income was RMB280.6 million (US$44.3 million), down 22.4% YoY
    and 20.8% QoQ. Operating margin was 26.0%, compared with 26.7% in Q3 2011
    and 31.4% in Q2 2012.
  oNet income attributable to ordinary shareholders was RMB253.9 million
    (US$40.0 million), down 25.9% YoY and 17.7% QoQ.
  oEarnings per diluted ADS were RMB0.92 (US$0.15), compared with RMB1.20 in
    Q3 2011 and RMB1.10 in Q2 2012.

Operating Highlights

  oAverage Monthly Active Users (average MAUs) for all games operated in
    China increased 6.2% QoQ to 18.4 million, mainly due to the release of
    content updates for certain major games during Q3 2012.
  oAverage Monthly Paying Users (average MPUs) for all games operated in
    China decreased 7.9% QoQ to 3.5 million. The sequential decrease was
    mainly due to the content updates released for major games which
    introduced a number of free functions and game play to users, resulting in
    a decline in low-spending paying accounts in Q3 2012.
  oMonthly Average Revenue per Paying User (ARPU) for all games operated in
    China increased 6.0% QoQ to RMB95.7. The increase was primarily due to a
    decline in paying accounts during the quarter caused by reasons mentioned
    above.

"During the third quarter, we continued our strategy to decelerate
monetization activities and enhance game play in order to lengthen the
lifecycle of our games and pushed through a number of other initiatives to
help revive our performance going forward," said Mr. Xiangdong Zhang, Chief
Executive Officer of Shanda Games. "As a result, we have already started to
see some traction as monthly active users rose 6.2% compared with the prior
quarter. With an increasing number of users being introduced to our games, we
believe that our growing portfolio of games and promising pipeline will
continue to deliver sustainable growth over the long-term."

"In addition, we also look forward to the launch of a series of new games
including 'RIFT,' 'World Zero,' 'Final Fantasy XIV 2.0' and 'Dungeon Striker,'
which are progressing in various stages of development. The strong pipeline
demonstrates our commitment to investing in our game portfolio and the efforts
we have gone through to diversify our revenue streams and improve the health
of our business overall."

"As we develop new content, we continue to expand resources to bring them
overseas. We will launch 'Dragon Nest' in Europe soon and are leveraging the
success it has had abroad to build our brand name globally, including the
export of new titles such as 'Dungeon Striker.' Overseas revenue is critical
to our long-term growth and the sustainability of our business."

"In recognition of the constantly changing gaming market, we are expanding our
presence in the mobile game field, where we believe our brand name,
operational expertise, distribution channels and financial strength will
continue to serve as a core competitive advantage. By providing new ways to
access our content, we hope to take our expertise to mobile and further
broaden our reach."

"Looking ahead, we are confident that our 'All-Star, All-Region and
All-Platform', or 'Triple-A', strategy will position us well for long-term
growth. With our pipeline development, global expansion and mobile innovation
on track, we expect the financial results to start to reflect the progress we
have made in the coming quarters."

Non-GAAP Quarterly Results
(in millions, except for per share data)
                                        Q3 2011  Q2 2012  Q3 2012
                                        (RMB)    (RMB)    (RMB)   (US$) QoQ
Net Revenues                            1,352.8  1,130.5  1,080.5 170.4 -4.4%
Gross Profit                            859.3    726.2    705.4   111.2 -2.9%
Operating Income                        433.1    390.8    324.2   51.1  -17.0%
Government Financial Incentives         43.6     16.9     69.5    11.0  311.2%
Net Income Attributable to Ordinary     403.5    336.6    289.9   45.7  -13.9%
Shareholders
Earnings Per Diluted ADS                1.42     1.20     1.04    0.17
Non-GAAP results exclude share-based compensation, amortization of
acquisition-related intangible assets
and the related income tax effects.



GAAP Quarterly Results
(in millions, except for per share data)
                                          Q3 2011 Q2 2012 Q3 2012
                                          (RMB)   (RMB)   (RMB)   (US$) QoQ
Net Revenues                              1,352.8 1,130.5 1,080.5 170.4 -4.4%
Gross Profit                              829.8   705.2   684.5   107.9 -2.9%
Operating Income                          361.4   354.5   280.6   44.3  -20.8%
Government Financial Incentives           43.6    16.9    69.5    11.0  311.2%
Net Income Attributable to Ordinary       342.6   308.4   253.9   40.0  -17.7%
Shareholders
Earnings Per Diluted ADS                  1.20    1.10    0.92    0.15

Third Quarter 2012 Unaudited Financial Results (GAAP)

Net Revenues. In the third quarter of 2012, Shanda Games reported net
revenues of RMB1,080.5 million (US$170.4 million), compared with RMB1,352.8
million in the third quarter of 2011 and RMB1,130.5 million in the second
quarter of 2012. Online game revenues generated in China and other revenues
accounted for 93.9% and 6.1% of total net revenues, respectively.

