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
September 2019
Commission File Number: 001-38198
BEST Inc.
(Registrants name)
2nd Floor, Block A, Huaxing Modern Industry Park
No. 18 Tangmiao Road, Xihu District, Hangzhou
Zhejiang Province 310013
Peoples Republic of China
(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 |
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x |
Form 40-F |
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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
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, thereunto duly authorized.
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BEST Inc. | |
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By |
/s/ Shao-Ning Johnny Chou |
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Name: Shao-Ning Johnny Chou |
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Title: Chairman and Chief Executive Officer |
Date: September 11, 2019
EXHIBIT INDEX
Exhibit |
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No. |
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Description |
Exhibit 99.1 |
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Unaudited Interim Condensed Consolidated Financial Statements |
Exhibit 99.2 |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
Exhibit 99.3 |
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Press release: BEST Inc. Announces Proposed Offering of US$175 Million Convertible Senior Notes |
Exhibit 99.1
BEST INC.
INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Page |
Consolidated Balance Sheet as of December 31, 2018 and Unaudited Interim Condensed Consolidated Balance Sheet as of June 30, 2019 |
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F-2 |
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Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss for the Six Months Ended June 30, 2018 and 2019 |
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F-4 |
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Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2019 |
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F-5 |
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Notes to the Unaudited Interim Condensed Consolidated Financial Statements for the Six Months Ended June 30, 2018 and 2019 |
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F-7 |
BEST INC.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2018 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 2019
(Amounts in thousands of Renminbi (RMB) and U.S. dollars (US$),
except for number of shares and per share data)
|
|
|
|
As at |
| ||||
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Notes |
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December 31, |
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June 30, 2019 |
| ||
|
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RMB |
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RMB |
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US$ |
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|
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(unaudited) |
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ASSETS |
|
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|
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Current assets: |
|
|
|
|
|
|
|
|
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Cash and cash equivalents |
|
|
|
1,630,444 |
|
1,575,254 |
|
229,462 |
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Restricted cash |
|
|
|
1,278,326 |
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1,223,996 |
|
178,295 |
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Accounts and notes receivables, net of allowance of RMB25,105 and RMB44,305 (US$6,454) as of December 31, 2018 and June 30, 2019, respectively |
|
4 |
|
1,046,844 |
|
1,026,171 |
|
149,479 |
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Inventories |
|
|
|
151,031 |
|
175,294 |
|
25,534 |
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Prepayments and other current assets |
|
6 |
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1,904,846 |
|
1,999,878 |
|
291,315 |
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Short-term investments |
|
|
|
1,007,329 |
|
1,083,465 |
|
157,824 |
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Lease rental receivables |
|
8 |
|
613,439 |
|
715,180 |
|
104,178 |
|
Amounts due from related parties |
|
15 |
|
197,488 |
|
153,737 |
|
22,394 |
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Total current assets |
|
|
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7,829,747 |
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7,952,975 |
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1,158,481 |
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Non-current assets: |
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|
|
|
|
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|
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Property and equipment, net |
|
5 |
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2,064,657 |
|
2,410,140 |
|
351,076 |
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Intangible assets, net |
|
7 |
|
143,810 |
|
129,905 |
|
18,923 |
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Long-term investments |
|
|
|
214,339 |
|
214,203 |
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31,202 |
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Goodwill |
|
|
|
469,076 |
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469,076 |
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68,329 |
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Non-current deposits |
|
|
|
77,043 |
|
103,052 |
|
15,011 |
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Other non-current assets |
|
|
|
45,531 |
|
69,525 |
|
10,127 |
|
Lease rental receivables |
|
8 |
|
1,431,441 |
|
1,352,958 |
|
197,081 |
|
Restricted cash |
|
|
|
90,638 |
|
163,026 |
|
23,747 |
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Operating lease right-of-use assets |
|
8 |
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|
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4,036,752 |
|
588,019 |
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Total non-current assets |
|
|
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4,536,535 |
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8,948,637 |
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1,303,515 |
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Total assets |
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|
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12,366,282 |
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16,901,612 |
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2,461,996 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities (including current liabilities of the consolidated VIE and the Plan without recourse to the primary beneficiary of RMB4,357,649 and RMB5,093,636 as of (US$741,971) December 31, 2018 and June 30, 2019, respectively): |
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|
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|
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Short-term bank loans |
|
9 |
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1,782,900 |
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2,271,500 |
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330,881 |
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Accounts and notes payable |
|
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2,851,557 |
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2,849,868 |
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415,130 |
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Securitization debt |
|
11 |
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|
145,359 |
|
21,174 |
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Income tax payable |
|
|
|
5,767 |
|
4,969 |
|
724 |
|
Customer advances and deposits and deferred revenue |
|
|
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1,219,230 |
|
1,329,016 |
|
193,593 |
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Accrued expenses and other liabilities |
|
10 |
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2,238,785 |
|
2,016,272 |
|
293,703 |
|
Financing lease liabilities |
|
8 |
|
2,851 |
|
1,884 |
|
274 |
|
Operating lease liabilities |
|
8 |
|
|
|
776,510 |
|
113,111 |
|
Amounts due to related parties |
|
15 |
|
12,429 |
|
597 |
|
87 |
|
Total current liabilities |
|
|
|
8,113,519 |
|
9,395,975 |
|
1,368,677 |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
BEST INC.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2018 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and U.S. dollars (US$),
except for number of shares and per share data)
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As at |
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Notes |
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December 31, |
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June 30, 2019 |
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RMB |
|
RMB |
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US$ |
|
|
|
|
|
|
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(unaudited) |
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Non-current liabilities (including non-current liabilities of the consolidated VIE and the Plan without recourse to the primary beneficiary of RMB108,643 and RMB1,930,853 (US$281,260) as of December 31, 2018 and June 30, 2019, respectively): |
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Deferred tax liabilities |
|
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25,356 |
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23,843 |
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3,473 |
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Securitization debt |
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11 |
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67,272 |
|
9,799 |
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Financing lease liabilities |
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8 |
|
745 |
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2,095 |
|
305 |
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Operating lease liabilities |
|
8 |
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3,380,525 |
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492,429 |
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Other non-current liabilities |
|
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86,504 |
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91,032 |
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13,260 |
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Total non-current liabilities |
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112,605 |
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3,564,767 |
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519,266 |
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Total liabilities |
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8,226,124 |
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12,960,742 |
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1,887,943 |
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Commitments and contingencies |
|
18 |
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Shareholdersequity: |
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Class A ordinary shares (par value of US$0.01 per share as of December 31, 2018 and June 30, 2019; 1,858,134,053 shares authorized as of December 31, 2018 and June 30, 2019; 250,648,452 shares issued and outstanding as of December 31, 2018 and June 30, 2019, respectively) |
|
|
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16,532 |
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16,532 |
|
2,408 |
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|
|
|
|
|
|
|
