UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of August 2015

 

Commission File Number: 001-34541

 

CHINA CORD BLOOD CORPORATION

(Translation of registrant’s name into English)

 

48th Floor, Bank of China Tower
1 Garden Road
Central
Hong Kong S.A.R.

(Address of Principal Executive Offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x

 

Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes o

 

No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-                       .

 

 

 



 

EXPLANATORY NOTE

 

This Report of Foreign Private Issuer on Form 6-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or China Cord Blood Corporation’s (the “Company”) future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. The information in this Report on Form 6-K is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company’s expectations are as of the date of this Report on Form 6-K, and the Company does not intend to update any of the forward-looking statements after the date of this Report on Form 6-K to conform these statements to actual results, unless required by law.

 

The forward-looking statements included in this Report on Form 6-K are subject to risks, uncertainties and assumptions about the Company’s businesses and business environments. These statements reflect the Company’s current views with respect to future events and are not a guarantee of future performance. Actual results of the Company’s operations may differ materially from information contained in the forward-looking statements as a result of risk factors some of which include, among other things: continued compliance with government regulations regarding cord blood banking in the People’s Republic of China, or PRC and any other jurisdiction in which the Company conducts its operations; changing legislation or regulatory environments (including revisions to China’s One Child Policy) in the PRC and any other jurisdiction in which the Company conducts its operations; the acceptance by subscribers of the Company’s different pricing and payment options and reaction to the introduction of the Company’s premium-quality pricing strategy; demographic trends in the regions of the PRC in which the Company is the exclusive licensed cord blood banking operator; labor and personnel relations; the existence of a significant shareholder able to influence and direct the corporate policies of the Company; credit risks affecting the Company’s revenue and profitability; changes in the healthcare industry, including those which may result in the use of stem cell therapies becoming redundant or obsolete; the Company’s ability to effectively manage its growth, including implementing effective controls and procedures and attracting and retaining key management and personnel; changing interpretations of generally accepted accounting principles; the availability of capital resources, including in the form of capital markets financing opportunities, in light of industry developments affecting issuers that have pursued a “reverse merger” with an operating company based in the PRC, as well as general economic conditions; compliance with restrictive debt covenants under the Company’s senior convertible notes; the non-binding proposal letter from Golden Meditech Holdings Limited and Nanjing Xinjiekou Department Store Co., Ltd.; and other relevant risks detailed in the Company’s filings with the Securities and Exchange Commission in the United States.

 

2



 

Results of Operations and Financial Condition

 

Following this cover page are the preliminary unaudited condensed consolidated financial results for the three months ended June 30, 2015 of the Company.

 

3



 

CHINA CORD BLOOD CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31 and June 30, 2015

 

 

 

March 31,

 

June 30,

 

 

 

2015

 

2015

 

 

 

RMB

 

RMB

 

US$

 

 

 

(in thousands except share data)

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

2,436,655

 

2,560,907

 

413,049

 

Trading securities

 

7,708

 

7,841

 

1,265

 

Accounts receivable, less allowance for doubtful accounts

(March 31, 2015: RMB28,624; June 30, 2015: RMB30,915 (US$4,986))

 

120,762

 

119,653

 

19,299

 

Inventories

 

23,803

 

25,564

 

4,123

 

Prepaid expenses and other receivables

 

19,508

 

15,162

 

2,446

 

Debt issuance costs

 

3,592

 

3,586

 

578

 

Deferred tax assets

 

10,270

 

11,088

 

1,788

 

Total current assets

 

2,622,298

 

2,743,801

 

442,548

 

Property, plant and equipment, net

 

603,167

 

596,161

 

96,155

 

Non-current deposits

 

207,258

 

208,360

 

33,606

 

Non-current accounts receivable, less allowance for doubtful accounts

(March 31, 2015: RMB55,211; June 30, 2015: RMB53,750 (US$8,669))

 

194,238

 

195,135

 

31,474

 

Inventories

 

58,224

 

59,947

 

9,669

 

Intangible assets, net

 

115,928

 

114,773

 

18,512

 

Available-for-sale equity securities

 

122,416

 

133,077

 

21,464

 

Other investment

 

189,129

 

189,129

 

30,505

 

Debt issuance costs

 

4,210

 

3,309

 

534

 

Deferred tax assets

 

2,618

 

2,172

 

350

 

Total assets

 

4,119,486

 

4,245,864

 

