UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 6-K/A

(Amendment No. 1)

 

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

 

For the month of December 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): 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)(7): o

 

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 ¨

 

No ý

 

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

 

 

 



 

EXPLANATORY NOTE

 

This Amendment No. 1 (the “Amendment”) to the Report of Foreign Private Issuer on Form 6-K (the “Original 6-K”), originally furnished by China Cord Blood Corporation (the “Company”) to the Securities and Exchange Commission on November 23, 2015, amends the Original 6-K to include an unaudited condensed consolidated statement of changes in equity, an unaudited condensed consolidated statements of cash flows, and notes to the unaudited condensed consolidated financial statements and the applicable interactive data file as Exhibit 101, which provides the unaudited condensed consolidated financial statements in XBRL (eXtensible business reporting language), and to provide for the incorporation by reference described below. No other changes have been made to the Original 6-K. This Amendment does not reflect events that may have occurred subsequent to the original submission date and does not modify or update in any way the disclosures made in the Original 6-K.

 

This Amendment and each of the exhibits to this Amendment are hereby incorporated by reference into the registration statements on Form F-3 (No. 333-191121 and No. 333-183143) of the Company.

 

This Amendment 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 Amendment 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 this Amendment is filed, and the Company does not intend to update any of the forward-looking statements after the date this Amendment is filed to conform these statements to actual results, unless required by law.

 

The forward-looking statements included in this Amendment 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 the October 2015 revision 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 letters 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 unaudited condensed consolidated financial results for the three months and six months ended September 30, 2015 of the Company.

 

3



 

China Cord Blood Corporation and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(Amounts expressed in thousands)

 

 

 

 

 

March 31,

 

September 30,

 

 

 

Note

 

2015

 

2015

 

2015

 

 

 

 

 

RMB

 

RMB

 

US$

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

2,436,655

 

2,671,772

 

420,382

 

Trading securities

 

 

 

7,708

 

7,861

 

1,237

 

Accounts receivable, less allowance for doubtful accounts (March 31, 2015: RMB28,624; September 30, 2015: RMB33,073 (US$5,204))

 

 

 

120,762

 

124,978

 

19,664

 

Inventories

 

 

 

23,803

 

29,126

 

4,583

 

Prepaid expenses and other receivables

 

 

 

19,508

 

17,773

 

2,797

 

Debt issuance costs

 

5

 

3,592

 

3,737

 

588

 

Deferred tax assets

 

 

 

10,270

 

11,874

 

1,868

 

Total current assets

 

 

 

2,622,298

 

2,867,121

 

451,119

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

3

 

603,167

 

590,061

 

92,841

 

Non-current deposits

 

 

 

207,258

 

215,601

 

33,923

 

Non-current accounts receivable, less allowance for doubtful accounts (March 31, 2015: RMB55,211; September 30, 2015: RMB56,422 (US$8,878))

 

 

 

194,238

 

182,265

 

28,677

 

Inventories

 

 

 

58,224

 

61,375

 

9,657

 

Intangible assets, net

 

 

 

115,928

 

113,618

 

17,877

 

Available-for-sale equity securities

 

 

 

122,416

 

146,016

 

22,974

 

Other investment

 

 

 

189,129

 

189,129

 

29,758

 

Debt issuance costs

 

5

 

4,210

 

2,507

 

394

 

Deferred tax assets

 

 

 

2,618

 

2,212

 

348

 

Total assets

 

 

 

4,119,486

 

4,369,905

 

687,568

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Bank loan

 

4

 

60,000

 

 

 

Accounts payable

 

 

 

12,673

 

15,987

 

2,515

 

Accrued expenses and other payables

 

 

 

87,381

 

62,447

 

9,826

 

Deferred revenue

 

 

 

220,140

 

247,837

 

38,995

 

Amounts due to related parties

 

 

 

20,802

 

45,428

 

7,148

 

Income tax payable

 

 

 

10,081

 

11,765

 

1,851

 

Deferred tax liabilities

 

 

 

9,100

 

11,700

 

1,841

 

Total current liabilities

 

 

 

420,177

 

395,164

 

62,176

 

 

 

 

 

 

 

 

 

 

 

Convertible notes

 

5

 

815,851

 

873,181

 

137,388

 

Non-current deferred revenue

 

 

 

1,099,399

 

1,223,559

 

192,517

 

Other non-current liabilities

 