Net revenues from online games operated in China declined 20.7% year-over-year
and 2.4% quarter-over-quarter to RMB1,015.1 million (US$160.1 million) in the
third quarter of 2012. The sequential decrease was primarily due to a decline
in revenue from "AION" as the initial attraction surrounding the launch of its
3.0 expansion pack in March 2012 subsided, and a decline in revenue from
"Woool" as the Company continued last quarter's strategy to decelerate the
monetization of the game to ensure a longer and healthier lifecycle. This was
partially offset by the first full quarter of revenue contribution from "Age
of Wushu," an increase in revenue from "Dragon Nest" following the launch of
an expansion pack in August, and positive seasonal effects on games during the
third quarter of 2012.

Other revenues, which primarily represent net overseas revenues generated from
game licensing, game operations, and advertising, were RMB65.4 million
(US$10.3 million) in the third quarter of 2012, compared with RMB72.1 million
in the third quarter of 2011 and RMB90.1 million in the second quarter of
2012. The quarter-over-quarter decrease in other revenues was primarily due
to a decrease in advertising revenues related to cross-marketing activities in
China during the third quarter of 2012.

Cost of Revenues.  Cost of revenues for the third quarter of 2012 was
RMB396.0 million (US$62.5 million), a decrease of 24.3% from RMB523.0 million
in the third quarter of 2011 and 6.9% from RMB425.3 million in the second
quarter of 2012. The quarter-over-quarter decrease was mainly attributable to
a decrease in royalty fees paid to third parties as a result of lower revenues
from licensed games and a decrease in platform fees, which are calculated
based upon the Company's revenues, paid to Shanda Online. Cost of revenues
represented 36.6% of net revenues, compared with 38.7% in the third quarter of
2011 and 37.6% in the second quarter of 2012.

Gross Profit.  Gross profit for the third quarter of 2012 was RMB684.5 million
(US$107.9 million), representing a decrease of 17.5% from RMB829.8 million in
the third quarter of 2011 and 2.9% from RMB705.2 million in the second quarter
of 2012. Gross margin was 63.4% in the third quarter of 2012, up from 61.3%
in the third quarter of 2011 and 62.4% in the second quarter of 2012.

Operating Expenses. Total operating expenses for the third quarter of 2012
were RMB403.9 million (US$63.6 million), representing a decrease of 13.8% from
RMB468.4 million in the third quarter of 2011 and an increase of 15.2% from
RMB350.7 million in the second quarter of 2012. Operating expenses
represented 37.4% of net revenues, compared with 34.6% in the third quarter of
2011 and 31.0% in the second quarter of 2012.

Product development expenses decreased 13.0% year-over-year and increased 8.2%
quarter-over-quarter to RMB161.5 million (US$25.4 million) in the third
quarter of 2012. The sequential increase in product development expenses was
primarily due to an annual salary increase for research and development
personnel during the third quarter of 2012. Product development expenses
represented 14.9% of net revenues, compared with 13.7% in the third quarter of
2011 and 13.2% in the second quarter of 2012.

Sales and marketing expenses decreased 6.2% year-over-year and increased 17.2%
quarter-over-quarter to RMB152.5 million (US$24.0 million) in the third
quarter of 2012. The sequential increase was primarily due to an increase in
service fees for distributing and marketing prepaid cards and a seasonal
increase in marketing and promotional expenses for the summer holidays which
occurred during the third quarter. Sales and marketing expenses represented
14.1% of net revenues, compared with 12.0% in the third quarter of 2011 and
11.5% in the second quarter of 2012.

General and administrative expenses decreased 25.2% year-over-year and
increased 25.9% quarter-over-quarter to RMB89.9 million (US$14.2 million) in
the third quarter of 2012. The sequential increase in general and
administrative expenses was primarily due to (i) an impairment of certain
assets as the Company initiated a series of restructuring measures and
streamlined its previous investments during the third quarter of 2012, (ii) a
net increase in bad debt expense due to the second quarter reversal of the bad
debt provision previously recorded as a result of subsequent repayment of a
loan, and (iii) an increase in share-based compensation expenses. The
increases were partially offset by a decline in sales tax expenses associated
with inter-company transactions during the third quarter of 2012. General and
administrative expenses accounted for 8.3% of net revenues, compared with 8.9%
in the third quarter of 2011 and 6.3% in the second quarter of 2012.

Share-based compensation expenses were RMB11.5 million (US$1.8 million) in the
third quarter of 2012, compared with RMB30.4 million in the third quarter of
2011 and RMB3.9 million in the second quarter of 2012. The
quarter-over-quarter increase was primarily a result of the repricing of
underwater share options held by Company's officers and employees, which was
partially offset by a decline in share-based compensation expenses due to the
departure of senior executives during the third quarter of 2012.

Operating Income.  Operating income for the third quarter of 2012 was
RMB280.6 million (US$44.3 million), a decrease of 22.4% from RMB361.4 million
in the third quarter of 2011 and 20.8% from RMB354.5 million in the second
quarter of 2012. Operating margin was 26.0% in the third quarter of 2012,
compared with 26.7% in the third quarter of 2011 and 31.4% in the second
quarter of 2012.