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Class B ordinary shares (par value of US$0.01 per share as of December 31, 2018 and June 30, 2019; 94,075,249 shares authorized, issued and outstanding as of December 31, 2018 and June 30, 2019, respectively) |
|
|
|
6,178 |
|
6,178 |
|
900 |
|
|
|
|
|
|
|
|
|
|
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Class C ordinary shares (par value of US$0.01 per share as of December 31, 2018 and June 30, 2019; 47,790,698 shares authorized, issued and outstanding as of December 31, 2018 and June 30, 2019, respectively) |
|
|
|
3,278 |
|
3,278 |
|
478 |
|
|
|
|
|
|
|
|
|
|
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Additional paid in capital |
|
|
|
19,407,460 |
|
19,458,333 |
|
2,834,426 |
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Accumulated deficit |
|
|
|
(15,419,256 |
) |
(15,669,608 |
) |
(2,282,536 |
) |
Accumulated other comprehensive income |
|
19 |
|
123,923 |
|
126,299 |
|
18,398 |
|
BEST Inc. shareholdersequity |
|
|
|
4,138,115 |
|
3,941,012 |
|
574,074 |
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Non-controlling interests |
|
|
|
2,043 |
|
(142 |
) |
(21 |
) |
Total shareholders equity |
|
|
|
4,140,158 |
|
3,940,870 |
|
574,053 |
|
Total liabilities and shareholders equity |
|
|
|
12,366,282 |
|
16,901,612 |
|
2,461,996 |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
BEST INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019
(Amounts in thousands of Renminbi (RMB) and U.S. dollars (US$),
except for number of shares and per share data)
|
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|
|
Six months ended June 30, |
| ||||
|
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Notes |
|
2018 |
|
2019 |
|
2019 |
|
|
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Revenue from third parties |
|
|
|
|
|
|
|
|
|
Express delivery |
|
|
|
7,333,331 |
|
9,605,261 |
|
1,399,164 |
|
Freight delivery |
|
|
|
1,792,697 |
|
2,293,715 |
|
334,117 |
|
Supply chain management |
|
|
|
694,176 |
|
884,849 |
|
128,893 |
|
Store+ |
|
|
|
1,343,918 |
|
1,344,080 |
|
195,787 |
|
Others |
|
|
|
300,490 |
|
1,182,622 |
|
172,268 |
|
|
|
|
|
11,464,612 |
|
15,310,527 |
|
2,230,229 |
|
Revenue from related party |
|
|
|
|
|
|
|
|
|
Supply chain management |
|
15 |
|
202,853 |
|
247,605 |
|
36,068 |
|
Express delivery |
|
15 |
|
68,630 |
|
104,572 |
|
15,233 |
|
|
|
|
|
271,483 |
|
352,177 |
|
51,301 |
|
Total revenue |
|
|
|
11,736,095 |
|
15,662,704 |
|
2,281,530 |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
|
|
|
|
|
|
|
Express delivery |
|
|
|
(7,143,725 |
) |
(9,338,694 |
) |
(1,360,334 |
) |
Freight delivery |
|
|
|
(1,755,874 |
) |
(2,177,011 |
) |
(317,117 |
) |
Supply chain management |
|
|
|
(838,976 |
) |
(1,059,832 |
) |
(154,382 |
) |
Store+ |
|
|
|
(1,224,656 |
) |
(1,190,942 |
) |
(173,480 |
) |
Others |
|
|
|
(245,704 |
) |
(1,083,452 |
) |
(157,823 |
) |
Total cost of revenue |
|
|
|
(11,208,935 |
) |
(14,849,931 |
) |
(2,163,136 |
) |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
527,160 |
|
812,773 |
|
118,394 |
|
Selling expenses |
|
|
|
(420,094 |
) |
(406,489 |
) |
(59,212 |
) |
General and administrative expenses |
|
|
|
(482,397 |
) |
(588,246 |
) |
(85,688 |
) |
Research and development expenses |
|
|
|
(83,514 |
) |
(116,536 |
) |
(16,975 |
) |
Total operating expenses |
|
|
|
(986,005 |
) |
(1,111,271 |
) |
(161,875 |
) |
Loss from operations |
|
|
|
(458,845 |
) |
(298,498 |
) |
(43,481 |
) |
Interest income |
|
|
|
48,690 |
|
50,049 |
|
7,290 |
|
Interest expense |
|
|
|
(34,799 |
) |
(40,744 |
) |
(5,935 |
) |
Foreign exchange loss |
|
|
|
(7,232 |
) |
(4,066 |
) |
(592 |
) |
Other income |
|
|
|
31,422 |
|
53,635 |
|
7,813 |
|
Other expense |
|
|
|
(8,296 |
) |
(7,920 |
) |
(1,154 |
) |
Loss before income tax and share of net loss of equity investees |
|
|
|
(429,060 |
) |
(247,544 |
) |
(36,059 |
) |
Income tax expense |
|
|
|
(4,000 |
) |
(8,102 |
) |
(1,180 |
) |
Loss before share of net loss of equity investees |
|
|
|
(433,060 |
) |
(255,646 |
) |
(37,239 |
) |
Share of net loss of equity investees |
|
|
|
(290 |
) |
(136 |
) |
(20 |
) |
Net loss |
|
|
|
(433,350 |
) |
(255,782 |
) |
(37,259 |
) |
Net loss attributable to non-controlling interests |
|
|
|
|
|
(5,430 |
) |
(791 |
) |
Net loss attributable to BEST Inc. |
|
|
|
(433,350 |
) |
(250,352 |
) |
(36,468 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
Basic: |
|
14 |
|
(1.14 |
) |
(0.65 |
) |
(0.09 |
) |
Diluted: |
|
14 |
|
(1.14 |
) |
(0.65 |
) |
(0.09 |
) |
Shares used in net loss per share computation: |
|
|
|
|
|
|
|
|
|
Class A ordinary shares |
|
|
|
|
|
|
|
|
|
Basic: |
|
14 |
|
239,699,919 |
|
246,067,755 |
|
|
|
Diluted: |
|
14 |
|
381,565,866 |
|
387,933,702 |
|
|
|
Class B ordinary shares |
|
|
|
|
|
|
|
|
|
Basic: |
|
14 |
|
94,075,249 |
|
94,075,249 |
|
|
|
Diluted: |
|
14 |
|
94,075,249 |
|
94,075,249 |
|
|
|
Class C ordinary shares |
|
|
|
|
|
|
|
|
|
Basic: |
|
14 |
|
47,790,698 |
|
47,790,698 |
|
|
|
Diluted: |
|
14 |
|
47,790,698 |
|
47,790,698 |
|
|
|
Other comprehensive income, net of tax of nil |
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
|
9,278 |
|
2,376 |
|
346 |
|
Comprehensive loss |
|
|
|
(424,072 |
) |
(253,406 |
) |
(36,913 |
) |
Comprehensive loss attributable to non-controlling interests |
|
|
|
|
|
(5,430 |
) |
(791 |
) |
Comprehensive loss attributable to BEST Inc. |
|
|
|
(424,072 |
) |
(247,976 |
) |
(36,122 |
) |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
BEST INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019
(Amounts in thousands of Renminbi (RMB) and U.S. dollars (US$))
|
|
|
|
Six months ended June 30, |
| ||||
|
|
Notes |
|
2018 |
|
2019 |
|
2019 |
|
|
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
(433,350 |
) |
(255,782 |
) |
(37,259 |
) |
Adjustments to reconcile net loss to net cash (used in)/generated from operating activities: |
|
|
|
|
|
|
|
|
|
Share of net loss of equity investees |
|
|
|
290 |
|
136 |
|
20 |
|
Deferred income tax |
|
|
|
(1,552 |
) |
(1,513 |
) |
(220 |
) |
Depreciation and amortization |
|
|
|
216,907 |
|
277,825 |
|
40,470 |
|
Allowance for doubtful accounts and inventory provision |
|
|
|
30,407 |
|
42,668 |
|
6,215 |
|
Share-based compensation |
|
20 |
|
56,742 |
|
48,255 |
|
7,029 |
|
Loss on disposal of property and equipment |
|
|
|
2,114 |
|
318 |
|
46 |
|
Foreign exchange loss |
|
|
|
7,232 |
|
4,066 |
|
592 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
|
(109,233 |
) |
(19,887 |
) |
(2,897 |
) |
Prepayment and other current assets |
|
|
|
(130,997 |
) |
(17,339 |
) |
(2,526 |
) |
Inventories |
|
|
|
(23,760 |
) |
(23,061 |
) |
(3,359 |
) |
Customer advances and deposits and deferred revenue |
|
|
|
155,584 |
|
109,786 |
|
15,992 |
|
Accounts and notes payable |
|
|
|
20,473 |
|
48,279 |
|
7,033 |
|
Accrued expenses and other liabilities |
|
|
|
(17,692 |
) |
(210,897 |
) |
(30,721 |
) |
Amounts due from related parties |
|
|
|
47,669 |
|
43,751 |
|
6,373 |
|
Other non-current assets |
|
|
|
(2,429 |
) |
(4,085 |
) |
(595 |
) |
Amounts due to related parties |
|
|
|
(2,391 |
) |
(11,832 |
) |
(1,724 |
) |
Non-current deposits |
|
|
|
994 |
|
(26,009 |
) |
(3,789 |
) |
Other non-current liabilities |
|
|
|
3,799 |
|
4,528 |
|
660 |
|
Right-of-use assets |
|
|
|
|
|
(439,713 |
) |
(64,051 |
) |
Operating lease liabilities |
|
|
|
|
|
559,996 |
|
81,573 |
|
Income tax payable |
|
|
|
1,099 |
|
(798 |
) |
(116 |
) |
Net cash (used in)/generated from operating activities |
|
|
|
(178,094 |
) |
128,692 |
|
18,746 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
|
(381,221 |
) |
(585,714 |
) |
(85,319 |
) |
Purchase of leased equipment |
|
|
|
(425,096 |
) |
(397,967 |
) |
(57,970 |
) |
Receipt of repayment of financing leasesprincipal portion |
|
|
|
93,438 |
|
313,253 |
|
45,630 |
|
Disposal of property and equipment and intangible assets |
|
|
|
32,940 |
|
14,890 |
|
2,169 |
|
Cash paid for business acquisitions, net of cash acquired |
|
|
|
(45,651 |
) |
(30,762 |
) |
(4,480 |
) |
Acquisition of intangible assets |
|
|
|
(681 |
) |
(1,432 |
) |
(209 |
) |
Acquisition of long-term investments |
|
|
|
(108,000 |
) |
|
|
|
|
Purchase of short-term investments |
|
|
|
(2,133,096 |
) |
(1,281,446 |
) |
(186,664 |
) |
Proceeds from maturities of short-term investments |
|
|
|
3,288,690 |
|
1,203,690 |
|
175,337 |
|
Other investing activities, net |
|
|
|
(54,609 |
) |
(61,763 |
) |
(8,997 |
) |
Net cash generated from/(used in) investing activities |
|
|
|
266,714 |
|
(827,251 |
) |
(120,503 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Proceeds from short-term bank loans |
|
|
|
1,744,800 |
|
1,571,500 |
|
228,915 |
|
Repayment of short-term bank loans |
|
|
|
(1,654,348 |
) |
(1,132,900 |
) |
(165,025 |
) |
Proceeds from issuance of asset-backed securities, net of issuance costs |
|
|
|
|
|
218,375 |
|
31,810 |
|
Payment of deferred initial public offering costs |
|
|
|
(9,836 |
) |
|
|
|
|
Proceeds from other financing activities |
|
|
|
|
|
887 |
|
128 |
|
Principal repayments of financing lease liabilites |
|
|
|
(3,134 |
) |
(504 |
) |
(73 |
) |
Proceeds from the exercise of share options |
|
|
|
2,070 |
|
894 |
|
130 |
|
Contributions from a subsidiarys non-controlling interest shareholders |
|
|
|
|
|
3,245 |
|
473 |
|
Net cash generated from financing activities |
|
|
|
79,552 |
|
661,497 |
|
96,358 |
|
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash, cash equivalents and restricted cash |
|
|
|
1,262 |
|
(70 |
) |
(10 |
) |
Net increase/(decrease) in cash, cash equivalents and restricted cash |
|
|
|
169,434 |
|
(37,132 |
) |
(5,409 |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
2,982,829 |
|
2,999,408 |
|
436,913 |
|
Cash, cash equivalents and restricted cash at end of period |
|
|
|
3,152,263 |
|
2,962,276 |
|
431,504 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
BEST INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and U.S. dollars (US$))
Reconciliation of cash, cash equivalents and restricted cash:
|
|
As at |
| ||||
|
|
June 30, 2018 |
|
June 30, 2019 |
| ||
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
Cash and cash equivalents |
|
1,770,238 |
|
1,575,254 |
|
229,462 |
|
Restricted cash current |
|
1,314,505 |
|
1,223,996 |
|
178,295 |
|
Restricted cash non-current |
|
67,520 |
|
163,026 |
|
23,747 |
|
Total cash, cash equivalents and restricted cash shown in the statement of cash flows |
|
3,152,263 |
|
2,962,276 |
|
431,504 |
|
|
|
Six months ended June 30, |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
Interest expense paid |
|
35,639 |
|
40,418 |
|
5,888 |
|
Income taxes paid |
|
2,901 |
|
10,413 |
|
1,517 |
|
Supplemental disclosures of non-cash information: |
|
|
|
|
|
|
|
Purchase of property and equipment included in accrued expenses and other liabilities |
|
183,278 |
|
289,730 |
|
42,204 |
|
Acquisition of property and equipment through financing leases |
|
5,921 |
|
3,979 |
|
580 |
|
Proceeds from disposal of property and equipment included in prepayment and other current assets |
|
|
|
1,658 |
|
242 |
|
Purchase consideration for business acquisitions include in accrued expenses and other liabilities. |
|
3,270 |
|
1,482 |
|
216 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
1. ORGANIZATION
The Company is a limited liability company incorporated in the Cayman Islands on March 3, 2008.
The Company does not conduct any substantive operations on its own but instead conducts its primary business operations through its subsidiaries, variable interest entity (the VIE) and its subsidiaries, which are mainly located in the Peoples Republic of China (the PRC). The accompanying unaudited interim condensed consolidated financial statements include the financial statements of the Company, its subsidiaries, VIE and its subsidiaries. The Company, its subsidiaries, VIE and its subsidiaries are hereinafter collectively referred to as the Group.
The Group is principally engaged in the business of providing express delivery services, freight delivery services, supply chain management services, store+ services and other value-added services. The Groups principal geographic market is in the PRC.