684,817

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Bank loan

 

60,000

 

60,000

 

9,677

 

Accounts payable

 

12,673

 

14,989

 

2,418

 

Accrued expenses and other payables

 

87,381

 

66,555

 

10,735

 

Deferred revenue

 

220,140

 

239,172

 

38,576

 

Amounts due to related parties

 

20,802

 

21,763

 

3,510

 

Income tax payable

 

10,081

 

10,844

 

1,749

 

Deferred tax liabilities

 

9,100

 

10,400

 

1,677

 

Total current liabilities

 

420,177

 

423,723

 

68,342

 

Convertible notes

 

815,851

 

826,069

 

133,237

 

Non-current deferred revenue

 

1,099,399

 

1,161,768

 

187,382

 

Other non-current liabilities

 

215,585

 

226,926

 

36,601

 

Deferred tax liabilities

 

25,261

 

25,156

 

4,057

 

Total liabilities

 

2,576,273

 

2,663,642

 

429,619

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Shareholders’ equity of China Cord Blood Corporation

 

 

 

 

 

 

 

Ordinary shares

 

 

 

 

 

 

 

- US$0.0001 par value, 250,000,000 shares authorized, 73,140,147 shares issued and 73,003,248 shares outstanding as of March 31 and June 30, 2015, respectively

 

50

 

50

 

8

 

Additional paid-in capital

 

814,678

 

828,775

 

133,674

 

Treasury stock, at cost
(March 31 and June 30, 2015: 136,899 shares, respectively)

 

(2,815

)

(2,815

)

(454

)

Accumulated other comprehensive income

 

63,230

 

74,649

 

12,041

 

Retained earnings

 

662,615

 

676,166

 

109,059

 

Total equity attributable to China Cord Blood Corporation

 

1,537,758

 

1,576,825

 

254,328

 

Non-controlling interests

 

5,455

 

5,397

 

870

 

Total equity

 

1,543,213

 

1,582,222

 

255,198

 

Total liabilities and equity

 

4,119,486

 

4,245,864

 

684,817

 

 

4



 

CHINA CORD BLOOD CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months ended June 30, 2014 and 2015

 

 

 

Three months ended June 30,

 

 

 

2014

 

2015

 

 

 

RMB

 

RMB

 

US$

 

 

 

(in thousands except per share data)

 

 

 

 

 

 

 

 

 

Revenues

 

153,331

 

165,363

 

26,672

 

Direct costs

 

(29,776

)

(36,573

)

(5,899

)

Gross profit

 

123,555

 

128,790

 

20,773

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

(2,499

)

(1,934

)

(312

)

Sales and marketing

 

(31,743

)

(37,209

)

(6,001

)

General and administrative

 

(29,146

)

(41,220

)

(6,648

)

Total operating expenses

 

(63,388

)

(80,363

)

(12,961

)

Operating income

 

60,167

 

48,427

 

7,812

 

Other expense, net

 

 

 

 

 

 

 

Interest income

 

4,266

 

4,710

 

760

 

Interest expense

 

(24,895

)

(25,883

)

(4,175

)

Exchange gain/(loss)

 

180

 

(41

)

(7

)

Dividend income

 

1,196

 

1,180

 

190

 

Others

 

617

 

89

 

14

 

Total other expense, net

 

(18,636

)

(19,945

)

(3,218

)

Income before income tax

 

41,531

 

28,482

 

4,594

 

Income tax expense

 

(11,937

)

(14,989

)

(2,418

)

Net income

 

29,594

 

13,493

 

2,176

 

Net income attributable to non-controlling interests

 

142

 

58

 

9

 

Net income attributable to China Cord Blood Corporation’s shareholders

 

29,736

 

13,551

 

2,185

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Attributable to ordinary shares

 

 

 

 

 

 

 

- Basic

 

0.37

 

0.19

 

0.03

 

- Diluted

 

0.37

 

0.19

 

0.03

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

- Net effect of foreign currency translation, net of nil tax

 

529

 

559

 

90

 

- Net unrealized gain in available-for-sale equity securities, net of nil tax

 

4,506

 

10,860

 

1,752

 

Comprehensive income

 

34,629

 

24,912

 

4,018

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to non-controlling interests

 

142

 

58

 

9

 

Comprehensive income attributable to China Cord Blood Corporation’s shareholders

 

34,771

 

24,970

 

4,027

 

 

5



 

Other Events

 

On August 19, 2015, the Company issued a press release announcing preliminary unaudited condensed consolidated financial results for the three months ended June 30, 2015. A copy of the press release is attached as Exhibit 99.1.