Government Financial Incentives. Government financial incentives totaled
RMB69.5 million (US$11.0 million) in the third quarter of 2012, compared with
RMB43.6 million in the third quarter of 2011 and RMB16.9 million in the second
quarter of 2012. The Company's receipt of government financial incentives is
subject to time lags and inconsistent government administrative practices
relating to the timing of payments.

Other Income (Expense), Net.  Other expense for the third quarter of 2012 was
RMB28.1 million (US$4.5 million), compared with other income of RMB3.0 million
in the third quarter of 2011 and other income of RMB15.2 million in the second
quarter of 2012. The quarter-over-quarter change was mainly due to a foreign
exchange loss of RMB21.6 million (US$3.4 million) recognized in the third
quarter of 2012, compared with a foreign exchange gain of RMB19.3 million in
the second quarter of 2012. The change in foreign exchange gains and losses
were mainly due to the unrealized exchange gains and losses related to the
foreign currency forward contracts.

Income Tax Expense. Income tax expense for the third quarter of 2012 was
RMB92.1 million (US$14.5 million), compared with RMB94.2 million in the third
quarter of 2011 and RMB99.3 million in the second quarter of 2012.

Net Income Attributable to Ordinary Shareholders. Net income for the third
quarter of 2012 was RMB253.9 million (US$40.0 million), a decrease of 25.9%
from RMB342.6 million in the third quarter of 2011 and 17.7% from RMB308.4
million in the second quarter of 2012. Earnings per diluted ADS in the third
quarter of 2012 were RMB0.92 (US$0.15), compared with RMB1.20 in the third
quarter of 2011 and RMB1.10 in the second quarter of 2012.

Net Cash. In the third quarter of 2012 the Company generated RMB207.7 million
(US$32.7 million) in cash flows from operating activities. The Company's cash
and cash equivalent, short-term investments, restricted cash and time
deposits, net of loans and dividend payable, increased from RMB3,036.6 million
as of June 30, 2012 to RMB3,072.6 million (US$484.6 million) as of September
30, 2012.

Nine Months 2012 Unaudited Financial Results

Net Revenues. Net revenues for the first nine months of 2012 totaled
RMB3,600.5 million (US$567.8 million), a decrease of 8.3% from RMB3,925.9
million in the first nine months of 2011.

Gross Profit. Gross profit for the first nine months of 2012 was RMB2,263.3
million (US$356.9 million), a decrease of 5.4% from RMB2,391.7 million in the
first nine months of 2011. Gross margin was 62.9%, an increase from 60.9% in
the first nine months of 2011.

Operating Income.  Operating income for the first nine months of 2012 was
RMB1,071.4 million (US$169.0 million), a decrease of 0.2% from RMB1,073.1
million in the first nine months of 2011. Operating margin was 29.8%, an
increase from 27.3% in the first nine months of 2011.

Non-GAAP Operating Income.  Non-GAAP operating income for the first nine
months of 2012 was RMB1,208.0 million (US$190.5 million), a decrease of 6.1%
from RMB1,285.8 million in the first nine months of 2011. Non-GAAP operating
margin was 33.6%, an increase from 32.8% in the first nine months of 2011.

Net Income Attributable to Ordinary Shareholders. Net income for the first
nine months of 2012 was RMB899.1 million (US$141.8 million), a decrease of
6.4% from RMB960.6 million in the first nine months of 2011. Net margin was
25.0%, increased from 24.5% in the first nine months of 2011. Earnings per
diluted ADS were RMB3.22 (US$0.51), compared with RMB3.38 in the first nine
months of 2011.

Non-GAAP Net Income Attributable to Ordinary Shareholders. Non-GAAP net
income for the first nine months of 2012 was RMB1,008.6 million (US$159.1
million), a decrease of 11.7% from RMB1,142.0 million in the first nine months
2011. Non-GAAP net margin was 28.0%, compared with 29.1% in the first nine
months of 2011. Non-GAAP earnings per diluted ADS were RMB3.62 (US$0.57),
compared with RMB4.02 in the first nine months of 2011.

Net Cash. In the first nine months of 2012 the Company generated RMB1,172.8
million (US$185.0 million) in cash flows from operating activities. The
Company's cash and cash equivalent, short-term investments, restricted cash
and time deposits, net of loans and dividend payable, increased from
RMB2,160.1 million as of December 31, 2011 to RMB3,072.6 million (US$484.6
million) as of September 30, 2012.