 

 

215,585

 

237,905

 

37,432

 

Deferred tax liabilities

 

 

 

25,261

 

24,356

 

3,832

 

Total liabilities

 

 

 

2,576,273

 

2,754,165

 

433,345

 

 

4



 

China Cord Blood Corporation and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets (Continued)

(Amounts expressed in thousands, except share data)

 

 

 

March 31,

 

September 30,

 

 

 

2015

 

2015

 

2015

 

 

 

RMB

 

RMB

 

US$

 

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 September 30, 2015, respectively

 

50

 

50

 

8

 

Additional paid-in capital

 

814,678

 

843,626

 

132,737

 

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

 

(2,815

)

(2,815

)

(443

)

Accumulated other comprehensive income

 

63,230

 

74,358

 

11,700

 

Retained earnings

 

662,615

 

694,889

 

109,335

 

Total equity attributable to China Cord Blood Corporation

 

1,537,758

 

1,610,108

 

253,337

 

 

 

 

 

 

 

 

 

Non-controlling interests

 

5,455

 

5,632

 

886

 

 

 

 

 

 

 

 

 

Total equity

 

1,543,213

 

1,615,740

 

254,223

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

4,119,486

 

4,369,905

 

687,568

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5



 

China Cord Blood Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Income

(Amounts expressed in thousands, except per share data)

 

 

 

 

 

Three months ended September 30,

 

Six months ended September 30,

 

 

 

Note

 

2014

 

2015

 

2015

 

2014

 

2015

 

2015

 

 

 

 

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

152,122

 

171,484

 

26,982

 

305,453

 

336,847

 

53,000

 

Direct costs

 

 

 

(30,348

)

(37,240

)

(5,859

)

(60,124

)

(73,813

)

(11,614

)

Gross profit

 

 

 

121,774

 

134,244

 

21,123

 

245,329

 

263,034

 

41,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

 

(2,330

)

(2,153

)

(339

)

(4,829

)

(4,087

)

(643

)

Sales and marketing

 

 

 

(30,953

)

(36,966

)

(5,816

)

(62,696

)

(74,175

)

(11,671

)

General and administrative

 

 

 

(31,028

)

(42,647

)

(6,710

)

(60,174

)

(83,867

)

(13,196

)

Total operating expenses

 

 

 

(64,311

)

(81,766

)

(12,865

)

(127,699

)

(162,129

)

(25,510

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

57,463

 

52,478

 

8,258

 

117,630

 

100,905

 

15,876

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

4,704

 

4,387

 

690

 

8,970

 

9,097

 

1,431

 

Interest expense

 

 

 

(25,209

)

(26,301

)

(4,138

)

(50,104

)

(52,184

)

(8,211

)

Exchange loss

 

 

 

(182

)

(152

)

(24

)

(2

)

(193

)

(30

)

Dividend income

 

 

 

 

10,020

 

1,577

 

1,196

 

11,200

 

1,762

 

Impairment loss on available-for-sale equity securities

 

6

 

 

(8,361

)

(1,316

)

 

(8,361

)

(1,316

)

Others

 

 

 

680

 

(328

)

(52

)

1,297

 

(239

)

(38

)

Total other expense, net

 

 

 

(20,007

)

(20,735

)

(3,263

)

(38,643

)

(40,680

)

(6,402

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income tax

 

 

 

37,456

 

31,743

 

4,995

 

78,987

 

60,225

 

9,474

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

7

 

(10,214

)

(12,785

)

(2,012

)

(22,151

)

(27,774

)

(4,369

)

Net income

 

 

 

27,242

 

18,958

 

2,983

 

56,836

 

32,451

 

5,105

 

Net income attributable to non-controlling interests

 

 

 

7

 

(235

)

(37

)

149

 

(177

)

(28

)

Net income attributable to China Cord Blood Corporation’s shareholders

 

 

 

27,249

 

18,723

 

2,946

 

56,985

 

32,274

 

5,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to ordinary shares

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

- Basic

 

 

 

0.35

 

0.25

 

0.04

 

0.72

 

0.44

 

0.07

 

- Diluted

 

 

 

0.35

 

0.25

 

0.04

 

0.72

 

0.44

 

0.07

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

913

 

(15,797

)

(2,486

)

1,442

 

(15,238

)

(2,398

)

- Net unrealized (loss)/gain in available-for-sale equity securities, net of nil tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Unrealized (loss)/gain arising during the period