 

Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release, dated August 19, 2015

 

6



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

CHINA CORD BLOOD CORPORATION

 

 

 

 

By:

/s/ Albert Chen

 

Name:

Albert Chen

 

Title:

Chief Financial Officer

 

Dated: August 19, 2015

 

7


Exhibit 99.1

 

GRAPHIC

 

China Cord Blood Corporation Reports Financial Results

for the First Quarter of Fiscal 2016

 

1Q16 Added 16,090 New Subscribers

1Q16 Revenue Up 7.8% YOY to RMB165.4 Million ($26.7 Million)

1Q16 Operating Income Amounted to RMB48.4 Million ($7.8 Million)

Conference Call to be Held on August 20, 2015 at 8:00 a.m. ET

 

HONG KONG, China, August 19, 2015 — China Cord Blood Corporation (NYSE: CO) (“CCBC” or the “Company”), China’s leading provider of cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services, today announced its preliminary unaudited financial results for the first quarter of fiscal 2016 ended June 30, 2015.

 

First Quarter of Fiscal 2016 Highlights

 

·

Revenues for the first quarter of fiscal 2016 increased by 7.8% to RMB165.4 million ($26.7 million) from RMB153.3 million in the prior year period.

·

New subscribers and accumulated subscriber base were 16,090 and 457,449, respectively.

·

Gross profit increased by 4.2% to RMB128.8 million ($20.8 million) from RMB123.6 million in the prior year period, despite higher raw material costs.

·

Gross margin was 77.9%, compared to 80.6% in the prior year period.

·

Operating income amounted to RMB48.4 million ($7.8 million), compared to RMB60.2 million in the prior year period, mainly due to the recognition of share-based compensation expense related to the restricted share units (“RSUs”) granted in the quarter ended December 31, 2014.

·

Operating income before depreciation and amortization and share-based compensation expenses was RMB74.8 million ($12.1 million), up 4.6% compared to RMB71.6 million in the prior year period.1

·

Interest expense was RMB25.9 million ($4.2 million) compared to RMB24.9 million in the prior year period.

·

Net income attributable to the Company’s shareholders was RMB13.6 million ($2.2 million), compared to RMB29.7 million in the prior year period.

·

Net cash provided by operating activities for the first quarter of fiscal 2016 was RMB130.1 million ($21.0 million).

 

During the reporting quarter, the market continued to contract and remained challenging. The decline in births, however, did not prevent us from recruiting more than sixteen thousand new subscribers, representing a year-over-year increase of 3.5%, which is in line with management’s expectations.” said Ms. Ting Zheng, Chief Executive Officer of China Cord Blood Corporation, “We will continue to deepen our existing channels and launch value-added products, utilize O2O channels to increase our conversion ratio, and foster greater customer loyalty by creating parents-children communities. Meanwhile, we continue to build up our team and marketing network for the Zhejiang market. In face of the market contraction in the Chinese lunar “Year of the Sheep”, we are determined to achieve our subscriber target for fiscal 2016 by capitalizing on deepening of our existing sales channels and exploring new promotion platforms.”

 


1 See exhibit 3 of this press release for a reconciliation of operating income to exclude the non-cash items related to the depreciation and amortization and share-based compensation expenses to the comparable financial measure prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

 



 

GRAPHIC

 

Summary — First Quarter Ended June 30, 2014 and 2015

 

 

 

Three Months Ended June 30

 

(in thousands)

 

2014

 

2015

 

 

 

RMB

 

RMB

 

US$

 

Revenues

 

153,331

 

165,363

 

26,672

 

Gross Profit

 

123,555

 

128,790

 

20,773

 

Operating Income

 

60,167

 

48,427

 

7,812

 

Depreciation and Amortization Expenses

 

11,407

 

12,328

 

1,988

 

Share-based Compensation Expense2

 

 

14,093

 

2,273

 

Interest Expense

 

24,895

 

25,883

 

4,175

 

Net Income Attributable to the Company’s Shareholders

 

29,736

 

13,551

 

2,185

 

Earnings per Ordinary Share — Basic3 and Diluted (RMB/US$)

 

0.37

 

0.19

 

0.03

 

 

 

 