Recent Business Highlights

  oAugust 30, 2012 - Shanda Games began unlimited closed-beta testing for the
    web version of "Woool of Paladin" (Han Jiang Chuan Shi), an in-house
    developed fantasy web game based on the Company's Woool franchise.
  oAugust 31, 2012 - NHN Korea began a second round of closed-beta testing
    for "Dungeon Striker," an action MMORPG developed by Eyedentity Games, a
    Korea-based game studio under Shanda Games.
  oSeptember 14, 2012 - Shanda Games' board of directors approved to adjust
    the exercise price for the share options held by the officers and
    employees of the Company and its subsidiaries and operating companies in
    China. The new exercise price for these options is US $1.835 per Class A
    ordinary share, representing the average closing price of the Company's
    ADSs during the 15 consecutive trading days prior to September 14, 2012
    divided by two.
  oSeptember 25, 2012 - Mail.Ru Group, a leading internet company in Russia,
    began commercial operation of Shanda Games' 3D MMORPG "Dragon Nest" in
    Russia.
  oOctober 7, 2012 - Eyedentity Games signed a publishing agreement for
    "Dungeon Striker" with NHN Japan, a leading Japanese online game company.
    Pursuant to the agreement, NHN Japan will be the exclusive operator of
    "Dungeon Striker" in Japan.
  oOctober 16, 2012 - Shanda Games and Square Enix, a leading game developer
    based in Japan, announced a mobile game partnership under which the two
    companies will share their resources and expertise in developing and
    operating mobile games. The partnership includes joint development for
    the mobile versions of "Final Fantasy I," "Final Fantasy II," "Final
    Fantasy III" and "Diffusion Million Arthur" for distribution in China,
    Taiwan, Korea, and Southeast Asia.
  oOctober 16, 2012 - Eyedentity Games announced its first mobile game
    "Dragon Nest: Labyrinth." Based on the popular PC-based MMORPG "Dragon
    Nest," "Dragon Nest: Labyrinth" has adopted the same fast-paced action and
    battle system of the original PC game. New features such as real-time
    multiplayer, leveling system and player community have been added in order
    to enhance the gaming experience on mobile platforms. The game is
    expected to launch in 2013.
  oOctober 23, 2012 - Shanda Games began the first round of closed-beta
    testing in Mainland China for "RIFT," a 3D MMORPG licensed from Trion
    World.

Share Repurchase

In June 2012, the Company's Board of Directors approved a share repurchase
program under which the Company is authorized to repurchase up to $100 million
worth of its outstanding ADSs during the next twelve (12) months. As of
November 23, 2012, the Company has repurchased approximately 10.9 million ADSs
for an aggregate consideration of US$40 million.

Conference Call and Webcast Notice

Shanda Games will host a conference call at 9:00 a.m. on November 27, 2012
Beijing/Hong Kong Time (8:00 p.m. on November 26, 2012 Eastern Time), to
discuss its third quarter results.

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

U.S. Toll Free: 1866-519-4004
Mainland China Toll Free (for mobile users): 400-620-8038
Mainland China Toll Free (for fixed line users): 800-819-0121
Hong Kong Toll Free: 800-930-346
U.K. Toll Free: 0808-234-6646
International Toll: +65-6723-9381
Passcode: 71472066

A replay of the conference call will be available from 12:00 pm (Beijing/Hong
Kong Time) on November 27, 2012 for 7 days.

U.S. Toll Free: 1855-452-5696
International Toll: +61-2-8199-0299
Passcode: 71472066

A live and archived webcast of the conference call will also be available on
Shanda Games' investor relations website at http://ir.shandagames.com/.

Currency Convenience Translation

The United States dollar (US$) amounts disclosed in this press release are
presented solely for the convenience of the reader. The conversion of
Renminbi (RMB) into U.S. dollars is based on RMB6.3410 to US$1.00 as published
by the People's Bank of China on September 28, 2012, the last trading day of
September 2012. The Company makes no representation that the Renminbi or US
dollar amounts referred to in this release could have been, or could be,
converted into US dollars at such rate or at all. The percentages stated are
calculated based on the RMB amounts.

Note to the Financial Information

The unaudited financial information disclosed above is preliminary and subject
to adjustments. Adjustments to these preliminary financial statements may be
identified when audit work is performed for the year-end audit, which could
result in significant differences from this preliminary unaudited financial
information.

Non-GAAP Financial Measures

In addition to disclosing financial results in accordance with United States
(U.S.) generally accepted accounting principles (GAAP), this earnings release
contains non-GAAP financial numbers including non-GAAP gross profit, non-GAAP
operating income, non-GAAP net income attributable to ordinary shareholders
and non-GAAP per share data.

The non-GAAP financial measures disclosed by the Company exclude share-based
compensation, amortization of acquisition-related intangible assets and the
related income tax effects. These non-GAAP measures are not in accordance
with, or an alternative for, measures prepared in accordance with generally
accepted accounting principles and may be different from non-GAAP measures
used by other companies. In addition, these non-GAAP measures are not based
on any comprehensive set of accounting rules or principles. Shanda Games
believes that non-GAAP measures have limitations in that they do not reflect
all of the amounts associated with Shanda Games' results of operations as
determined in accordance with GAAP and that these measures should only be used
to evaluate the Company's results of operations in conjunction with the
corresponding GAAP measures.

Shanda Games believes that the presentation of non-GAAP financial measures
when shown in conjunction with the corresponding GAAP measures provides useful
information to investors and management regarding financial and business
trends relating to its financial condition and results of operations. Shanda
Games' management also believes that the non-GAAP financial measures are
appropriate for period to period comparisons in the Company's budget, planning
and evaluation processes. From time to time in the future, there may be other
items that Shanda Games may exclude in reviewing its financial results.