Details of the Companys principal subsidiaries and VIE as of June 30, 2019 are as follows:
Name of Company |
|
Place and date of |
|
Percentage of |
|
Principal activities |
|
Subsidiaries: |
|
|
|
|
|
|
|
Eight Hundred Logistics Technologies Corporation (BEST BVI) |
|
BVI/ May 22, 2007 |
|
100 |
% |
Investment holding |
|
BEST Logistics Technologies Limited (BEST HK) |
|
HK/ May 29, 2007 |
|
100 |
% |
Investment holding |
|
BEST Capital Inc. (BEST Capital) |
|
Cayman Islands/ December 13, 2017 |
|
100 |
% |
Investment holding |
|
BEST Capital Holding Limited (BEST Capital BVI) |
|
BVI/ December 13, 2017 |
|
100 |
% |
Investment holding |
|
BEST Capital Management Limited (BEST Capital HK) |
|
HK/ December 20, 2017 |
|
100 |
% |
Investment holding |
|
BEST Logistics Technologies (China) Co., Ltd. (BEST China) |
|
PRC/ April 23, 2008 |
|
100 |
% |
Freight delivery and Supply chain management services |
|
BEST Store Network (Hangzhou) Co., Ltd. (BEST Store) |
|
PRC/ May 16, 2013 |
|
100 |
% |
Store+ services |
|
Zhejiang BEST Technology Co., Ltd. (BEST Technology) |
|
PRC/ July 26, 2007 |
|
100 |
% |
Logistics technical services |
|
Xinyuan Financial Leasing (Zhejiang) Co., Ltd. (BEST Finance) |
|
PRC/ January 15, 2015 |
|
100 |
% |
Financial services |
|
BEST Logistics Technologies (Ningbo Free Trade Zone) Co., Ltd. (BEST Ningbo) |
|
PRC/ May 22, 2015 |
|
100 |
% |
Supply chain management services |
|
VIE |
|
|
|
|
|
|
|
Hangzhou BEST Network Technologies Co., Ltd. (BEST Network) |
|
PRC August 22, 2007 |
|
Nil |
|
Express delivery services |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
1. ORGANIZATION (CONTINUED)
The carrying amounts of the assets, liabilities and the results of operations of the VIE and its subsidiaries included in the Companys consolidated balance sheets and statements of comprehensive loss are as follows:
|
|
As at |
| ||||
|
|
December 31, 2018 |
|
June 30, 2019 |
| ||
|
|
RMB |
|
RMB |
|
US$ |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
251,531 |
|
498,378 |
|
72,597 |
|
Restricted cash |
|
46,506 |
|
100,039 |
|
14,572 |
|
Accounts receivable, net |
|
215,070 |
|
97,195 |
|
14,158 |
|
Inventories |
|
79,896 |
|
81,946 |
|
11,937 |
|
Short-term investments |
|
135,019 |
|
154,754 |
|
22,542 |
|
Prepayment and other current assets |
|
995,505 |
|
1,066,312 |
|
155,326 |
|
Amounts due from related parties |
|
79,867 |
|
56,709 |
|
8,261 |
|
Total current assets |
|
1,803,394 |
|
2,055,333 |
|
299,393 |
|
Non-current assets: |
|
|
|
|
|
|
|
Property and equipment, net |
|
1,418,007 |
|
1,803,550 |
|
262,717 |
|
Intangible assets, net |
|
111,409 |
|
106,184 |
|
15,467 |
|
Goodwill |
|
430,763 |
|
430,763 |
|
62,748 |
|
Restricted cash |
|
16,455 |
|
33,779 |
|
4,920 |
|
Other non-current assets |
|
12,741 |
|
37,573 |
|
5,473 |
|
Operating lease right-of-use assets |
|
|
|
2,102,855 |
|
306,315 |
|
Total non-current assets |
|
1,989,375 |
|
4,514,704 |
|
657,640 |
|
Total assets |
|
3,792,769 |
|
6,570,037 |
|
957,033 |
|
LIABILITIES |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Short-term bank loans |
|
735,000 |
|
579,000 |
|
84,341 |
|
Accounts and notes payable |
|
1,399,578 |
|
1,665,246 |
|
242,570 |
|
Income tax payable |
|
275 |
|
|
|
|
|
Customer advances and deposits and deferred revenue |
|
989,880 |
|
1,079,727 |
|
157,280 |
|
Accrued expenses and other liabilities |
|
1,232,916 |
|
1,254,505 |
|
182,739 |
|
Operating lease liabilities |
|
|
|
365,158 |
|
53,191 |
|
Amounts due to related parties |
|
1,640,124 |
|
2,080,766 |
|
303,098 |
|
Total current liabilities |
|
5,997,773 |
|
7,024,402 |
|
1,023,219 |
|
Operating lease liabilities |
|
|
|
1,750,379 |
|
254,971 |
|
Deferred tax liabilities |
|
26,817 |
|
25,851 |
|
3,766 |
|
Other non-current liabilities |
|
81,826 |
|
85,623 |
|
12,472 |
|
Total non-current liabilities |
|
108,643 |
|
1,861,853 |
|
271,209 |
|
Total liabilities |
|
6,106,416 |
|
8,886,255 |
|
1,294,428 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
1. ORGANIZATION (CONTINUED)
The revenue-producing assets that are held by the VIE and its subsidiaries comprise mainly of machinery and electronic equipment, express delivery software the courier service operation permit, the ICP license, the road transportation operation permit, and domain name. The VIE and its subsidiaries contributed an aggregate of 66% and 65% of the Groups consolidated revenue for the six months ended June 30, 2018 and 2019, respectively, after elimination of inter-company transactions. As of June 30, 2019, there was no pledge or collateralization of the VIE and its subsidiaries assets that can only be used to settled obligations of the VIE and its subsidiaries.
Other than the amounts due to related parties (which are eliminated upon consolidation) all remaining liabilities of the VIE and its subsidiaries are without recourse to the primary beneficiary. The Company did not provide or intend to provide financial or other support not previously contractually required to the VIE and its subsidiaries during the periods presented.
|
|
Six months ended |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Total revenue |
|
7,753,549 |
|
10,152,503 |
|
1,478,879 |
|
Net loss |
|
(63,576 |
) |
(8,181 |
) |
(1,192 |
) |
Net cash generated from operating activities |
|
263,111 |
|
707,991 |
|
103,131 |
|
Net cash used in investing activities |
|
(196,090 |
) |
(543,408 |
) |
(79,156 |
) |
Net cash generated from financing activities |
|
117,501 |
|
153,121 |
|
22,305 |
|
The VIE as of December 31, 2018 are BEST Network and its subsidiaries, Sichuan Wowo Supermarket Chain Co., Ltd. (Sichuan Wowo) and Shanxi Wowo Supermarket Chain Co., Ltd. (Shanxi Wowo) (collectively WOWO). The principal activities of WOWO are convenience store operations.
In June 2019, BEST Finance transferred certain lease rental receivables to a securitization vehicle through Xinyuan Leasing Asset Backed Special Plan (the Plan). The Group acts as the servicer of the Plan by providing payment collection services for the underlying lease rental receivables and holds significant variable interests in the Plan through holding the subordinated tranche of asset-backed debt securities and the guarantee provided, from which the Group has the obligation to absorb losses of the Plan that could potentially be significant to the Plan. Accordingly, the Group is considered the primary beneficiary of the Plan and has consolidated the Plans assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
1. ORGANIZATION (CONTINUED)
The tables sets forth the assets, liabilities and cash flows of the consolidated Plan included in the Groups consolidated balance sheet:
|
|
As at December 31, |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Amounts due from related parties |
|
|
|
450,000 |
|
65,550 |
|
Total current assets |
|
|
|
450,000 |
|
65,550 |
|
Restricted cash |
|
|
|
40,000 |
|
5,827 |
|
Amounts due from related parties |
|
|
|
210,000 |
|
30,590 |
|
Total non-current assets |
|
|
|
250,000 |
|
36,417 |
|
|
|
|
|
|
|
|
|
Securitization debt |
|
|
|
150,000 |
|
21,850 |
|
Amounts due to related parties |
|
|
|
300,000 |
|
43,700 |
|
Total current liabilities |
|
|
|
450,000 |
|
65,550 |
|
Securitization debt |
|
|
|
69,000 |
|
10,051 |
|
Amounts due to related parties |
|
|
|
181,000 |
|
26,366 |
|
Total non-current liabilities |
|
|
|
250,000 |
|
36,417 |
|
|
|
Six months ended |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Net cash used in operating activities |
|
|
|
(660,000 |
) |
(96,140 |
) |
Net cash used in investing activities |
|
|
|
|
|
|
|
Net cash generated from financing activities |
|
|
|
700,000 |
|
101,966 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP)
Principles of Consolidation
The unaudited interim condensed consolidated financial statements of the Group include the financial statements of the Company, its subsidiaries, the VIE and its subsidiaries for which the Company is the primary beneficiary. All significant intercompany balances and transactions between the Company, its subsidiaries, the VIE and its subsidiaries have been eliminated on consolidation.
Unaudited Interim Condensed Consolidated Financial Statements
In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position, operating results and cash flows of the Group for each of the periods presented. Interim period results are not necessarily indicative of results of operations or cash flows for a full-year period. The consolidated balance sheet data as of December 31, 2018 was derived from the audited consolidated financial statements at that date but does not include all of the disclosures required by U.S. GAAP for annual financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Groups consolidated financial statements for the year ended December 31, 2018.
The Groups business is affected by seasonality. The Group generally generates more revenue from express delivery services and supply chain management services during Singles Day and Double 12 events in the fourth quarter of each year due to the increase in end consumer purchases that trigger a corresponding increase in parcel delivery volumes. In addition, due to the Chinese New Year holiday, the Group has historically generated lower revenues from all its service segments in the first quarter of each year.
Restricted cash
The Groups restricted cash mainly represents (a) deposits held in designated bank accounts for issuance of notes payable and short term loans; (b) security deposits as required by the Groups sortation centers and warehouses; and (c) deposits held in a designated bank account of the Plan which can only be utilized for repayment of the Series A and B tranches when there is default of the underlying lease rental receivables (Note 1). As of December 31, 2018 and June 30, 2019, the restricted cash related to the deposits held in designated bank accounts as pledged security of notes payable was RMB34,979 and RMB101,267 (US$14,751), respectively. The restricted cash related to deposits held in designated bank accounts as pledged security of short term loans are disclosed in Note 9.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in the Groups financial statements include, but are not limited to, allowance for doubtful accounts, fair value measurements of equity instruments with no readily determinable fair value, incremental borrowing rates for lease liabilities, standalone selling price related to lease and non-lease components in the lease arrangement, useful lives of long-lived assets, the purchase price allocation with respect to business combinations, impairment of long-lived assets and goodwill, realization of deferred tax assets, uncertain tax positions and share based compensation. Management bases the estimates on historical experience and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could materially differ from those estimates.
Convenience translation
Amounts in U.S. dollars are presented for the convenience of the reader and are translated at the noon buying rate of 6.8650 per US$1.00 on June 28, 2019, the last business day in June 2019, in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.
Revenue recognition
Revenue is recognized when control of promised goods or services is transferred to the Groups customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. The Group presents value-added taxes as a reduction from revenues. The Group does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Group recognizes revenue at the amount to which it has the right to invoice for services performed.
The Groups revenue recognition policies are as follows:
Express delivery services
The Group provides express services that comprise of sorting, line-haul and feeder transportation services to its franchisee service stations, which are also the Groups customers, when parcels (under 15 kg) are dropped off by the Groups franchisee service station customers at the Groups first hub or sortation center.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (Continued)
The Group offers an integrated service to the franchised service stations that includes last-mile delivery service to end recipients and acts as the principal that is directly responsible for all parcels sent through its network, from the point when customers drop off the parcels at the Groups first hub or sortation center all the way through to the point when the parcels are delivered to end recipients.