 

 

 

 

 

Revenue Breakdown (%)

 

 

 

 

 

 

 

Processing Fees

 

69.2

%

64.8

%

 

 

Storage Fees

 

30.8

%

35.2

%

 

 

 

 

 

 

 

 

 

 

New Subscribers (persons)

 

15,548

 

16,090

 

 

 

Total Accumulated Subscribers (persons)

 

392,171

 

457,449

 

 

 

 

Summary — Selected Cash Flow Statement Items

 

 

 

Three Months Ended June 30

 

(in thousands)

 

2014

 

2015

 

 

 

RMB

 

RMB

 

US$

 

Net cash provided by operating activities

 

124,643

 

130,126

 

20,988

 

Net cash used in investing activities

 

(18,397

)

(5,579

)

(900

)

Net cash provided by financing activities

 

 

 

 

 


2 Share-based compensation expense relates to the Company’s restricted share unit scheme (“RSU Scheme”) in which 7,300,000 RSUs were granted to certain executives, directors and key employees during the three months ended December 31, 2014. Out of 7,300,000 RSUs granted, 7,080,000 ordinary shares (“Shares”) were then issued and deposited into a trust sponsored and funded by the Company (“Trust”).

 

3 The terms of the convertible notes held by KKR China Healthcare Investment Limited (“KKR”), Cordlife Group Limited (“CGL”) and Magnum Opus International Holdings Limited (“Magnum”) provide each party with the ability to participate in any excess cash dividend. As there is no excess cash dividend for the three months ended June 30, 2015, such participating right effect is nil.

 



 

GRAPHIC

 

First Quarter of Fiscal 2016 Financial Results

 

REVENUES. Revenues increased by 7.8% to RMB165.4 million ($26.7 million) in the first quarter of fiscal 2016 from RMB153.3 million in the prior year period. The key driver of this increase was the solid increase in storage revenue.

 

Revenues generated from storage fee increased by 23.5% to RMB58.3 million ($9.4 million) in the first quarter of fiscal 2016 from RMB47.2 million in the prior year period due to the expansion of the accumulated subscriber base. The subscriber base grew to 457,449 by the end of June 2015. Storage fees accounted for 35.2% of total revenues, compared to 30.8% in the prior year period.

 

Revenues generated from processing fees and other services in the first quarter of fiscal 2016 were RMB107.1 million ($17.3 million), up from RMB106.1 million in the prior year period. Revenues generated from processing fees accounted for 64.8% of total revenues, compared to 69.2% in the prior year period.

 

GROSS PROFIT. Gross profit for the first quarter of fiscal 2016 amounted to RMB128.8 million ($20.8 million), a 4.2% increase from RMB123.6 million in the prior year period. Gross margin was 77.9%, compared to 80.6% in the prior year period, due to higher raw material costs.

 

OPERATING INCOME. Operating income for the first quarter was RMB48.4 million ($7.8 million) compared to RMB60.2 million in the prior year period, mainly due to the recognition of share-based compensation expense. As a result, operating margin decreased to 29.3%, compared to 39.2% in the prior year period. Depreciation and amortization expenses for the first quarter were RMB12.3 million ($2.0 million), compared to RMB11.4 million in the prior year period. Share-based compensation expense related to the Company’s RSUs which were granted in December 2014 pursuant to the Company’s RSU Scheme amounted to RMB14.1 million ($2.3 million) for the first quarter, whereas no such expense was incurred in the prior year period. Operating income before depreciation and amortization and share-based compensation expenses totaled RMB74.8 million ($12.1 million), a modest increase compared to RMB71.6 million in the prior year period.4

 

Research and Development Expenses. Research and development expenses remained stable at RMB1.9 million ($0.3 million) in the first quarter of fiscal 2016.

 

Sales and Marketing Expenses. Sales and marketing expenses for the first quarter amounted to RMB37.2 million ($6.0 million), compared to RMB31.7 million in the prior year period. As a percentage of revenue, sales and marketing expenses were 22.5%, as compared to 20.7% in the prior year period. This increase is attributable to increased marketing expenses and promotion activities, as well as the recognition of share-based compensation expense in the current quarter, whereas no such expense was incurred in the prior year period.

 

General and Administrative Expenses. General and administrative expenses for the first quarter were RMB41.2 million ($6.6 million) compared to RMB29.1 million in the prior year period. This increase is also mainly a result of the recognition of share-based compensation expense in the current quarter. As a result, general and administrative expenses as the percentage of revenue were 24.9%, compared to 19.0% in the prior year period.