 

 

 

(8,818

)

7,145

 

1,124

 

(4,312

)

18,005

 

2,832

 

- Reclassification adjustment for losses included in net income

 

 

 

 

8,361

 

1,316

 

 

8,361

 

1,316

 

Comprehensive income

 

 

 

19,337

 

18,667

 

2,937

 

53,966

 

43,579

 

6,855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to non-controlling interests

 

 

 

7

 

(235

)

(37

)

149

 

(177

)

(28

)

Comprehensive income attributable to China Cord Blood Corporation’s shareholders

 

 

 

19,344

 

18,432

 

2,900

 

54,115

 

43,402

 

6,827

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

6



 

China Cord Blood Corporation and Subsidiaries

Unaudited Condensed Consolidated Statement of Changes in Equity

(Amounts expressed in thousands, except share data)

 

 

 

China Cord Blood Corporation shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Share capital

 

Additional

 

Treasury stock

 

other

 

 

 

Non-

 

 

 

 

 

No. of

 

 

 

paid-in

 

No. of

 

 

 

comprehensive

 

Retained

 

controlling

 

Total

 

 

 

shares

 

Amount

 

capital

 

shares

 

Amount

 

income

 

earnings

 

interests

 

equity

 

 

 

 

 

RMB

 

RMB

 

 

 

RMB

 

RMB

 

RMB

 

RMB

 

RMB

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of April 1, 2015

 

73,140,147

 

50

 

814,678

 

(136,899

)

(2,815

)

63,230

 

662,615

 

5,455

 

1,543,213

 

Net income

 

 

 

 

 

 

 

32,274

 

177

 

32,451

 

Other comprehensive income

 

 

 

 

 

 

11,128

 

 

 

11,128

 

Share-based compensation

 

 

 

28,948

 

 

 

 

 

 

28,948

 

Balance as of September 30, 2015

 

73,140,147

 

50

 

843,626

 

(136,899

)

(2,815

)

74,358

 

694,889

 

5,632

 

1,615,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2015 - US$

 

 

 

$

8

 

$

132,737

 

 

 

$

(443

)

$

11,700

 

$

109,335

 

$

886

 

$

254,223

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

7



 

China Cord Blood Corporation and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(Amounts expressed in thousands)

 

 

 

Six months ended September 30,

 

 

 

2014

 

2015

 

2015

 

 

 

RMB

 

RMB

 

US$

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net cash provided by operating activities

 

295,691

 

298,632

 

46,987

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

(22,407

)

(9,643

)

(1,517

)

Proceeds from disposal of property, plant and equipment

 

12

 

113

 

18

 

Net cash used in investing activities

 

(22,395

)

(9,530

)

(1,499

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Repayments of bank loan

 

(60,000

)

(60,000

)

(9,440

)

Proceeds from bank loan

 

60,000

 

 

 

Net cash used in financing activities

 

 

(60,000

)

(9,440

)

 

 

 

 

 

 

 

 

Effect of foreign currency exchange rate change on cash and cash equivalents

 

330

 

6,015

 

947

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

273,626

 

235,117

 

36,995

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

1,882,901

 

2,436,655

 

383,387

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

2,156,527

 

2,671,772

 

420,382

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid for income taxes

 

23,680

 

25,593

 

4,027

 

Cash refund for income taxes

 

18,279

 

 

 

Cash paid for interest, net of capitalized interest

 

28,268

 

27,948

 

4,397

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

8



 

Notes to the unaudited condensed consolidated financial statements

(Amounts expressed in thousands, except share data)

 

1                                        Principal activities and basis of presentation

 

(a)                                Principal activities

 

China Cord Blood Corporation (the “Company”) and its subsidiaries (collectively the “Group”) are principally engaged in the provision of umbilical cord blood storage and ancillary services in the People’s Republic of China (the “PRC”). As of September 30, 2015, the Group has three operating cord blood banks in the Beijing municipality, the Guangdong province and the Zhejiang province, the PRC. The Company’s shares are listed on the New York Stock Exchange.

 

The Group provides cord blood testing, processing and storage services under the direction of subscribers for a cord blood processing fee and a storage fee. The Group also tests, processes and stores donated cord blood, and provides matching services to the public for a fee.