Customers are required to prepay for express delivery services and the Group records such amounts as customer advances and deposits and deferred revenue in the consolidated balance sheets. The transaction price the Group earns from its customers are based on the parcels weight and route to the end recipients destination. In addition, the Group provides certain discounts, incentives and rebates based on explicitly agreed upon terms with its customers that can decrease the transaction price and estimates variable consideration based on the most likely amount to be provided. The amount of variable consideration included in the transaction price is limited to the amount that will not result in a significant revenue reversal. The Group reviews the estimate of variable consideration and updates the transaction price at the end of each reporting period as necessary. Uncertainties related to the estimates of variable consideration are resolved in a short time frame. Adjustments to variable consideration are recognized in the period the adjustments are identified and were insignificant for the periods presented.
The Groups express delivery services contracts with customers include only one performance obligation. Performance obligations are generally short-term in nature and with transit days being a week or less for each parcel. The Group recognizes revenue over time as customers receive the benefit of the Groups services as the goods are delivered from one location to another. As such, express delivery services revenue is recognized proportionally as a parcel moves from origin to destination and the related costs are recognized as incurred. The Group uses an output method of progress based on time-in-transit as it best depicts the transfer of control to the customer.
A minor percentage of the Groups express delivery services are performed by its self-operated service stations for direct customers (direct customer express delivery services), who are the senders of the parcels. The Group is directly responsible for the parcel from the point it is received from the senders all the way through the point when the parcels are delivered to end recipients. Direct customer express delivery services revenue is recognized proportionally as parcels are transported to end recipients and the related costs are recognized as incurred.
Express delivery services revenue also includes initial non-refundable franchise fees. The initial non-refundable franchise fees are recognized over the franchise period due to the franchisees rights to access the Groups logos and brand names which are considered symbolic intellectual properties. The initial non-refundable franchise fees are negotiated under a separate agreement and represent a very small percentage of revenue for all periods presented.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (Continued)
Freight delivery services
Similar to express delivery services, the Group provides freight services that comprise of sorting, line-haul and feeder transportation services mainly to its franchisees, which are also the Groups customers. The Group offers an integrated service to franchisee service stations that includes last-mile delivery service to end recipients and acts as the principal that is directly responsible for all shipments sent through its network, from the point when customers drop off the shipments at the Groups first hub or sortation center all the way through to the point when the shipments are delivered to end recipients.
Customers are required to prepay for freight delivery services and the Group records such amounts as customer advances and deposits and deferred revenue in the consolidated balance sheets. The transaction price the Group earns from its customers are based on the shipments weight and route to the end recipients destination.
The Groups freight delivery services contracts with customers include only one performance obligation. Performance obligations are generally short-term in nature with transit days being a week or less for each shipment. The Group recognizes revenue over time as customers receive the benefit of the Groups services as the goods are shipped from one location to another. As such, freight delivery services revenue is recognized proportionally as a shipment moves from origin to destination and the related costs are recognized as incurred. The Group uses an output method of progress based on time-in-transit as it best depicts the transfer of control to the customer.
Freight delivery services revenue also includes initial non-refundable franchise fees. The initial non-refundable franchise fees are recognized over the franchise period due to the franchisees rights to access the Groups logos and brand names which are considered symbolic intellectual properties. The initial non-refundable franchise fees are negotiated under a separate agreement and represent a very small percentage of revenue for all periods presented.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (Continued)
Supply chain management services
The Group provide warehouse management, order fulfillment services and transportation services to its offline and online enterprise customers (enterprise customers). The Group enters into supply chain warehouse management service agreements with these customers to provide warehouse management and order fulfillment services through its self-operated order fulfillment centers and also enters into transportation services agreements to provide transportation services. The majority of the these contracts having an effective term of one year. Order fulfillment services revenue is generated from various service fees charged on a volume basis in connection with various order fulfillment services, which may include in-warehouse processing, order fulfillment, express delivery, freight delivery and other value-added services. Pursuant to the warehouse management service agreements and transportation services agreements, enterprise customers have the right to terminate the contracts by providing a one-month advance notice. Therefore, even though the contract term for the majority of the contracts is one year, due to the termination rights provided to enterprise customers, warehouse management service agreements and transportation services agreements are considered month-to-month service contracts. Enterprise customers are billed on a monthly basis and make payments according to their granted credit terms which ranges from 5 to 120 days.
Under some situations, enterprise customers may request to add a transportation route or increase the warehouse rental space by entering into a separate contract with the Group. The additional services are considered distinct and the service fees are priced at their standalone selling prices, i.e. they cannot be purchased at a significant or incremental discount. Therefore, the Group accounts for this type of contract modification as a separate contract and the revenue recognized to date on the original contract is not adjusted.
The warehouse management service agreements comprise various service offerings that can be purchased at the option of the customer. Although the service options are interrelated, none of the services modify the other services and they are not integrated to provide a combined output. Each of the service options is substantive and the enterprise customers cannot purchase each additional service at a significant and incremental discount. Therefore, each service is accounted for as a separate performance obligation. The Group is the primary obligor and does not outsource any portion of the order fulfillment services to supply chain franchisee partners. The Group recognizes warehouse management and order fulfillment services revenue upon completion of the services as that is when the Group transfers control of the services and has right to payment.
For transportation services, the Group provides the service of arranging transportation and coordinating shipments to and from locations designated by its enterprise customers. Each transportation order for delivery of goods from origin to destination is considered a performance obligation. Performance obligations are generally short-term in nature with transit days being a week or less for each shipment. The Group recognizes transportation services revenue over time as customers receive the benefit of the services as the goods are shipped from origin to destination. As such, transportation services revenue is recognized proportionally as a shipment moves from origin to destination and the related costs are recognized as incurred. The Group use an output method of progress based on time-in-transit as it best depicts the transfer of control to the customer.
A small percentage of revenue is also earned from supply chain franchisee partners that can access the Groups supply chain network. These franchisee partners pay an initial non-refundable fee for a comprehensive operating manual and orientation training, as well as an agreed system usage fee for each order processed through the Groups supply chain network. The initial non-refundable fees and system usage fees were insignificant for all periods presented.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (Continued)
Store+ services
The Group recognizes revenue upon the delivery of the consumer goods to its convenience store membership customers. For the Groups self-operated convenience stores, revenue recognized upon the sales of merchandise to end consumers. The Group is the principal to the transaction for the sales of customer goods and merchandise and revenue from these transactions are recognized on a gross basis. Transfer of control occurs at a point in time once delivery has been completed as the Group has transferred control of the promised goods to the customer. Generally, customers are billed upon delivery of the consumer goods while convenience store customers make payment upon checkout of merchandise.
Other services
The Group mainly provides cross-border logistic coordination services, finance leasing services and Ucargo transportation services. For cross-border logistic coordination services, the Group recognize revenue upon completion of the services. Revenue from interest income on sales-type and financing leases is recognized using the effective interest rate method. Ucargo transportation services revenue is recognized proportionally as a shipment moves from origin to destination using an output method of progress based on time-in-transit while the related costs are recognized as incurred. The Group is the principal to the transaction for these services and revenue from these transactions is recognized on a gross basis.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (Continued)
Contract assets and liabilities
The Group enters into contracts with its customers, which may give rise to contract liabilities (deferred revenue) and contract assets (unbilled revenue). The payment terms and conditions within the Groups contracts vary by the type of service and customers. When the timing of revenue recognition differs from the timing of payments made by customers, the Group recognizes either unbilled revenue (its performance precedes the billing date) or deferred revenue (customer payment is received in advance of performance).
Contract assets represent unbilled amounts resulting from provision of transportation services as the Group has an unconditional right to payment only once all delivered goods reach their destination. Contract assets are classified as current and the full balance is reclassified to accounts receivables when the right to payment becomes unconditional. As of December, 31, 2018 and June 30, 2019, the balance of contract assets was insignificant.
Contract liabilities are included in customer advances and deposits and deferred revenue in the accompanying consolidated balance sheet. Contract liabilities represent the amount of consideration received upfront from customers related to in-transit shipments that has not yet been recognized as revenue based on our selected measure of progress and non-refundable franchise fees which are recognized over the franchise period. The Group classifies contract liabilities as current based on the timing of when the Group expects to recognize revenue, which typically occurs within a week after period-end.
The opening and closing balances of contract liabilities arising from contracts with customers as of June 30, 2019 were as follows:
|
|
Balance at |
|
Balance at |
|
Balance at |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
|
|
|
|
Contract liabilities |
|
639,912 |
|
1,321,075 |
|
192,436 |
|
Revenue recognized for the six months ended June 30, 2019 that was included in the contract liability balance at the beginning of the period was RMB586,368 (US$85,414). This revenue was driven primarily by express and freight delivery performance obligations being satisfied.
For contract costs associated with obtaining a contract, the Group capitalized the incremental contract cost such as commissions incurred in connection with obtaining a contract and amortizes the capitalized contract costs using a straight line basis over the term of the contract. The capitalized contract costs as of December 31, 2018 and June 30, 2019 and the related amortization for all periods presented was insignificant.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfer of financial assets
The Group accounts for transfers of financial assets in accordance with ASC 860, Transfers and Servicing (ASC 860). For a transfer of financial assets considered as a sale, the assets would be removed from the Groups consolidated balance sheets. If the conditions for a sale required by ASC 860 are not met, the transfer is considered to be a secured borrowing and the assets remain on the consolidated balance sheet while the sale proceeds are recognized as a liability.
Pursuant to ASC 860, the issuance of debt securities securitized by Groups lease rental receivables arising from its financing lease business (note 11) and the factoring of note receivables to domestic banks (note 9) do not constitute a sale of the underlying financial assets for accounting purposes due to the recourse obligations retained by the Group. Therefore, these transactions are accounted for as secured borrowings on the consolidated balance sheet and the fianncial assets are not derecognized.
Cost of revenue
Cost of revenue consists primarily of transportation costs including last-mile delivery service fees, cost of express and freight delivery accessories, operating costs for the delivery platforms, hubs and sortation centers, operating costs for the supply chain management network, purchased consumer goods, salaries and benefits of related personnel, depreciation, rental costs, and other related operating costs.
Selling expenses
Advertising costs are expensed when incurred and are included in selling expenses in the consolidated statements of comprehensive loss. For the six months ended June 30, 2018 and 2019, advertising expenses were RMB24,131 and RMB25,065 (US$3,651), respectively.
Selling expenses include shipping and handling costs incurred for the Store+ services segment comprising of costs for operating and staffing the Groups warehouses, packaging, and outbound shipping to customers. For the six months ended June 30, 2018 and 2019, shipping and handling costs amounted to RMB105,826 and RMB91,550 (US$13,336), respectively.
Selling expenses also include retail store occupancy costs such as rent, depreciation, amortization and overhead expenses incurred for Wowo and Shanxi Wowo, which is included in the Store+ services segment. For the six months ended June 30, 2018 and 2019, retail store occupancy costs amounted to RMB51,009 and RMB66,296 (US$9,657), respectively.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases
On January 1, 2019, the Group adopted Accounting Standards Update (ASU) No. 2016-02 (ASU 2016-02), Leases (Topic 842), using the modified retrospective transition method and elected the transition option to use an effective date of January 1, 2019 as the date of initial application. As a result, the comparative periods were not restated.