 


4 See exhibit 3 of this press release for a reconciliation of operating income to exclude the non-cash items related to the depreciation and amortization and share-based compensation expenses to the comparable financial measure prepared in accordance with U.S. GAAP.

 



 

GRAPHIC

 

OTHER INCOME AND EXPENSES.

 

Interest Expense. Interest expense was RMB25.9 million ($4.2 million), compared to RMB24.9 million in the prior year period. Interest expense was mainly related to the Company’s outstanding convertible notes.

 

NET INCOME ATTRIBUTABLE TO THE COMPANY’S SHAREHOLDERS. As a result of the increase in direct costs and operating expenses, income before income tax for the first quarter decreased to RMB28.5 million ($4.6 million) from RMB41.5 million. Net income attributable to the Company’s shareholders for the first quarter of fiscal 2016 amounted to RMB13.6 million ($2.2 million), compared to RMB29.7 million in the prior year period. Net margin for the first quarter of fiscal 2016 was 8.2%.

 

EARNINGS PER SHARE. The terms of the convertible notes held by KKR, CGL and Magnum provide each party with the ability to participate in any Excess Cash Dividend5. Therefore, the calculation of basic and diluted EPS has taken into consideration the effect of such participating rights. As there is no Excess Cash Dividend for the current period, such participating right effect is nil. Basic and diluted earnings per ordinary share for the first quarter of fiscal 2016 were RMB0.19 ($0.03).6

 

LIQUIDITY. As of June 30, 2015, the Company had cash and cash equivalents of RMB2,560.9 million ($413.0 million), compared to RMB2,436.7 million as of March 31, 2015. The Company had total debt of RMB886.1 million ($142.9 million) as of June 30, 2015. Net cash provided by operating activities for the first quarter of fiscal 2016 amounted to RMB130.1 million ($21.0 million).

 


5 “Excess Cash Dividend” means any cash dividend to holders of shares that, together with all other cash dividends previously paid to holders of shares in the same financial year, exceeds, on a per share basis, an amount equal to the interest that has accrued and shall accrue at 7% in such financial year divided by the number of shares into which the note is convertible at the conversion price then in effect on the relevant record date.

 

6 During the quarter ended December 31, 2014, the Company granted a total of 7,300,000 RSUs to certain executives, directors and key employees under the Company’s RSU Scheme, subject to certain performance conditions. Out of 7,300,000 RSUs granted, 7,080,000 Shares were then issued and deposited into a Trust, and will be transferred to respective executives, directors and key employees (or their designated nominees) under the Company’s RSU Scheme when the performance conditions are met. The Trust facilitates the granting (and subsequent vesting) of incentive RSUs and holds such Shares for the benefit of such executives, directors and key employees as a class. Under the non-GAAP measure to take into account of such Shares, in addition to 73,003,248 outstanding shares, basic and diluted earnings per ordinary share were RMB0.17 ($0.03) for the three months ended June 30, 2015.

 



 

GRAPHIC

 

Recent Developments

 

·                          On April 27, 2015, the Company announced that its board of directors (the “Board”) has received a non-binding proposal letter from Golden Meditech Holdings Limited (“Golden Meditech”), pursuant to which Golden Meditech proposes to acquire all of the outstanding ordinary shares of the Company not already directly or indirectly owned by Golden Meditech for US$6.40 per ordinary share in cash.

 

According to the proposal letter, which was dated April 27, 2015, the proposed transaction is intended to be financed with a combination of available cash resources of Golden Meditech and debt and equity capital. In connection with the proposed transaction, Golden Meditech also intends to acquire all of the 7% senior convertible notes of the Company pursuant to agreements entered into with the holders of such convertible notes.

 

·                          On April 29, 2015, the Company announced that in response to the non-binding proposal letter dated April 27, 2015 received by the Board from Golden Meditech, the Board has formed a special committee of independent directors who are not affiliated with Golden Meditech (the “Special Committee”) to evaluate such proposal. The Special Committee consists of Mr. Mark D. Chen, Dr. Ken Lu and Ms. Jennifer J. Weng, each of whom currently serves as an independent director on the Board, with Mr. Chen serving as the chair of the Special Committee.