Safe Harbor Statement

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. Statements in this announcement that are not
historical facts, including but not limited to statements regarding the
long-term growth of the Company; the future benefits brought by the Company's
"All-Star, All-Region and All-Platform" strategy; the introduction and
potential success of new game titles; the expansion into global market; and
the expansion into micro-clients games, browser games and mobile games and the
future benefits brought by these games represent only the Company's current
expectations, assumptions, estimates and projections and are forward-looking
statements. These forward-looking statements involve various risks and
uncertainties. Important risks and uncertainties that could cause the
Company's actual results to be materially different from expectations include
but are not limited to the risk that there are delays in the launch of, or the
Company is unable to launch, the games the Company intends to release; such
games and any related expansion packs are not well received by users in China;
the games fail to meet the expectations of end users; the games that the
Company operates overseas or has licensed to partners globally are not well
received by end users in these countries; the Company fails to execute its
"All-Star, All-Region and All-Platform" strategy and the Company fails to
deliver long-term growth, as well as the risks set forth in the Company's
filings with the U.S. Securities and Exchange Commission, including the
Company's annual report on form 20-F. The Company does not undertake any
obligation to update any forward-looking statement, except as required under
applicable law.

About Shanda Games

Shanda Games Limited (NASDAQ: GAME) is a leading online game developer,
operator and publisher in China. Shanda Games offers a diversified game
portfolio, which includes some of the most popular massively multiplayer
online role-playing games (MMORPGs) and advanced casual games in China,
targeting a large and diverse community of users. Shanda Games manages and
operates online games that are developed in-house, co-developed with
world-leading game developers, acquired through investments or licensed from
third parties. For more information about Shanda Games, please visit
http://www.shandagames.com.

Contact

Shanda Games Limited:
Ellen Chiu, Investor Relations Director
Maggie Zhou, Investor Relations Associate Director
Phone: +86-21-5050-4740 (Shanghai)
Email: IR@ShandaGames.com

Christensen:
Christian Arnell
Phone: +86-10-5826-4939 (China)
Email: carnell@ChristensenIR.com

Linda Bergkamp
Phone: +1-480-614-3004 (U.S.A.)
Email: lbergkamp@ChristensenIR.com



SHANDA GAMES LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except for share and per share data)
                            December 31  June 30      September 30
                            2011         2012         2012
                            RMB          RMB          RMB          US$
ASSETS
Current assets:
Cash and cash equivalents   1,835.5      1,546.3      1,625.6      256.4
Restricted cash             20.4         35.4         258.4        40.8
Short-term investments      2,209.0      2,533.9      2,356.5      371.6
Marketable securities       3.8          4.6          6.5          1.0
Accounts receivable, net of
allowance for doubtful      72.8         69.2         88.1         13.9
accounts
Accounts receivable due     406.0        290.3        327.9        51.7
from related parties
Deferred licensing fees and 19.8         10.4         12.1         1.9
related costs
Prepayments and other       182.0        239.1        203.7        32.1
current assets
Other receivables due from  931.3        2,036.8      2,063.9      325.5
related parties ^1
Deferred tax assets         74.7         52.0         65.3         10.3
Total current assets        5,755.3      6,818.0      7,008.0      1,105.2
Time deposit with maturity  -            260.0        -            -
over one year
Investment in affiliated    37.9         179.5        193.8        30.6
companies
Investment in securities    -            5.6          5.7          0.9
Property and equipment     230.5        222.4        207.9        32.8
Intangible assets           994.7        629.2        617.4        97.4
Goodwill                    492.1        328.5        329.2        51.9
Long-term deposits          95.1         52.7         53.2         8.4
Other long-term assets      326.6        217.6        186.2        29.2
Non-current deferred tax    26.4         25.2         22.6         3.6
assets
Total assets                7,958.6      8,738.7      8,624.0      1,360.0
LIABILITIES
Current liabilities:
Short-term borrowings       858.8        2,294.2      2,132.7      336.3
Accounts payable            38.4         47.5         40.3         6.4
Accounts payable due to     77.3         63.8         64.2         10.1
related parties
Licensing fees payable      188.2        257.6        149.1        23.5
Taxes payable               190.6        166.1        150.6        23.8
Deferred revenue            173.4        120.7        139.3        22.0
Other payables and accruals 416.0        373.4        383.0        60.3
Other payables due to       125.9        993.1        1,002.8      158.1
related parties ^2
Dividend payable            1,823.4      20.7         13.3         2.1
Deferred tax liabilities    72.9         88.4         98.0         15.5
Total current liabilities   3,964.9      4,425.5      4,173.3      658.1
Long-term liabilities       68.9         89.6         99.9         15.8
Non-current deferred tax    260.2        114.7        108.7        17.1
liabilities
Non-current deferred        47.6         44.2         36.0         5.7
revenue
Total liabilities           4,341.6      4,674.0      4,417.9      696.7
Redeemable non-controlling  14.0         14.0         14.0         2.1
interests
SHAREHOLDERS' EQUITY
Ordinary shares outstanding 560,309,556  560,160,962  547,874,828  547,874,828
ADS equivalent outstanding  280,154,778  280,080,481  273,937,414  273,937,414
Ordinary shares (US$0.01    40.9         40.9         40.1         6.3
par value)
Additional paid-in capital  1,561.3      1,367.3      1,352.8      213.3
Statutory reserves          147.1        149.8        149.8        23.6
Accumulated other           (68.5)       (62.6)       (47.9)       (7.5)
comprehensive loss
Retained earnings          1,665.0      2,268.0      2,385.9      376.3
Total Shanda Games Limited  3,345.8      3,763.4      3,880.7      612.0
shareholders' equity
Non-controlling interests   257.2        287.3        311.4        49.2
Total shareholders' equity  3,603.0      4,050.7      4,192.1      661.2
Total liabilities and       7,958.6      8,738.7      8,624.0      1,360.0
shareholders' equity