 

(b)                                Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The condensed consolidated balance sheet as of March 31, 2015 was derived from the audited consolidated financial statements of the Company. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the March 31, 2015 audited consolidated financial statements of the Company included in the Company’s annual report on Form 20-F for the year ended March 31, 2015.

 

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of September 30, 2015, the results of operations for the three and six months ended September 30, 2014 and 2015, and cash flows for the six months ended September 30, 2014 and 2015 have been made.

 

For the convenience of the readers, certain amounts as of and for the three and six months ended September 30, 2015 included in the accompanying unaudited condensed consolidated financial statements have been translated into U.S. dollars at the rate of US$1.00 = RMB6.3556, being the spot exchange rate of U.S. dollars in effect on September 30, 2015 for cable transfers in RMB per U.S. dollar as certified for customs purposes by the Federal Reserve, the central bank of the United States of America. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at that rate or at any other rate on September 30, 2015 or at any other date.

 

9



 

2                                        Summary of significant accounting policies

 

(a)                                Principles of consolidation

 

The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its majority-owned subsidiaries. For consolidated subsidiaries where the Company’s ownership is less than 100%, the outside shareholders’ interests are shown as non-controlling interests. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has no involvement with variable interest entities.

 

(b)                                Use of estimates

 

The preparation of the consolidated financial statements, in accordance with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the establishment of the selling prices of multiple deliverables in revenue arrangements, the estimation of direct costs for the provision of donated cord blood for transplantation and research, the useful lives of property, plant and equipment and intangible assets, the valuation allowances for receivables and deferred tax assets, the realizability of inventories and the fair values of share-based compensation.

 

3                                        Property, plant and equipment, net

 

Property, plant and equipment, net consist of the following:

 

 

 

March 31,

 

September 30,

 

 

 

2015

 

2015

 

2015

 

 

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

Buildings

 

581,252

 

581,508

 

91,495

 

Leasehold improvements

 

14,864

 

14,864

 

2,339

 

Machineries

 

137,811

 

146,636

 

23,072

 

Motor vehicles

 

15,209

 

15,505

 

2,440

 

Furniture, fixtures and equipment

 

40,132

 

40,205

 

6,326

 

Construction-in-progress

 

4,283

 

1,706

 

268

 

 

 

793,551

 

800,424

 

125,940

 

Less: Accumulated depreciation

 

(190,384

)

(210,363

)

(33,099

)

Total property, plant and equipment, net

 

603,167

 

590,061

 

92,841

 

 

Depreciation expense related to property, plant and equipment for the three months ended September 30, 2014 and 2015 was RMB12,146 and RMB11,420 (US$1,797), respectively. Depreciation expense related to property, plant and equipment for the six months ended September 30, 2014 and 2015 was RMB22,398 and RMB22,593 (US$3,554), respectively.

 

As of March 31, 2015, buildings with carrying value of RMB107,509 were collateralized for a short-term bank loan of RMB60,000 (Note 4).

 

10



 

4                                        Bank loan

 

On August 25, 2014, the Group borrowed RMB60,000 from Hangzhou Bank for one year. The loan bears a monthly fixed interest rate at 0.6%. The Group repaid the bank loan in full on August 24, 2015.

 

5                                        Convertible notes

 

On April 27 and October 3, 2012, the Company completed the sale of US$65,000 and US$50,000 in aggregate principal amount of 7% senior unsecured convertible notes to Brilliant China Healthcare Investment Limited (formerly known as KKR China Healthcare Investment Limited) (“BCHIL”) (the “KKR Notes”) and Golden Meditech Holdings Limited (“GMHL”) (the “GM Notes,” and collectively the “Notes”), respectively.

 

In November 2014, GMHL completed the sale of US$50,000 in aggregate principal amount of GM Notes to Magnum Opus International Holdings Limited (“Magnum”), a private vehicle that is controlled by the Company’s chairman, and Cordlife Group Limited (“CGL”), for a total consideration of US$88,090. As a result, the holders of the GM Notes became Magnum and CGL and each of them holds US$25,000 of the GM Notes. All terms and conditions of the GM Notes remained the same after the transfer from GMHL to Magnum and CGL, except for the change of the holder’s name on the GM Notes and the denomination of the GM Notes from US$50,000 to US$25,000.