 

·                          On June 2, 2015, the Company announced that the Special Committee has appointed Houlihan Lokey (China) Limited as its independent financial advisor, Cleary Gottlieb Steen & Hamilton LLP as its United States legal counsel and Maples & Calder as its Cayman Islands legal counsel. The Special Committee is considering Golden Meditech’s proposal as well as the Company’s other alternatives. The Special Committee has not set a definitive timetable to complete its evaluation of Golden Meditech’s proposal or any other alternative and does not currently intend to announce developments unless and until an agreement has been reached.

 

·                          On August 6, 2015, the Company announced that the Board has received a non-binding acquisition proposal letter from Nanjing Xinjiekou Department Store Co., Ltd. (“Nanjing Xinjiekou”), pursuant to which Nanjing Xinjiekou offered to acquire all of the Company’s China business, including all of the Company’s equity interests in its China subsidiaries and its assets and resources relating to its business in China.  The purchase price offered is not lower than RMB6.0 billion, to be paid in cash or shares or a combination thereof. The Special Committee, in consultation with its legal and financial advisors, will carefully review and evaluate the Nanjing Xinjiekou’s proposal.

 

The Company cautions its shareholders and others considering trading its securities that no decisions have been made with respect to the Company’s response to either Golden Meditech’s proposal or Nanjing Xinjiekou’s proposal, and there cannot be any assurance as to when, if ever, or on what terms any alternative transaction will be consummated.

 

Conference Call

 

The Company will host a conference call at 8:00 a.m. ET on Thursday, August 20, 2015 to discuss its financial performance and give a brief overview of the Company’s recent developments, followed by a question and answer session. Interested parties can access the audio webcast through the Company’s IR website at http://ir.chinacordbloodcorp.com. A replay of the webcast will be accessible two hours after the conference call and available for three weeks at the same URL above. Listeners can also access the call by dialing 1-631-514-2526 or 1-855-298-3404 for US callers, or +852-5808-3202 for Hong Kong callers, access code: 9995725.

 



 

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Use of Non-GAAP Financial Measures

 

GAAP results for the three months ended June 30, 2015 include non-cash items related to the depreciation and amortization and share-based compensation expenses. To supplement the Company’s unaudited condensed consolidated financial statements presented on a U.S. GAAP basis, the Company has provided adjusted financial information excluding the impact of these items in this press release. The non-GAAP financial measure represents non-GAAP operating income. Such adjustment is a departure of U.S. GAAP; however, the Company’s management believes that these adjusted measures provide investors with a better understanding of how the results relate to the Company’s historical performance. Also, management uses non-GAAP operating income as a measurement tool for evaluating actual operating performance compared to budget and prior periods. These adjusted measures should not be considered an alternative to operating income, or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. These measures are not necessarily comparable to a similarly titled measure of another company. A reconciliation of the adjustments to U.S. GAAP results appears in exhibit 3 accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for U.S. GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.

 

About China Cord Blood Corporation

 

China Cord Blood Corporation is the first and largest umbilical cord blood banking operator in China in terms of geographical coverage and the only cord blood banking operator with multiple licenses. Under current PRC government regulations, only one licensed cord blood banking operator is permitted to operate in each licensed region and only seven licenses have been authorized as of today. China Cord Blood Corporation provides cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services. For more information, please visit our website at http://www.chinacordbloodcorp.com.

 



 

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Safe Harbor Statement

 

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. The information in this press release is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company expectations are as of the date this press release is issued, and the Company does not intend to update any of the forward-looking statements after the date this press release is issued to conform these statements to actual results, unless required by law.

 

The forward-looking statements included in this press release are subject to risks, uncertainties and assumptions about the Company’s businesses and business environments. These statements reflect the Company’s current views with respect to future events and are not a guarantee of future performance. Actual results of the Company’s operations may differ materially from information contained in the forward-looking statements as a result of risk factors some of which include, among other things: continued compliance with government regulations regarding cord blood banking in the People’s Republic of China, or PRC and any other jurisdiction in which the Company conducts its operations; changing legislation or regulatory environments (including revisions to China’s One Child Policy) in the PRC and any other jurisdiction in which the Company conducts its operations; the acceptance by subscribers of the Company’s different pricing and payment options and reaction to the introduction of the Company’s premium-quality pricing strategy; demographic trends in the regions of the PRC in which the Company is the exclusive licensed cord blood banking operator; labor and personnel relations; the existence of a significant shareholder able to influence and direct the corporate policies of the Company; credit risks affecting the Company’s revenue and profitability; changes in the healthcare industry, including those which may result in the use of stem cell therapies becoming redundant or obsolete; the Company’s ability to effectively manage its growth, including implementing effective controls and procedures and attracting and retaining key management and personnel; changing interpretations of generally accepted accounting principles; the availability of capital resources, including in the form of capital markets financing opportunities, in light of industry developments affecting issuers that have pursued a “reverse merger” with an operating company based in China, as well as general economic conditions; compliance with restrictive debt covenants under our senior convertible notes; the non-binding proposal letters from Golden Meditech and Nanjing Xinjiekou; and other relevant risks detailed in the Company’s filings with the Securities and Exchange Commission in the United States.