The Group has elected the package of practical expedients permitted which allows the Group not to reassess the following at adoption date: (i) whether any expired or existing contracts are or contains a lease, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for any expired or existing leases (i.e. whether those costs qualify for capitalization under ASU 2016-02). The Group also elected the short-term lease exemption for certain classes of underlying assets including office space, warehouses and hub and sortation center facilities and equipment, with a lease term of 12 months or less.
The Groups accounting policy effective on the adoption date of ASU 2016-02 is as follows:
Sales-type, direct financing and operating leases as Lessor
The Group classifies a lease as a sales-type lease when the lease meets any one of the following criteria at lease commencement:
|
a. |
The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. |
|
|
|
|
b. |
The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. |
|
|
|
|
c. |
The lease term is for a major part of the remaining economic life of the underlying asset. |
|
|
|
|
d. |
The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset. |
|
|
|
|
e. |
The underlying asset is of such a specialized nature that it is expected to have no alternative use to the Company at the end of the lease term. |
For sales-type leases, when collectability is probable at lease commencement, the Group derecognizes the underlying asset and recognizes the net investment in the lease which is the sum of the lease receivable and the unguaranteed residual asset. Initial direct costs are expensed, at the commencement date, if the fair value of the underlying asset is different from its carrying amount. Interest income is recognized in financing income over the lease term using the interest method.
When none of the criteria above are met, the Group classifies a lease as either a direct financing lease or an operating lease. The Group will classify the lease as a direct financing lease if (i) the present value of the sum of lease payments and any residual value guaranteed by the lessee and any other third party unrelated to the Group equals or exceeds substantially all the fair value of the underlying asset; and (ii) it is probable that the Group will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. If both of the criteria above are not met, the Group will classify the lease as a an operating lease.
The new standard requires lessors within the scope of ASC 942, Financial Services Depository and Lending, to classify principal payments received from sales-type and direct financing leases in investing activities in the statement of cash flows. The Company continues to present cash receipts from direct financing and sales-type leases as an investing cash inflow. For the six months ended June 30, 2019, and cash receipts from sales-type and direct financing leases were RMB313,253 (US$45,630) respectively.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases (continued)
Financing lease and operating lease as Lessee
The Group classifies a lease as a financing lease when the lease meets any one of the criteria specified as (a) to (e) in the Sales-type, direct financing and operating leases as Lessor policy at lease commencement. When none of the criteria are met, the Group classifies a lease as an operating lease.
For both operating and financing leases, the Group records a lease liability and corresponding right-of-use (ROU) asset at lease commencement. Lease terms are based on the non-cancellable term of the lease and may contain options to extend the lease when it is reasonably certain that the Group will exercise the option. Lease liabilities represent the present value of the lease payments not yet paid, discounted using the discount rate for the lease at lease commencement.
The Group estimates its incremental borrowing rate for its leases at the commencement date to determine the present value of future lease payments when the implicit rate is not readily determinable in the lease. In estimating its incremental borrowing rate, the Group considers its credit rating and publicly available data of borrowing rates for loans of similar amount, currency and term as the lease.
Operating leases are presented as operating lease ROU assets and operating lease liabilities. Lease liabilities that become due within one year of the balance sheet date are classified as current liabilities. Operating lease ROU asset represents the right to use an underlying asset for the lease term and are recognized in an amount equal to the lease liability adjusted for any lease payments made prior to commencement date, less any lease incentives received and any initial direct costs incurred by the Group.
After lease commencement, operating lease liabilities are measured at the present value of the remaining lease payments using the discount rate determined at lease commencement. Operating lease ROU assets are measured at the amount of the lease liabilities and further adjusted for prepaid or accrued lease payments, the remaining balance of any lease incentives received, unamortized initial direct costs and impairment of the ROU assets, if any. Operating lease expense is recognized as a single cost on a straight-line basis over the lease term.
Financing lease ROU assets are included in property and equipment and financing lease liabilities on the consolidated balance sheet. Lease liabilities that become due within one year of the balance sheet date are classified as current liabilities. Financing lease ROU assets are amortized on a straight-line basis from the lease commencement date. After initial measurement, the carrying value of the lease liability is increased to reflect interest at a constant rate and reduced to reflect any lease payments made during the period.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases (continued)
The cumulative effect of the changes made to the Groups consolidated balance sheet as of January 1, 2019 for the adoption of ASU 2016-02 is as follows:
|
|
Balance as of |
|
Adjustments due to |
|
Balance as of |
|
|
|
RMB |
|
RMB |
|
RMB |
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Prepayments and other current assets |
|
1,904,846 |
|
(219,438 |
) |
1,685,408 |
|
Operating lease right-of-use assets |
|
|
|
3,568,886 |
|
3,568,886 |
|
Liabilities: |
|
|
|
|
|
|
|
Operating lease liabilities (current) |
|
|
|
(641,323 |
) |
(641,323 |
) |
Operating lease liabilities (non-current) |
|
|
|
(2,955,716 |
) |
(2,955,716 |
) |
Accrued expenses and other liabilities |
|
(2,238,785 |
) |
247,591 |
|
(1,991,194 |
) |
The impact of adopting ASU 2016-02 on the Groups unaudited consolidated balance sheet as of June 30, 2019 are as follows:
|
|
As reported |
|
Legacy GAAP |
|
Effect of the |
|
|
|
RMB |
|
RMB |
|
RMB |
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Prepayments and other current assets |
|
1,999,878 |
|
2,202,132 |
|
(202,254 |
) |
Operating lease right-of-use assets |
|
4,036,752 |
|
|
|
4,036,752 |
|
Liabilities: |
|
|
|
|
|
|
|
Operating lease liabilities (current) |
|
(776,510 |
) |
|
|
(776,510 |
) |
Operating lease liabilities (non-current) |
|
(3,380,525 |
) |
|
|
(3,380,525 |
) |
Accrued expenses and other liabilities |
|
(2,016,272 |
) |
(2,338,809 |
) |
322,537 |
|
The adoption of the standard did not have significant impact the Groups condensed consolidated statements of comprehensive loss or cash flows.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
3. CHANGES IN SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Ordinary Shares |
|
Additional |
|
other |
|
|
|
Non- |
|
Total |
| ||
|
|
Number of |
|
|
|
paid-in |
|
comprehensive |
|
Accumulated |
|
controlling |
|
shareholders |
|
|
|
shares |
|
Amount |
|
capital |
|
income |
|
deficit |
|
interests |
|
equity |
|
|
|
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2018 |
|
374,514,399 |
|
24,786 |
|
19,240,912 |
|
12,333 |
|
(14,886,214 |
) |
678 |
|
4,392,495 |
|
Net loss for the period |
|
|
|
|
|
|
|
|
|
(433,350 |
) |
|
|
(433,350 |
) |
Cumulative effect of accounting change |
|
|
|
|
|
|
|
|
|
(25,053 |
) |
|
|
(25,053 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
9,278 |
|
|
|
|
|
9,278 |
|
Share-based compensation |
|
|
|
|
|
56,742 |
|
|
|
|
|
|
|
56,742 |
|
Acquisition of non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
(678 |
) |
(678 |
) |
Newly deposited and issued to Citibank, N.A. (Citi) |
|
16,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of share options transferred from Citi to the grantees |
|
(12,596,456 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of share options |
|
12,596,456 |
|
1,065 |
|
56,107 |
|
|
|
|
|
|
|
57,172 |
|
Balance as of June 30, 2018 |
|
390,514,399 |
|
25,851 |
|
19,353,761 |
|
21,611 |
|
(15,344,617 |
) |
|
|
4,056,606 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
3. CHANGES IN SHAREHOLDERS EQUITY (CONTINUED)
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Ordinary Shares |
|
Additional |
|
other |
|
|
|
Non- |
|
Total |
| ||
|
|
Number of |
|
|
|
paid-in |
|
comprehensive |
|
Accumulated |
|
controlling |
|
shareholders |
|
|
|
shares |
|
Amount |
|
capital |
|
income |
|
deficit |
|
interests |
|
equity |
|
|
|
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
Balance as of January 1, 2019 |
|
392,514,399 |
|
25,988 |
|
19,407,460 |
|
123,923 |
|
(15,419,256 |
) |
2,043 |
|
4,140,158 |
|
Net loss for the period |
|
|
|
|
|
|
|
|
|
(250,352 |
) |
(5,430 |
) |
(255,782 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
2,376 |
|
|
|
|
|
2,376 |
|
Share-based compensation |
|
|
|
|
|
48,255 |
|
|
|
|
|
|
|
48,255 |
|
Contributions from a subsidiarys non-controlling interest shareholders |
|
|
|
|
|
|
|
|
|
|
|
3,245 |
|
3,245 |
|
Exercise of share options transferred from Citi to the grantees |
|
(522,040 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of share options |
|
522,040 |
|
|
|
2,618 |
|
|
|
|
|
|
|
2,618 |
|
Balance as of June 30, 2019 |
|
392,514,399 |
|
25,988 |
|
19,458,333 |
|
126,299 |
|
(15,669,608 |
) |
(142 |
) |
3,940,870 |
|
Balance as of June 30, 2019 in US$ |
|
|
|
3,786 |
|
2,834,426 |
|
18,398 |
|
(2,282,536 |
) |
(21 |
) |
574,053 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
4. ACCOUNTS AND NOTES RECEIVABLE, NET
Accounts and notes receivable, net, consists of the following:
|
|
As at December 31 |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Accounts receivable |
|
1,059,129 |
|
1,048,909 |
|
152,791 |
|
Notes receivable |
|
12,820 |
|
21,567 |
|
3,142 |
|
Allowance for doubtful accounts |
|
(25,105 |
) |
(44,305 |
) |
(6,454 |
) |
Accounts and notes receivable, net |
|
1,046,844 |
|
1,026,171 |
|
149,479 |
|
The movements in the allowance for doubtful accounts were as follows:
|
|
As at December 31 |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Balance at beginning of the year |
|
(5,794 |
) |
(25,105 |
) |
(3,657 |
) |
Additions |
|
(60,183 |
) |
(40,560 |
) |
(5,908 |
) |
Write-offs |
|
40,872 |
|
21,360 |
|
3,111 |
|
Balance at end of the period |
|
(25,105 |
) |
(44,305 |
) |
(6,454 |
) |
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
5. PROPERTY AND EQUIPMENT, NET
|
|
As at December 31 |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Machinery and electronic equipment |
|
1,794,624 |
|
2,184,134 |
|
318,155 |
|
Leasehold improvements |
|
952,789 |
|
993,584 |
|
144,732 |
|
Motor vehicles |
|
5,410 |
|
5,044 |
|
735 |
|
Construction in progress |
|
493,121 |
|
611,030 |
|
89,007 |
|
|
|
3,245,944 |
|
3,793,792 |
|
552,629 |
|
Less: accumulated depreciation |
|
(1,181,287 |
) |
(1,383,652 |
) |
(201,553 |
) |
|
|
2,064,657 |
|
2,410,140 |
|
351,076 |
|
The Group acquired certain machinery and electronic equipment by entering into financing leases. The gross amount and the accumulated depreciation of these machinery and electronic equipment were RMB29,167 and RMB19,176, respectively, as of December 31, 2018 and RMB30,048 (US$4,377) and RMB21,803 (US$3,176), respectively, as of June 30, 2019. Future minimum lease payments are disclosed in Note 8. Depreciation expense of property and equipment, including assets under financing leases, was RMB206,917 and RMB262,488 (US$38,236) for the six months ended June 30, 2018 and 2019, respectively.