 

In August 2015, BCHIL transferred the KKR Notes to Excellent China Healthcare Investment Limited (“ECHIL”). On the same day, Magnum Opus 2 International Holdings Limited (“MO2”), an entity wholly owned by the Company’s chairman, acquired all the issued and outstanding shares of ECHIL. The total purchase price of ECHIL’s issued and outstanding shares was US$161,784. As a result, MO2 indirectly holds the KKR Notes through its wholly owned subsidiary, ECHIL.

 

The carrying amounts of the Notes are summarized in the following table:

 

 

 

March 31,

 

September 30,

 

 

 

2015

 

2015

 

2015

 

 

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

Principal amount of the KKR Notes

 

400,175

 

416,298

 

65,502

 

Principal amount of the GM Notes

 

307,828

 

320,229

 

50,385

 

Cumulative interest payable

 

107,848

 

136,654

 

21,501

 

Carrying amount

 

815,851

 

873,181

 

137,388

 

 

11



 

The Company accrued interest on the Notes based on the guaranteed 12% internal rate of return per annum. The difference between the accrued interest rate of 12% and the coupon rate of 7% of the Notes is recorded in convertible notes in the unaudited condensed consolidated balance sheets. Debt issuance costs capitalized in connection with the issuance of the Notes are amortized from the date the Notes were issued to the earliest date the holders of the Notes can demand payment, which is five years.

 

Interest expense relating to the Notes is as follows:

 

 

 

Three months ended September 30,

 

Six months ended September 30,

 

 

 

2014

 

2015

 

2015

 

2014

 

2015

 

2015

 

 

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KKR Notes interest incurred

 

13,488

 

14,481

 

2,279

 

26,638

 

28,217

 

4,440

 

GM Notes interest incurred

 

9,843

 

10,540

 

1,658

 

19,587

 

20,696

 

3,256

 

Amortization of debt issuance costs

 

912

 

927

 

146

 

1,814

 

1,821

 

287

 

Total interest expense

 

24,243

 

25,948

 

4,083

 

48,039

 

50,734

 

7,983

 

 

6                                        Impairment loss on available-for-sale equity securities

 

The Group recorded an impairment loss on available-for-sale equity securities of RMB8,361 (US$1,316) in the three and six months ended September 30, 2015, which related to the Group’s investment in Life Corporation Limited (“LFC”). Having considered the extent of the decline in the fair value of the ordinary shares of LFC, the length of time to which the market value of the shares had been below cost, and the financial condition and near-term prospects of LFC, the management considered that the decline in value on the investment in LFC up to September 30, 2015 was other-than-temporary. As a result, an impairment loss of RMB8,361 (US$1,316) was recognized in earnings during the three months ended September 30, 2015.

 

7                                        Income tax

 

The Company’s PRC subsidiaries are subject to PRC statutory income tax rate of 25% unless otherwise specified.

 

In February 2012, Beijing Jiachenhong Biological Technologies Co., Ltd. (“Beijing Jiachenhong”) received approval from the tax authority on the renewal of its High and New Technology Enterprise (“HNTE”) status which entitled it to the preferential income tax rate of 15% effective retroactively from January 1, 2011 to December 31, 2013. In January 2015, Beijing Jiachenhong received approval from the tax authority on the renewal of its HNTE status which entitled it to the preferential income tax rate of 15% effective retroactively from January 1, 2014 to December 31, 2016.

 

12



 

In June 2011, Guangzhou Municipality Tianhe Nuoya Bio-engineering Co., Ltd. (“Guangzhou Nuoya”) received approval from the tax authority that it qualified as a HNTE which entitled it to the preferential income tax rate of 15% effective retrospectively from January 1, 2010 to December 31, 2012. In April 2014, Guangzhou Nuoya received approval from the tax authority on the renewal of its HNTE status which entitled it to the preferential income tax rate of 15% effective retroactively from January 1, 2013 to December 31, 2015.

 

The Enterprise Income Tax law and its implementation rules impose a withholding tax at 10%, unless reduced by a tax treaty or agreement, for dividends receivable by non-PRC-resident enterprises from PRC-resident enterprises in respect of earnings accumulated beginning on January 1, 2008. As of March 31 and September 30, 2015, the Company has provided RMB9,100 and RMB11,700 (US$1,841), respectively, for withholding income tax on a portion of the undistributed earnings of its PRC subsidiaries that are expected to be distributed. No income taxes were provided for the remaining undistributed earnings which are intended to be invested indefinitely in the PRC. As of September 30, 2015, such unremitted earnings that may be subject to the withholding tax amounted to RMB1,058,252 (US$166,507) and the related unrecognized deferred tax liability was RMB105,825 (US$16,651).