Note:

1.The balance of "other receivables due from related parties" as of
    September 30, 2012 mainly represented the outstanding loans we lent to our
    parent company Shanda Interactive Entertainment Limited or its affiliates.
    The aggregate amount of these loans was RMB1,952.6 million (US$307.9
    million), with interest rates ranging from 3% to 6.71%. The interest
    receivable related to these loans amounted to RMB90.6 million (US$14.3
    million).
2.The balance of "other payables due to related parties" as of September 30,
    2012 mainly represented the outstanding loans we obtained from our parent
    company Shanda Interactive Entertainment Limited or its affiliates. The
    aggregate amount of these loans was RMB974.5 million (US$153.7 million),
    with interest rates ranging from 1.8% to 3%. The interest payable related
    to these loans amounted to RMB18.5 million (US$2.9 million).



SHANDA GAMES LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except for share and per share data)
                           Three months ended
                           September 30  June 31      September 30

                           2011          2012         2012
                           RMB           RMB          RMB          US$
Net revenues:
Online game revenues       1,280.7       1,040.4      1,015.1      160.1
generated in China
Other revenues             72.1          90.1         65.4         10.3
Total net revenues         1,352.8       1,130.5      1,080.5      170.4
Cost of revenues           (523.0)       (425.3)      (396.0)      (62.5)
Gross profit               829.8         705.2        684.5        107.9
Operating expenses:
Product development        (185.7)       (149.2)      (161.5)      (25.4)
Sales and marketing        (162.5)       (130.1)      (152.5)      (24.0)
General and administrative (120.2)       (71.4)       (89.9)       (14.2)
Total operating expenses   (468.4)       (350.7)      (403.9)      (63.6)
Income from operations     361.4         354.5        280.6        44.3
Interest income net with   36.3          29.0         32.8         5.2
interest expense
Government financial       43.6          16.9         69.5         11.0
incentives
Other income (expense),    3.0           15.2         (28.1)       (4.5)
net
Income before income tax
expenses, equity in
affiliated                 444.3         415.6        354.8        56.0
 companies, and
non-controlling interests
Income tax expenses        (94.2)        (99.3)       (92.1)       (14.5)
Equity in loss of          (2.9)         (2.7)        (4.9)        (0.8)
affiliated companies
Net income                 347.2         313.6        257.8        40.7
Net income attributable to (4.6)         (5.2)        (3.9)        (0.7)
non-controlling interests
Net income attributable to 342.6         308.4        253.9        40.0
ordinary shareholders
Earnings per ordinary
share
Basic                      0.60          0.55         0.46         0.07
Diluted                    0.60          0.55         0.46         0.07
Earnings per ADS
Basic                      1.20          1.10         0.92         0.15
Diluted                    1.20          1.10         0.92         0.15
Weighted average ordinary
shares outstanding
Basic                      569,927,358   560,915,794  554,753,776  554,753,776
Diluted                    570,040,780   560,923,399  554,759,632  554,759,632
Weighted average ADS
outstanding
Basic                      284,963,679   280,457,897  277,376,888  277,376,888
Diluted                    285,020,390   280,461,700  277,379,816  277,379,816
Reconciliation from non-GAAP measures to GAAP measures
Non-GAAP gross profit      859.3         726.2        705.4        111.2
Intangible assets
amortization arising from  (29.3)        (21.0)       (20.9)       (3.3)
acquisition
Share-based compensation   (0.2)         -            -            -
cost
GAAP gross profit          829.8         705.2        684.5        107.9
Non-GAAP operating income  433.1         390.8        324.2        51.1
Intangible assets
amortization arising from  (41.3)        (32.4)       (32.1)       (5.0)
acquisition
Share-based compensation   (30.4)        (3.9)        (11.5)       (1.8)
cost
GAAP operating income      361.4         354.5        280.6        44.3
Non-GAAP net income
attributable to ordinary   403.5         336.8        289.9        45.7
shareholders
Intangible assets
amortization arising from  (41.3)        (32.4)       (32.1)       (5.0)
acquisition
Share-based compensation   (30.4)        (3.9)        (11.5)       (1.8)
cost
Income tax effect          10.1          7.1          7.0          1.0
Intangible assets
amortization of            0.7           0.8          0.6          0.1
non-controlling interests
GAAP net income
attributable to ordinary   342.6         308.4        253.9        40.0
shareholders
Non-GAAP diluted earnings  0.71          0.60         0.52         0.08
per share
Non-GAAP expense per share (0.11)        (0.05)       (0.06)       (0.01)
GAAP diluted earnings per  0.60          0.55         0.46         0.07
share
Non-GAAP diluted earnings  1.42          1.20         1.04         0.17
per ADS
Non-GAAP expense per ADS   (0.22)        (0.10)       (0.12)       (0.02)
GAAP diluted earnings per  1.20          1.10         0.92         0.15
ADS
 Supplemental disclosure of intangible assets amortization arising from
acquisitions included in:
Cost of revenues           (29.3)        (21.0)       (20.9)       (3.3)
Product development        (3.2)         (6.9)        (6.9)        (1.0)
Sales and marketing        (3.8)         (2.3)        (1.8)        (0.3)
General and administrative (5.0)         (2.2)        (2.5)        (0.4)
Total                      (41.3)        (32.4)       (32.1)       (5.0)
 Supplemental disclosure of share-based compensation cost included in:
Cost of revenues           (0.2)         -            -            -
Product development        (6.1)         (6.1)        (4.8)        (0.8)
Sales and marketing        (0.1)         -            (0.3)        -
General and administrative (24.0)        2.2          (6.4)        (1.0)
Total                      (30.4)        (3.9)        (11.5)       (1.8)