 

This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars as of and for the periods ending June 30, 2015 were made at the noon buying rate of RMB6.2000 to $1.00 on June 30, 2015 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York. China Cord Blood Corporation makes no representation that the Renminbi or U.S. dollar amounts referred to in this press release could have been or could be converted into U.S. dollars or Renminbi, at any particular rate or at all.

 

For more information, please contact:

 

China Cord Blood Corporation

Investor Relations Department

Tel: (+852) 3605-8180

Email: [email protected]

 

ICR, Inc.

William Zima

Tel: (+86) 10-6583-7511

U.S. Tel: (646) 405-5185

Email: [email protected]

 



 

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EXHIBIT 1

 

CHINA CORD BLOOD CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31 and June 30, 2015

 

 

 

March 31,

 

June 30,

 

 

 

2015

 

2015

 

 

 

RMB

 

RMB

 

US$

 

 

 

(in thousands except share data)

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

2,436,655

 

2,560,907

 

413,049

 

Trading securities

 

7,708

 

7,841

 

1,265

 

Accounts receivable, less allowance for doubtful accounts (March 31, 2015: RMB28,624; June 30, 2015: RMB30,915 (US$4,986))

 

120,762

 

119,653

 

19,299

 

Inventories

 

23,803

 

25,564

 

4,123

 

Prepaid expenses and other receivables

 

19,508

 

15,162

 

2,446

 

Debt issuance costs

 

3,592

 

3,586

 

578

 

Deferred tax assets

 

10,270

 

11,088

 

1,788

 

Total current assets

 

2,622,298

 

2,743,801

 

442,548

 

Property, plant and equipment, net

 

603,167

 

596,161

 

96,155

 

Non-current deposits

 

207,258

 

208,360

 

33,606

 

Non-current accounts receivable, less allowance for doubtful accounts (March 31, 2015: RMB55,211; June 30, 2015: RMB53,750 (US$8,669))

 

194,238

 

195,135

 

31,474

 

Inventories

 

58,224

 

59,947

 

9,669

 

Intangible assets, net

 

115,928

 

114,773

 

18,512

 

Available-for-sale equity securities

 

122,416

 

133,077

 

21,464

 

Other investment

 

189,129

 

189,129

 

30,505

 

Debt issuance costs

 

4,210

 

3,309

 

534

 

Deferred tax assets

 

2,618

 

2,172

 

350

 

Total assets

 

4,119,486

 

4,245,864

 

684,817

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Bank loan

 

60,000

 

60,000

 

9,677

 

Accounts payable

 

12,673

 

14,989

 

2,418

 

Accrued expenses and other payables

 

87,381

 

66,555

 

10,735

 

Deferred revenue

 

220,140

 

239,172

 

38,576

 

Amounts due to related parties

 

20,802

 

21,763

 

3,510

 

Income tax payable

 

10,081

 

10,844

 

1,749

 

Deferred tax liabilities

 

9,100

 

10,400

 

1,677

 

Total current liabilities

 

420,177

 

423,723

 

68,342

 

Convertible notes

 

815,851

 

826,069

 

133,237

 

Non-current deferred revenue

 

1,099,399

 

1,161,768

 

187,382

 

Other non-current liabilities

 

215,585

 

226,926

 

36,601

 

Deferred tax liabilities

 

25,261

 

25,156

 

4,057

 

Total liabilities

 

2,576,273

 

2,663,642

 

429,619

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Shareholders’ equity of China Cord Blood Corporation

 

 

 

 

 

 

 

Ordinary shares

 

 

 

 

 

 

 