 

The Company’s effective income tax rates for the three months ended September 30, 2014 and 2015 were 27.3% and 40.3%, and were 28.0% and 46.1% for the six months ended September 30, 2014 and 2015, respectively. The effective income tax rates for the three and six months ended September 30, 2014 and 2015 differ from the PRC statutory income tax rate of 25% primarily due to the effect of withholding tax and the effect of non-PRC entities not being subject to income tax, which is offset by the effect of Beijing Jiachenhong and Guangzhou Nuoya’s preferential tax treatments.

 

As of and for the six months ended September 30, 2015, the Company did not have any material unrecognized tax benefits and thus no interest and penalties related to unrecognized tax benefits were recorded. In addition, the Company does not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.

 

13



 

8                                        Net income per share

 

The following table sets forth the computation of basic net income per share and diluted net income per share for the three and six months ended September 30, 2014 and 2015 respectively:

 

 

 

 

 

Three months ended September 30,

 

 

 

Note

 

2014

 

2015

 

2015

 

 

 

 

 

RMB

 

RMB

 

US$

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income attributable to the Company’s shareholders

 

 

 

27,249

 

18,723

 

2,946

 

Earnings allocated to participating convertible notes

 

(i)

 

(1,638

)

 

 

Net income for basic and diluted net income per share

 

 

 

25,611

 

18,723

 

2,946

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding for basic and diluted net income per share

 

 

 

73,003,248

 

73,003,248

 

73,003,248

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to ordinary shares:

 

 

 

 

 

 

 

 

 

- Basic

 

 

 

0.35

 

0.25

 

0.04

 

- Diluted

 

(ii)

 

0.35

 

0.25

 

0.04

 

 

 

 

 

 

Six months ended September 30,

 

 

 

Note

 

2014

 

2015

 

2015

 

 

 

 

 

RMB

 

RMB

 

US$

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income attributable to the Company’s shareholders

 

 

 

56,985

 

32,274

 

5,077

 

Earnings allocated to participating convertible notes

 

(i)

 

(4,246

)

 

 

Net income for basic and diluted net income per share

 

 

 

52,739

 

32,274

 

5,077

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding for basic and diluted net income per share

 

 

 

73,003,248

 

73,003,248

 

73,003,248

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to ordinary shares:

 

 

 

 

 

 

 

 

 

- Basic

 

 

 

0.72

 

0.44

 

0.07

 

- Diluted

 

(ii)

 

0.72

 

0.44

 

0.07

 

 

Notes:

 

(i)

The Notes provide each holder with the ability to participate in any excess cash dividend. 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% coupon interest rate in such financial year divided by the number of shares into which the Notes are convertible at the conversion price then in effect on the relevant record date. Therefore, net income attributable to the Company’s shareholders is reduced by such allocated earnings to participating convertible notes for each reporting period in both basic and diluted net income per share computation.

 

 

(ii)

During the three and six months ended September 30, 2014 and 2015, the Company had potentially dilutive ordinary shares of 40,521,495 respectively, representing shares issuable upon conversion of the Notes (Note 5). Such potentially dilutive ordinary shares were excluded from diluted net income per share computation because their effects would have been anti-dilutive.

 

14



 

9                                        Subsequent events

 

In October 2015, GMHL completed an open offer of the sale of its shares (the “Open Offer”) for the purpose of acquiring US$50,000 in principal amount of the Notes and 7,314,015 ordinary shares of the Company held by CGL (the “CGL Sale Shares”). The total proceeds from the Open Offer amounted to approximately HK$985,696 (before expenses in relation to the Open Offer). In October and November 2015, GMHL applied a portion of the net proceeds from the Open Offer for the purchase of US$25,000 in principal amount of the Notes and the CGL Sale Shares and the Company has been informed that GMHL currently intends to apply the remaining net proceeds to acquire the other US$25,000 in aggregate principal amount of the Notes.