SHANDA GAMES LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except for share and per share data)
                                        Nine months ended
                                        September 30  September 30

                                        2011          2012
                                        RMB           RMB          US$
Net revenues:
Online game revenues generated in China 3,713.4       3,344.1      527.4
Other revenues                          212.5         256.4        40.4
Total net revenues                      3,925.9       3,600.5      567.8
Cost of revenues                        (1,534.2)     (1,337.2)    (210.9)
Gross profit                            2,391.7       2,263.3      356.9
Operating expenses:
Product development                     (504.1)       (486.6)      (76.7)
Sales and marketing                     (467.8)       (438.8)      (69.2)
General and administrative              (346.7)       (266.5)      (42.0)
Total operating expenses                (1,318.6)     (1,191.9)    (187.9)
Income from operations                  1,073.1       1,071.4      169.0
Interest income net with interest       77.8          81.7         12.9
expense
Government financial incentives         87.3          96.4         15.2
Other (expense), net                    (3.8)         (19.0)       (3.0)
Income before income tax expenses,
equity in affiliated companies,         1,234.4       1,230.5      194.1
 and non-controlling interests
Income tax expenses                     (258.9)       (296.7)      (46.8)
Equity in loss of affiliated companies  (4.5)         (13.0)       (2.1)
Net income                              971.0         920.8        145.2
Net income attributable to              (10.4)        (21.7)       (3.4)
non-controlling interests
Net income attributable to ordinary     960.6         899.1        141.8
shareholders
Earnings per ordinary share
Basic                                   1.69          1.61         0.25
Diluted                                 1.69          1.61         0.25
Earnings per ADS
Basic                                   3.38          3.22         0.51
Diluted                                 3.38          3.22         0.51
Weighted average ordinary shares
outstanding
Basic                                   569,236,463   558,751,392  558,751,392
Diluted                                 569,275,017   558,786,563  558,786,563
Weighted average ADS outstanding
Basic                                   284,618,232   279,375,696  279,375,696
Diluted                                 284,637,509   279,393,282  279,393,282



SHANDA GAMES LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except for share and per share data)
                                        Nine months ended
                                        September 30  September 30