6. PREPAYMENTS AND OTHER CURRENT ASSETS
As of December 31, 2018 and June 30, 2019, VAT prepayments amounting to RMB697,112 and RMB903,379 (US$131,592), respectively, are included in prepayments and other current assets.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
7. INTANGIBLE ASSETS, NET
|
|
As at |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Customer relationships |
|
10,449 |
|
10,449 |
|
1,522 |
|
Brand name |
|
116,600 |
|
116,600 |
|
16,984 |
|
Software |
|
56,346 |
|
57,778 |
|
8,416 |
|
Domain name |
|
1,329 |
|
1,329 |
|
194 |
|
Others |
|
6,130 |
|
6,130 |
|
893 |
|
|
|
190,854 |
|
192,286 |
|
28,009 |
|
Less: accumulated amortization |
|
(47,044 |
) |
(62,381 |
) |
(9,086 |
) |
|
|
143,810 |
|
129,905 |
|
18,923 |
|
Amortization expense of intangible assets was RMB9,990 and RMB15,337 (US$2,234) for the six months ended June 30, 2018 and 2019, respectively. Estimated amortization expense relating to the existing intangible assets with finite lives as of June 30, 2019 as follows:
|
|
RMB |
|
US$ |
|
Within 1 year |
|
17,504 |
|
2,550 |
|
Between 1 and 2 years |
|
13,682 |
|
1,993 |
|
Between 2 and 3 years |
|
7,675 |
|
1,118 |
|
Between 3 and 4 years |
|
6,251 |
|
911 |
|
Between 4 and 5 years |
|
6,245 |
|
910 |
|
Total |
|
51,357 |
|
7,482 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
8. LEASES
Leases of motor vehicles and logistic equipment as Lessor
The Group provides direct financing and sales-type leases of multiple types of motor vehicles and logistic equipment, primarily to transportation service providers that meet the Groups credit assessment requirements. The leases range from two to ten years, do not contain contingent rental income clauses, and are fully collateralized by assets the Group can repossess in the event of default. Initial direct costs were insignificant for all periods presented. The lease agreements include lease payments that are largely fixed, do not contain residual value guarantees or variable lease payments. The Group generally either grants the lessee an option at the end of the lease term to purchase the underlying asset that the lessee is reasonably certain to exercise or ownership of the underlying asset transfers to the lessee if a nominal amount is paid.
The net investment in direct financing and sales-type leases are presented as lease rental receivables on the consolidated balance sheets as follows:
|
|
As at |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Current assets: |
|
|
|
|
|
|
|
Direct financing leases |
|
613,439 |
|
601,721 |
|
87,651 |
|
Sales-type leases |
|
|
|
113,459 |
|
16,527 |
|
|
|
613,439 |
|
715,180 |
|
104,178 |
|
Non-current assets: |
|
|
|
|
|
|
|
Direct financing leases |
|
1,431,441 |
|
1,143,735 |
|
166,604 |
|
Sales-type leases |
|
|
|
209,223 |
|
30,477 |
|
|
|
1,431,441 |
|
1,352,958 |
|
197,081 |
|
|
|
2,044,880 |
|
2,068,138 |
|
301,259 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
8. LEASES (CONTINUED)
The net investment in direct financing and sales-type leases consisted of:
|
|
As at |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
| ||
|
|
RMB |
|
RMB |
|
US$ |
|
Total minimum lease payments receivable |
|
2,340,674 |
|
2,358,323 |
|
343,529 |
|
Less: Executory costs |
|
|
|
|
|
|
|
Less: Allowance for uncollectibles |
|
|
|
(6,615 |
) |
(964 |
) |
Net minimum lease payments receivable |
|
2,340,674 |
|
2,351,708 |
|
342,565 |
|
Unguaranteed residuals |
|
|
|
|
|
|
|
Less: Unearned income |
|
(295,794 |
) |
(283,570 |
) |
(41,306 |
) |
Net investment in direct financing and sales-type leases |
|
2,044,880 |
|
2,068,138 |
|
301,259 |
|
Current portion |
|
613,439 |
|
715,180 |
|
104,178 |
|
Non-current portion |
|
1,431,441 |
|
1,352,958 |
|
197,081 |
|
For the six months ended June 30, 2018 and 2019, the Group recorded RMB39,959 and RMB77,045 (US$11,223) of interest income from direct financing and sales-type leases as a lessor in Other revenues on its consolidated statements of comprehensive loss.
Losses incurred with respect to default on lease receivables were insignficant for all periods presented. As of December 31, 2018 and June 30, 2019, the allowance of lease rental receivables were RMB nil and RMB6,615 (US$964). Accordingly, risk of default with respect to these receivables is remote.
Future minimum lease payments to be received for the direct financing and sales-type leases for each of the five succeeding fiscal years as of the June 30, 2019 are as follows:
|
|
As at |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
| ||
|
|
RMB |
|
RMB |
|
US$ |
|
For the year ending June 30, 2020 |
|
748,377 |
|
855,336 |
|
124,594 |
|
For the year ending June 30, 2021 |
|
735,913 |
|
768,072 |
|
111,882 |
|
For the year ending June 30, 2022 |
|
475,313 |
|
430,593 |
|
62,723 |
|
For the year ending June 30, 2023 |
|
214,554 |
|
173,160 |
|
25,224 |
|
For the year ending June 30, 2024 |
|
107,120 |
|
79,360 |
|
11,560 |
|
Thereafter |
|
59,397 |
|
45,187 |
|
6,582 |
|
Total minimum lease payments |
|
2,340,674 |
|
2,351,708 |
|
342,565 |
|
Unearned income |
|
(295,794 |
) |
(283,570 |
) |
(41,306 |
) |
Net investment in direct financing and sales-type leases |
|
2,044,880 |
|
2,068,138 |
|
301,259 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
8. LEASES (CONTINUED)
Financing and operatings as Lessee
The Group has operating leases for certain offices, warehouses, hub and sortation center facilities and equipment and financing leases for certain machinery and electronic equipment as a lessee.
The Groups lease agreements include lease payments that are largely fixed, do not contain material residual value guarantees or variable lease payments. The leases have remaining lease terms of up to twenty years. Certain lease agreements include terms with options to extend the lease, however none of these have been recognized in the Companys right-of-use assets or lease liabilities since those options were not reasonably certain to be exercised. The Groups leases do not contain restrictions or covenants that restrict the Group from incurring other financial obligations. The Groups lease agreements may contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. Consideration for lease and non-lease components are allocated on a relative standalone selling price basis.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
8. LEASES (CONTINUED)
The components of lease cost were as follows:
|
|
Six months ended June 30, 2019 |
| ||
|
|
RMB |
|
US$ |
|
Operating lease cost |
|
628,605 |
|
91,567 |
|
Short-term lease cost |
|
57,225 |
|
8,336 |
|
Financing lease cost: |
|
|
|
|
|
Amortization of right-of-use assets |
|
2,627 |
|
383 |
|
Interest |
|
155 |
|
23 |
|
|
|
|
|
|
|
Total lease cost |
|
688,612 |
|
100,309 |
|
|
|
|
| ||
|
|
Six months ended June 30, 2019 |
| ||
|
|
RMB |
|
US$ |
|
Other information |
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
Operating cash flows from operating leases |
|
593,700 |
|
86,482 |
|
Operating cash flows from financing leases |
|
155 |
|
23 |
|
Financing cash flows from financing leases |
|
504 |
|
73 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
960,715 |
|
139,944 |
|
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
881 |
|
128 |
|
Weighted-average remaining lease term (in years): |
|
|
|
|
|
Operating leases |
|
5.6 |
|
|
|
Financing leases |
|
3.3 |
|
|
|
Weighted-average discount rate: |
|
|
|
|
|
Operating leases |
|
9.4 |
% |
|
|
Financing leases |
|
7.7 |
% |
|
|
For the six months ended June 30, 2019, total operating and short-term lease costs of RMB621,242 (US$90,495), RMB45,319 (US$6,601) and RMB19,269 (US$2,807) were recorded in cost of revenue, selling expenses, general and administrative expenses, respectively.
Total expenses under operating leases were RMB564,851 (US$82,280) for the six months ended June 30, 2018.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
8. LEASES (CONTINUED)
Future minimum lease payments for operating and financing leases as of June 30, 2019 are as follows:
|
|
Operating Leases |
|
Financing leases |
| ||||
|
|
RMB |
|
US$ |
|
RMB |
|
US$ |
|
For the year ended June 30, 2020 |
|
1,213,106 |
|
176,709 |
|
1,525 |
|
222 |
|
For the year ended June 30, 2021 |
|
1,059,707 |
|
154,364 |
|
1,459 |
|
213 |
|
For the year ended June 30, 2022 |
|
878,038 |
|
127,901 |
|
882 |
|
128 |
|
For the year ended June 30, 2023 |
|
767,919 |
|
111,860 |
|
439 |
|
64 |
|
For the year ended June 30, 2024 |
|
611,044 |
|
89,009 |
|
246 |
|
36 |
|
Thereafter |
|
1,019,016 |
|
148,436 |
|
|
|
|
|
Total minimum lease payments |
|
5,548,830 |
|
808,279 |
|
4,551 |
|
663 |
|
Less: imputed interest |
|
1,391,795 |
|
202,739 |
|
572 |
|
84 |
|
Total lease liability balance |
|
4,157,035 |
|
605,540 |
|
3,979 |
|
579 |
|
|
|
|
|
|
|
|
|
|
|
Minimum payments related to leases not yet commenced as of June 30, 2019 |
|
131,485 |
|
19,153 |
|
|
|
|
|
9. SHORT-TERM BANK LOANS
|
|
As at |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Short-term bank loans guaranteed by subsidiaries within the Group |
|
740,000 |
|
1,140,000 |
|
166,060 |
|
Short-term bank loans pledged by deposit |
|
1,042,900 |
|
940,000 |
|
136,926 |
|
Short-term bank loan pledged by notes receivables |
|
|
|
191,500 |
|
27,895 |
|
|
|
1,782,900 |
|
2,271,500 |
|
330,881 |
|
Short-term bank loans consisted of several bank loans denominated in RMB. The total deposits in restricted cash pledged for short-term loans was RMB1,166,744 and RMB1,065,580 (US$155,219) as of December 31, 2018 and June 30, 2019, respectively. The weighted average interest rate for the outstanding borrowings as of December 31, 2018 and June 30, 2019, was 4.8% and 4.4% respectively.