- US$0.0001 par value, 250,000,000 shares authorized, 73,140,147 shares issued and 73,003,248 shares outstanding as of March 31 and June 30, 2015, respectively

 

50

 

50

 

8

 

Additional paid-in capital

 

814,678

 

828,775

 

133,674

 

Treasury stock, at cost (March 31 and June 30, 2015: 136,899 shares, respectively)

 

(2,815

)

(2,815

)

(454

)

Accumulated other comprehensive income

 

63,230

 

74,649

 

12,041

 

Retained earnings

 

662,615

 

676,166

 

109,059

 

Total equity attributable to China Cord Blood Corporation

 

1,537,758

 

1,576,825

 

254,328

 

Non-controlling interests

 

5,455

 

5,397

 

870

 

Total equity

 

1,543,213

 

1,582,222

 

255,198

 

Total liabilities and equity

 

4,119,486

 

4,245,864

 

684,817

 

 



 

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EXHIBIT 2

 

CHINA CORD BLOOD CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months ended June 30, 2014 and 2015

 

 

 

Three months ended June 30,

 

 

 

2014

 

2015

 

 

 

RMB

 

RMB

 

US$

 

 

 

(in thousands except per share data)

 

 

 

 

 

 

 

 

 

Revenues

 

153,331

 

165,363

 

26,672

 

Direct costs

 

(29,776

)

(36,573

)

(5,899

)

Gross profit

 

123,555

 

128,790

 

20,773

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

(2,499

)

(1,934

)

(312

)

Sales and marketing

 

(31,743

)

(37,209

)

(6,001

)

General and administrative

 

(29,146

)

(41,220

)

(6,648

)

Total operating expenses

 

(63,388

)

(80,363

)

(12,961

)

Operating income

 

60,167

 

48,427

 

7,812

 

Other expense, net

 

 

 

 

 

 

 

Interest income

 

4,266

 

4,710

 

760

 

Interest expense

 

(24,895

)

(25,883

)

(4,175

)

Exchange gain/(loss)

 

180

 

(41

)

(7

)

Dividend income

 

1,196

 

1,180

 

190

 

Others

 

617

 

89

 

14

 

Total other expense, net

 

(18,636

)

(19,945

)

(3,218

)

Income before income tax

 

41,531

 

28,482

 

4,594

 

Income tax expense

 

(11,937

)

(14,989

)

(2,418

)

Net income

 

29,594

 

13,493

 

2,176

 

Net income attributable to non-controlling interests

 

142

 

58

 

9

 

Net income attributable to China Cord Blood Corporation’s shareholders

 

29,736

 

13,551

 

2,185

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Attributable to ordinary shares

 

 

 

 

 

 

 

- Basic

 

0.37

 

0.19

 

0.03

 

- Diluted

 

0.37

 

0.19

 

0.03

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

- Net effect of foreign currency translation, net of nil tax

 

529

 

559

 

90

 

- Net unrealized gain in available-for-sale equity securities, net of nil tax

 

4,506

 

10,860

 

1,752

 

Comprehensive income

 

34,629

 

24,912

 

4,018

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to non-controlling interests

 

142

 

58

 

9

 

Comprehensive income attributable to China Cord Blood Corporation’s shareholders

 

34,771

 

24,970

 

4,027

 

 



 

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EXHIBIT 3

 

CHINA CORD BLOOD CORPORATION

RECONCILIATION OF NON-GAAP OPERATING INCOME

For the Three Months ended June 30, 2014 and 2015

 

 

 

Three months ended June 30,

 

 

 

2014

 

2015

 

 

 

RMB

 

RMB

 

US$

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

GAAP amount of operating income

 

60,167

 

48,427

 

7,812

 

 

 

 

 

 

 

 

 

Depreciation and amortization expenses7

 

11,407

 

12,328

 

1,988

 

 

 

 

 

 

 

 

 

Share-based compensation expense8

 

 

14,093

 

2,273

 

 

 

 

 

 

 

 

 

Non-GAAP operating income

 

71,574

 

74,848

 

12,073

 

 


7 Depreciation and amortization expenses relate to property, plant and equipment and intangible assets respectively.

 

8 Share-based compensation expense relates to the Company’s RSU Scheme in which 7,300,000 RSUs were granted to certain executives, directors and key employees during the three months ended December 31, 2014. Out of 7,300,000 RSUs granted, 7,080,000 Shares were then issued and deposited into a Trust.