 

In November 2015, GMHL and Nanjing Xinjiekou Department Store Co., Ltd. (“Nanjing Xinjiekou”) entered into a non-binding framework purchase agreement (the “MOU”). Pursuant to the MOU, Nanjing Xinjiekou proposed to (i) acquire from GMHL an aggregate of 47,835,509 ordinary shares of the Company (comprising ordinary shares to be issued upon conversion of all outstanding Notes and the CGL Sale Shares) and 30,681,266 ordinary shares of the Company currently held by GMHL, which in the aggregate would represent approximately 65.1% of the enlarged issued share capital of the Company (the “Minimum Company Shares”); and (ii) provide assistance, including possible financing, to GMHL in its proposed “going private” transaction involving the Company. The total consideration for the possible disposal of the Minimum Company Shares to Nanjing Xinjiekou by GMHL (the “Total Consideration”) is subject to further negotiation between GMHL and Nanjing Xinjiekou with reference to the valuation of the Minimum Company Shares, which is preliminarily expected to be not less than RMB7,255,000 (the “Expected Valuation”).

 

The Total Consideration is proposed to be settled by Nanjing Xinjiekou issuing its new shares (the “Settlement Shares”) representing an amount of not less than RMB4,000,000 and the remaining RMB3,255,000 of the Total Consideration being settled in cash, resulting in cash consideration of approximately RMB41.4 per Minimum Company Share (approximately US$6.5 per Minimum Company Share).

 

The proposed disposal of the Minimum Company Shares to Nanjing Xinjiekou and the agreement on the Expected Valuation by Nanjing Xinjiekou are conditional upon (i) Nanjing Xinjiekou acquiring the Minimum Sale Shares upon completion of the proposed “going private” transaction of the Company by GMHL; (ii) GMHL undertaking not to transfer the Settlement Shares for a period of 36 months; (iii) GMHL taking effective steps to ensure that the Company’s management does not resign in a 36 months’ period; and (iv) GMHL providing a conditional undertaking to Nanjing Xinjiekou with respect to the Company achieving certain profit targets in calendar years 2015, 2016 and 2017, including providing compensation to Nanjing Xinjiekou with respect to any profit shortfall.

 

15



 

The proposed disposal of the Minimum Company Shares to Nanjing Xinjiekou by GMHL and the agreement on the Expected Valuation by GMHL are conditional upon (i) Nanjing Xinjiekou providing financing to GMHL in respect of GMHL’s proposed “going private” transaction of the Company, if requested by GMHL and subject to agreement between the parties; (ii) neither the appraised value of the Minimum Company Shares nor the Total Consideration would be less than RMB7,255,000; (iii) the market value of the Settlement Shares at the relevant price determination date will not be less than RMB4,000,000 and RMB3,255,000 of the Total Consideration will be settled in cash; (iv) Nanjing Xinjiekou maintains its listing status on the Shanghai Stock Exchange; and (v) Nanjing Xinjiekou will not change the strategy or business model of the Company for a period of 36 months from the date of completion of the proposed disposal.

 

In addition to the Minimum Company Shares, Nanjing Xinjiekou has indicated that it also intends to acquire the remaining 34.9% of the Company’s ordinary shares owned by other shareholders of the Company. Nanjing Xinjiekou proposed a preliminary valuation of RMB1,745,000 for such shares, representing a valuation of approximately RMB41.4 per ordinary share (approximately US$6.5 per ordinary share).

 

The MOU is effective until May 2016 and GMHL has agreed not to enter into any discussions, negotiations or transactions with any party other than Nanjing Xinjiekou in relation to the sale or disposition of the Minimum Company Shares during the term of the MOU.

 

As of the date of this report, no decisions have been made with respect to the Company’s response to the non-binding proposals received from GMHL and Nanjing Xinjiekou in April 2015 and August 2015, respectively, and there cannot be any assurance as to when, if ever, or on what terms any potential transaction will be consummated.

 

16



 

Other Events

 

On November 23, 2015, the Company issued a press release announcing preliminary unaudited condensed consolidated financial results for the three months and six months ended September 30, 2015. A copy of the press release is attached as Exhibit 99.1.

 

Exhibits

 

Exhibit No.

 

Description

99.1 *

 

Press Release, dated November 23, 2015

101.INS XBRL

 

Instance Document

101.SCH XBRL

 

Taxonomy Extension Schema Document

101.CAL XBRL

 

Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL

 

Taxonomy Extension Definition Linkbase Document

101.LAB XBRL

 

Taxonomy Extension Label Linkbase Document

101.PRE XBRL

 

Taxonomy Extension Presentation Linkbase Document

 


* Previously filed

 

17



 

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: December 11, 2015

 

 

18