As of June 30, 2019, the Group factored certain intercompany notes receivables with a total face value of RMB191,500 (US$27,895) to several domestic banks for total proceeds of RMB186,200 (US$27,123), at an effective interest rate of 3.4%-3.6% (the receivable factoring transaction). As the factoring of notes receivables was with recourse, the receivable factoring transaction did not qualify as a transfer of financial assets to be considered as a sale under ASC 860 and was accounted for as a secured borrowing. The note receivables remain on the consolidated balance sheet while the sale proceeds are recognized as liabilities included in Short-term bank loans.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
10. ACCRUED EXPENSES AND OTHER LIABILITIES
|
|
As at |
|
As at June 30 |
| ||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Salary and welfare payable |
|
1,164,401 |
|
1,239,388 |
|
180,537 |
|
Accrual for purchase of property and equipment |
|
252,265 |
|
289,719 |
|
42,202 |
|
Accrued expenses |
|
277,479 |
|
39,204 |
|
5,710 |
|
Payable for business acquisitions |
|
12,335 |
|
1,482 |
|
216 |
|
Others |
|
532,305 |
|
446,479 |
|
65,038 |
|
|
|
2,238,785 |
|
2,016,272 |
|
293,703 |
|
Payable for business acquisitions mainly represents the amount to be paid to the original shareholders at the end of the escrow periods or considerations to be paid for other acquisitions based on their respective payment schedules.
11. SECURITIZATION DEBT
In June 2019, BEST Finance transferred certain lease rental receivables totaling RMB705,033 (US$102,700) with remaining lease terms ranging from one to four years originating from its finance leasing services business to a securitization vehicle. The securitization vehicle created Xinyuan Leasing Asset Backed Special Plan (the Plan and contemporaneously issued debt securities securitized by the transferred lease rental receivables (asset-backed securities) to qualified institution investors on the Shanghai Stock Exchange and raised total proceeds of RMB219,000 (US$31,901) under the Plan. The Plan consists of three tranches: Series A tranche with a stated interest of 5.5% maturing in 2020, Series B tranche with a stated interest of 6.5% maturing in 2021 and a subordinated tranche maturing in 2023. The Group also provided a guarantee to the Plan to secure the full repayment of the principal and interest of the Series A and B tranches of the Plan issued to external investors.
The Group acts as the servicer of the Plan by providing payment collection services for the underlying lease rental receivables and holds significant variable interests in the Plan through holding the subordinated tranche of asset-backed debt securities and the guarantee provided, from which the Group has the obligation to absorb losses of the Plan that could potentially be significant to the Plan. Accordingly, the Group is considered the primary beneficiary of the Plan and has consolidated the Plans assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements.
As a result of the series of transactions described above, the maturity dates of the Series A and B tranches of the Plan issued to external investors were considered borrowings from external investors. The proceeds from borrowings from external investors is a financing activity and reported as Proceeds from issuance of asset-back securities, net of issuance costs on the consolidated statements of cash flow. Total issuance costs incurred for the securitization transaction amounted to RMB6,684 (US$974), including RMB5,768 (US$840) recorded in accrued expenses and other liabilities as of June 30, 2019.
As of June 30, 2019, the total outstanding borrowings from external investors were RMB212,631 (US$30,973) for which RMB145,359 (US$21,174) is repayable within one year and is included in current Securitization debt and the remaining balance of RMB67,272 (US$9,799) is repayable beyond one year and included in non-current Securitization debt on the consolidated balance sheet. The weighted average effective interest rate for the outstanding securitization debt was 11.78% as of June 30, 2019.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
11. SECURITIZATION DEBT (CONTINUED)
As of June 30, 2019, aggregate loan principal payments on borrowings from external investors are due according to the following schedule:
|
|
As at June 30 |
| ||
|
|
2019 |
| ||
|
|
RMB |
|
US$ |
|
Within 1 year |
|
151,535 |
|
22,074 |
|
Between 1-2 year |
|
67,465 |
|
9,827 |
|
|
|
219,000 |
|
31,901 |
|
12. TAXATION
The Group recorded income tax expense of RMB4,000 and RMB8,102 (US$1,180), representing effective tax rates of negative 0.93% and negative 3.27%, for the six months ended June 30, 2018 and 2019, respectively. The primary difference between the PRC statutory tax rate of 25% and the effective tax rate for the six months ended June 30, 2018 and 2019 is primarily due to the Group is in a cumulative loss position as of December 31, 2018 and June 30, 2019.
There is an immaterial provision for income taxes because the Company and substantially all of its wholly-owned subsidiaries are in a current loss position for all the periods presented. The Group is in a cumulative loss position as of December 31, 2018 and June 30, 2019. Deferred tax assets amounting to RMB16,157 (US$2,354) were recorded based on known and solid taxable income with no uncertainty as of December 31, 2018 and June 30, 2019, while for the remaining deferred tax assets, the Group provided a full valuation allowance due to the uncertainty of future reversal.
Unrecognized tax benefits amounted to RMB132,808 and RMB138,037 (US$20,107) as of December 31, 2018 and June 30, 2019. The unrecognized tax benefits represents the estimated income tax expense the Group would pay should its income tax returns have been prepared in accordance with the current PRC tax laws and regulations. It is possible that the amount of uncertain tax position will change in the next twelve months; however, an estimate of the range of the possible outcomes cannot be made at this time. All of the uncertain tax positions, if ultimately recognized, will impact the effective tax rate. In general, the PRC tax authority has up to five years to conduct examinations of the Groups tax filings. Accordingly, the PRC subsidiaries and VIE and its subsidiaries tax years 2014 through 2018 remain open to examination by the taxing jurisdictions.
As of June 30, 2019, the Group intends to permanently reinvest the undistributed earnings from foreign subsidiaries to fund future operations. As of June 30, 2019, the total amount of undistributed earnings from its PRC subsidiaries as well as VIE and its subsidiaries was RMB62,725 (US$9,137).
13. RESTRICTED NET ASSETS
Under PRC laws and regulations, there are restrictions on the Companys PRC subsidiaries, the VIE and its subsidiaries with respect to transferring certain of their net assets to the Company either in the form dividends, loans, or advances. Amounts restricted include paid-in capital and statutory reserve funds of the Companys PRC subsidiaries and the VIE and its subsidiaries, totaling approximately RMB4,602,769 (US$670,469) as of June 30, 2019.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
14. LOSS PER SHARE
Basic and diluted loss per share for each of the periods presented are calculated as follows:
|
|
Six months ended June 30, |
| ||||||||||||||||
|
|
2018 |
|
2018 |
|
2018 |
|
2019 |
|
2019 |
|
2019 |
|
2019 |
|
2019 |
|
2019 |
|
|
|
Class A |
|
Class B |
|
Class C |
|
Class A |
|
Class A |
|
Class B |
|
Class B |
|
Class C |
|
Class C |
|
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
US$ |
|
RMB |
|
US$ |
|
RMB |
|
US$ |
|
Basic loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ordinary shareholdersbasic |
|
(272,230 |
) |
(106,843 |
) |
(54,277 |
) |
(158,799 |
) |
(23,132 |
) |
(60,711 |
) |
(8,843 |
) |
(30,842 |
) |
(4,493 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstandingbasic |
|
239,699,919 |
|
94,075,249 |
|
47,790,698 |
|
246,067,755 |
|
246,067,755 |
|
94,075,249 |
|
94,075,249 |
|
47,790,698 |
|
47,790,698 |
|
Basic loss per share |
|
(1.14 |
) |
(1.14 |
) |
(1.14 |
) |
(0.65 |
) |
(0.09 |
) |
(0.65 |
) |
(0.09 |
) |
(0.65 |
) |
(0.09 |
) |
Diluted loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ordinary shareholdersbasic |
|
(272,230 |
) |
(106,843 |
) |
(54,277 |
) |
(158,799 |
) |
(23,132 |
) |
(60,711 |
) |
(8,843 |
) |
(30,842 |
) |
(4,493 |
) |
Reallocation of net loss attribute to ordinary shareholders as a result of conversion of Class C and Class B to Class A ordinary shares |
|
(161,120 |
) |
|
|
|
|
(91,553 |
) |
(13,336 |
) |
|
|
|
|
|
|
|
|
Net loss attribute to ordinary shareholdersdiluted |
|
(433,350 |
) |
(106,843 |
) |
(54,277 |
) |
(250,352 |
) |
(36,468 |
) |
(60,711 |
) |
(8,843 |
) |
(30,842 |
) |
(4,493 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstandingbasic |
|
239,699,919 |
|
94,075,249 |
|
47,790,698 |
|
246,067,755 |
|
246,067,755 |
|
94,075,249 |
|
94,075,249 |
|
47,790,698 |
|
47,790,698 |
|
Conversion of Class C and Class B to Class A ordinary shares |
|
141,865,947 |
|
|
|
|
|
141,865,947 |
|
141,865,947 |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding diluted |
|
381,565,866 |
|
94,075,249 |
|
47,790,698 |
|
387,933,702 |
|
387,933,702 |
|
94,075,249 |
|
94,075,249 |
|
47,790,698 |
|
47,790,698 |
|
Basic loss per share |
|
(1.14 |
) |
(1.14 |
) |
(1.14 |
) |
(0.65 |
) |
(0.09 |
) |
(0.65 |
) |
(0.09 |
) |
(0.65 |
) |
(0.09 |
) |
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
14. LOSS PER SHARE (Continued)
For the six months ended June 30, 2018 and 2019, the two-class method is applicable because the Company has three classes of ordinary shares outstanding, Class A, Class B and Class C ordinary shares, respectively. The effects of all outstanding share options and restricted share units were excluded from the computation of diluted loss per share for the six months ended June 30, 2018 and 2019 as their effects would be anti-dilutive.
15. RELATED PARTY TRANSACTIONS
a) Related Parties
Name of Related Parties |
|
Relationship with the Group |
Zhejiang Cainiao Supply Chain Management Co. Ltd (Cainiao) |
|
Entity controlled by a preferred shareholder of the Group |
Alibaba Cloud Computing Co. Ltd(Ali Cloud) |
|
Entity controlled by a principal shareholder of the Group |
b) The Group had the following transactions with its related parties:
|
|
Six months ended June 30, |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Rendering of express delivery and supply chain services: |
|
|
|
|
|
|
|
Cainiao |
|
271,483 |
|
352,177 |
|
51,301 |
|
|
|
Six months ended June 30, |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Rental of warehouses as a leasee: |
|
|
|
|
|
|
|
Cainiao |
|
4,945 |
|
5,514 |
|
803 |
|
|
|
Six months ended June 30, |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Operating costs paid on behalf of the Group: |
|
|
|
|
|
|
|
Cainiao |
|
7,754 |
|
4,851 |
|
707 |
|
|
|
Six months ended June 30, |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Commission fee paid to related party: |
|
|
|
|
|
|
|
Cainiao |
|
255 |
|
|
|
|
|
|
|
Six months ended June 30, |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Operating costs paid to related party: |
|
|
|
|
|
|
|
Ali Cloud |
|
1,402 |
|
3,941 |
|
574 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
15. RELATED PARTY TRANSACTIONS(Continued)
c) The Group had the following balances with its related parties:
|
|
As at |
| ||||
|
|
December 31, 2018 |
|
June 30, 2019 |
|
June 30, 2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Amounts due from related parties: |
|
|
|
|
|
|
|
Cainiao |
|
197,488 |
|
153,737 |
|
22,394 |
|
|
|
|
|
|
|
|
|
Amounts due to related parties: |
|
|
|
|
|
|
|
Cainiao |
|
12,429 |
|
597 |
|
87 |
|
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
16. SEGMENT REPORTING
The Group has determined that it operates in five operating segments: (1) Supply chain management services, (2) Express delivery services, (3) Freight delivery services, (4) Store+ services, and (5) Others. The Others category principally relates to finance leasing services, cross-border logistic coordination services and Ucargo transportation services. The operating segments also represented the reporting segments.