                                        2011          2012
                                        RMB           RMB          US$
Net revenues:
Online game revenues generated in China 3,713.4       3,344.1      527.4
Other revenues                          212.5         256.4        40.4
Total net revenues                      3,925.9       3,600.5      567.8
Cost of revenues                        (1,534.2)     (1,337.2)    (210.9)
Gross profit                            2,391.7       2,263.3      356.9
Operating expenses:
Product development                     (504.1)       (486.6)      (76.7)
Sales and marketing                     (467.8)       (438.8)      (69.2)
General and administrative              (346.7)       (266.5)      (42.0)
Total operating expenses                (1,318.6)     (1,191.9)    (187.9)
Income from operations                  1,073.1       1,071.4      169.0
Interest income net with interest       77.8          81.7         12.9
expense
Government financial incentives         87.3          96.4         15.2
Other (expense), net                    (3.8)         (19.0)       (3.0)
Income before income tax expenses,
equity in affiliated                    1,234.4       1,230.5      194.1
 companies, and non-controlling
interests
Income tax expenses                     (258.9)       (296.7)      (46.8)
Equity in loss of affiliated companies  (4.5)         (13.0)       (2.1)
Net income                              971.0         920.8        145.2
Net income attributable to              (10.4)        (21.7)       (3.4)
non-controlling interests
Net income attributable to ordinary     960.6         899.1        141.8
shareholders
Earnings per ordinary share
Basic                                   1.69          1.61         0.25
Diluted                                 1.69          1.61         0.25
Earnings per ADS
Basic                                   3.38          3.22         0.51
Diluted                                 3.38          3.22         0.51
Weighted average ordinary shares
outstanding
Basic                                   569,236,463   558,751,392  558,751,392
Diluted                                 569,275,017   558,786,563  558,786,563
Weighted average ADS outstanding
Basic                                   284,618,232   279,375,696  279,375,696
Diluted                                 284,637,509   279,393,282  279,393,282
Reconciliation from non-GAAP measures to GAAP measures
Non-GAAP gross profit                   2,480.1       2,331.5      367.7
Intangible assets amortization arising  (87.7)        (68.0)       (10.7)
from acquisition
Share-based compensation cost           (0.7)         (0.2)        (0.1)
GAAP gross profit                       2,391.7       2,263.3      356.9
Non-GAAP operating income               1,285.8       1,208.0      190.5
Intangible assets amortization arising  (122.6)       (106.3)      (16.7)
from acquisition
Share-based compensation cost           (90.1)        (30.3)       (4.8)
GAAP operating income                   1,073.1       1,071.4      169.0
Non-GAAP net income attributable to     1,142.0       1,008.6      159.1
ordinary shareholders
Intangible assets amortization arising  (122.6)       (106.3)      (16.7)
from acquisition
Share-based compensation cost           (90.1)        (30.3)       (4.8)
Income tax effect                       29.8          24.9         3.9
Intangible assets amortization of       1.5           2.2          0.3
non-controlling interests
GAAP net income attributable to         960.6         899.1        141.8
ordinary shareholders
Non-GAAP diluted earnings per share     2.01          1.81         0.28
Non-GAAP expense per share              (0.32)        (0.20)       (0.03)
GAAP diluted earnings per share         1.69          1.61         0.25
Non-GAAP diluted earnings per ADS       4.02          3.62         0.57
Non-GAAP expense per ADS                (0.64)        (0.40)       (0.06)
GAAP diluted earnings per ADS           3.38          3.22         0.51
Supplemental disclosure of intangible assets amortization arising from
acquisitions included in:
Cost of revenues                        (87.7)        (68.0)       (10.7)
Product development                     (9.5)         (20.6)       (3.3)
Sales and marketing                     (10.5)        (7.9)        (1.2)
General and administrative              (14.9)        (9.8)        (1.5)
Total                                   (122.6)       (106.3)      (16.7)
Supplemental disclosure of share-based compensation cost included in:
Cost of revenues                        (0.7)         (0.2)        (0.1)
Product development                     (18.4)        (14.9)       (2.3)
Sales and marketing                     (0.1)         (0.3)        -
General and administrative              (70.9)        (14.9)       (2.4)
Total                                   (90.1)        (30.3)       (4.8)



SHANDA GAMES LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, except for share and per share data)
                                             Nine months ended
                                              September 30  September 30

                                              2011          2012
                                              RMB           RMB        US$
Cash flows from operating activities:
Net income                                    971.0         920.8      145.2
Adjustments for:
Share-based compensation expenses            90.1          30.3       4.8
Depreciation and amortization             261.3         207.6      32.7
Others                                        (28.0)        56.3       8.9
Changes in assets and liabilities, net of
acquisitions:
Prepayments and licensing fee and royalty     (315.1)       9.6        1.5
Others                                     4.7           (51.8)     (8.1)
Net cash provided by operating activities  984.0         1,172.8    185.0
Cash flows from investing activities:
Purchase of property, equipment and           (100.5)       (49.8)     (7.9)
intangible assets
Acquisition (net of cash acquired) and        (9.9)         (42.6)     (6.7)
equity investment
Changes of short-term investments and time    (264.4)       (127.5)    (20.1)
deposit with maturity over one year
Increase in loan receivable                   (383.0)       (1,059.0)  (167.0)
Others                                        (24.2)        (7.8)      (1.2)
Net cash used in investing activities      (782.0)       (1,286.7)  (202.9)
Cash flows from financing activities:
Repurchase of common stock                    -             (170.5)    (26.9)
Proceeds from loan borrowed                   940.4         3,523.8    555.7
Repayment of loans                            (907.3)       (1,403.5)  (221.3)
Dividends paid to the company shareholders    -             (1,809.3)  (285.3)
Others                                        (400.2)       (243.9)    (38.5)
Net cash used in financing activities      (367.1)       (103.4)    (16.3)
Effect of exchange rate changes on cash       (18.6)        7.4        1.1
Net decrease in cash and cash equivalents     (183.7)       (209.9)    (33.1)
Cash and cash equivalents, beginning of       1,571.8       1,835.5    289.5
period
Cash and cash equivalents, end of period    1,388.1       1,625.6    256.4



SOURCE Shanda Games Limited

Website: http://ir.shandagames.com/
Website: http://www.shandagames.com
 
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