The chief operating decision maker (CODM) has been identified as the Chief Executive Officer. The CODM assess the performance of the operating segments based on the measures of revenues, costs of revenues and gross profit. Other than the information provided below, the CODM does not use any other measures by segments. The Group currently does not allocate assets to its operating segments, as the CODM does not use such information to allocate resources to or evaluate the performance of the operating segments. As most of the Groups long-lived assets are located in the PRC and most of the Groups revenues are derived from the PRC, no geographical information is presented.
The table below provides a summary of the Groups operating segment results for the six months ended June 30, 2018 and 2019, respectively.
|
|
Six months ended June 30, |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Revenues: |
|
|
|
|
|
|
|
Express delivery |
|
7,417,342 |
|
9,724,956 |
|
1,416,600 |
|
Freight delivery |
|
1,797,900 |
|
2,297,422 |
|
334,657 |
|
Supply chain management |
|
910,088 |
|
1,226,085 |
|
178,599 |
|
Store+ |
|
1,344,057 |
|
1,344,080 |
|
195,787 |
|
Others |
|
780,267 |
|
1,688,153 |
|
245,908 |
|
Inter-segment* |
|
(513,559 |
) |
(617,992 |
) |
(90,021 |
) |
Total revenues |
|
11,736,095 |
|
15,662,704 |
|
2,281,530 |
|
Cost of revenues: |
|
|
|
|
|
|
|
Express delivery |
|
7,159,983 |
|
9,353,817 |
|
1,362,537 |
|
Freight delivery |
|
1,763,024 |
|
2,180,718 |
|
317,657 |
|
Supply chain management |
|
854,927 |
|
1,153,211 |
|
167,984 |
|
Store+ |
|
1,224,795 |
|
1,190,942 |
|
173,480 |
|
Others |
|
719,895 |
|
1,588,983 |
|
231,462 |
|
Inter-segment* |
|
(513,689 |
) |
(617,740 |
) |
(89,984 |
) |
Total cost of revenues |
|
11,208,935 |
|
14,849,931 |
|
2,163,136 |
|
Gross profit: |
|
|
|
|
|
|
|
Express delivery |
|
257,359 |
|
371,139 |
|
54,063 |
|
Freight delivery |
|
34,876 |
|
116,704 |
|
17,000 |
|
Supply chain management |
|
55,161 |
|
72,874 |
|
10,615 |
|
Store+ |
|
119,262 |
|
153,138 |
|
22,307 |
|
Others |
|
60,372 |
|
99,170 |
|
14,446 |
|
Inter-segment* |
|
130 |
|
(252 |
) |
(37 |
) |
Total gross profit |
|
527,160 |
|
812,773 |
|
118,394 |
|
* The inter-segment eliminations mainly consist of (i) express delivery services provided by the Express delivery services segment to the Supply chain management services segment; and (ii) supply chain management services provided by the Supply chain management services segment to the Store+ services segment, and (iii) services provided by the Others segment to the Express delivery services, Freight delivery services and Supply chain management services segments, for the six months ended June 30, 2018 and 2019, respectively.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
17. FAIR VALUE MEASUREMENTS
The following tables illustrate the fair value measurement hierarchy of the Groups financial instruments:
|
|
Fair value measurements as at December 31, 2018 using |
| ||||||
|
|
Quoted |
|
Significant |
|
Significant |
|
Total |
|
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
Non-recurring fair value measurement for: |
|
|
|
|
|
|
|
|
|
Long-term investments |
|
|
|
|
|
94,628 |
|
94,628 |
|
|
|
Fair value disclosure as at June 30, 2019 using |
|
|
| ||||||
|
|
Quoted |
|
Significant |
|
Significant |
|
Total |
|
Total |
|
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
US$ |
|
Fair value disclosure for: |
|
|
|
|
|
|
|
|
|
|
|
Securitization debt |
|
|
|
212,631 |
|
|
|
212,631 |
|
30,973 |
|
The Group recongnized a gain of RMB64,628 (US$9,400) for measuring equity investments at fair value using the measurement alternative resulting from the observable price changes occurring in August, 2018.
The Group carries the securitization debt at amortized cost on its consolidated balance sheet. The carrying value of the current portion of securitization debt approximates its fair value due to its short-term maturity while the non-current portion of securitization debt approximates its fair value due to the fact that the related interest rates approximate market rates for similar debt instruments of comparable maturities.
The Group had no financial assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2018. The Group had no financial assets and liabilities measured and recorded at fair value on a recurring or non-recurring basis as of June 30, 2019.
BEST INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019 (CONTINUED)
(Amounts in thousands of Renminbi (RMB) and US dollars (US$)
except for number of shares and per share data)
18. COMMITMENTS AND CONTINGENCIES
Capital expenditure commitments
The Group has commitments for the construction of warehouses and equipment of RMB636,920 (US$92,778) at June 30, 2019, which are scheduled to be paid within one year.
Contingencies
From time to time, the Group is subject to legal proceedings, investigations, and claims incidental to the conduct of its business. The Group is currently not involved in any legal or administrative proceedings that may have a material adverse impact on the Groups business, financial position or results of operations.
19. ACCUMULATED OTHER COMPREHENSIVE INCOME
|
|
RMB |
|
Balance as of January 1, 2018 |
|
12,333 |
|
Foreign currency translation adjustments |
|
9,278 |
|
Balance as of June 30, 2018 |
|
21,611 |
|
Balance as of January 1, 2019 |
|
123,923 |
|
Foreign currency translation adjustments |
|
2,376 |
|
Balance as of June 30, 2019 |
|
126,299 |
|
Balance as of June 30, 2019, in US$ |
|
18,398 |
|
There have been no reclassifications out of accumulated other comprehensive income to net loss for the periods presented.
20. SHARE-BASED PAYMENTS
The following table summarizes total share-based compensation expense recognized for the six months ended June 30, 2018 and 2019:
|
|
Six months ended June 30, |
| ||||
|
|
2018 |
|
2019 |
|
2019 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
881 |
|
540 |
|
79 |
|
Selling expenses |
|
2,142 |
|
3,273 |
|
477 |
|
General and administrative expenses |
|
49,294 |
|
39,878 |
|
5,808 |
|
Research and development expenses |
|
4,425 |
|
4,564 |
|
665 |
|
Total |
|
56,742 |
|
48,255 |
|
7,029 |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto set forth in this offering memorandum, and the section titled Operating and Financial Review and Prospects in the 2018 Annual Report and the audited consolidated financial statements and the notes thereto set forth in such annual report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Risk Factors or in other parts of this offering memorandum.
Our Chairman and Chief Executive Officer, Mr. Shao-Ning Johnny Chou, founded BEST in 2007, in the belief that technology and business model innovation can disrupt and transform the inefficient logistics and supply chain industry in China. We are focused on maximizing long-term value propositions to businesses and consumers in our ecosystem through comprehensive integrated services and enhanced experiences driven by technology and service quality. Our multi-sided platform combines technology, integrated logistics and supply chain services, last-mile services and value-added services. We believe we are well positioned to transform the logistics and supply chain industry in China and capture growth opportunities in the New Retail era.
We have achieved superior revenue growth. Our total revenue increased by 39.9% from RMB19,989.6 million in 2017 to RMB27,961 million (US$4,066.8 million) in 2018, and grew from RMB11,736.1 million in the six months ended June 30, 2018 to RMB15,662.7 million (US$2,281.5 million) in the same period in 2019. We had net losses of RMB1,228.1 million in 2017, RMB508.4 million (US$73.9 million) in 2018 and RMB255.8 million (US$37.3 million) in the six months ended June 30, 2019. Our gross profit margin has improved from 2.4% in 2017 to 5.2% in 2018 and 5.2% in the six months ended June 30, 2019, respectively, as a result of continued improvement in operational efficiency.
Our Business Philosophy
Our brand name in Chinese, means hundreds of generations. Our business philosophy is to build and invest for the long-term. Since inception, we have focused on building a platform to meet evolving market demands with Smart Supply Chain solutions. We are committed to continuing investment in and enhancement of our platform, which we believe will generate long-term benefits.
Platform Infrastructure. We have invested in and established our proprietary technology infrastructure, which is the backbone of the integrated solutions we offer, as well as our integrated supply chain service network, which has significant scale and density. With the platform infrastructure in place, we expect to continue to reap the benefits of our investments.
Comprehensive Solutions. Leveraging our platform, we have successfully launched multiple services, which allow customers to enjoy comprehensive solutions from a single source. We believe this gives us a strong competitive advantage, especially over monoline service providers. Our platform also allows us to introduce additional innovative solutions and services, capture more cross-selling opportunities and generate strong network effects, driving further growth.
Operating Leverage. Our business enjoys significant operating leverage, and as our business continues to expand, we expect to enjoy greater economies of scale. In addition, we will leverage our technology and synergies across our different services to increase operational efficiency.
Asset-Light Business Model. Our business model allows us to scale quickly while optimizing our levels of capital investment and enables us to maintain effective control over our network and service quality that will cultivate customer stickiness. See also Business Our Competitive Strengths Flexible asset-light business model for control and scale and Business Asset-Light Business Model.
Guided by our business philosophy, we believe our platform will enable us to continue driving growth, increasing operating leverage and generating long-term value to our ecosystem participants and our shareholders.
Key Factors Affecting Our Results of Operations
We believe that our results of operations are directly affected by the following key factors.
Macroeconomic Trends and Consumption in China
Our results of operations and financial condition are affected by the general factors driving Chinas economy, the retail industry, and logistics and supply chain market. These factors include levels of per capita disposable income, levels of consumer spending, rate of Internet and mobile penetration, and other general economic conditions in China that affect consumption and business activities in general. Our results of operations are also affected by seasonal patterns. For example, the fourth quarter has historically been our strongest quarter by volume, led by the Singles Day and December 12 promotion periods. As our customers reduce activity in connection with Chinese holidays, such as Chinese New Year, the first quarter historically has been a low volume quarter.
In particular, we anticipate additional growth from the trend toward a New Retail paradigm, which is the seamless integration of online and offline retail enabled by Smart Supply Chain. The emergence of New Retail and transformation of the logistics and supply chain industry affect the demand for our services and our business opportunities.
Competitive Landscape
We are able to provide comprehensive, integrated supply chain solutions leveraging our technology infrastructure and supply chain service network, which differentiates us from monoline service providers. Our ability to strengthen our market position as a leading comprehensive supply chain solution provider and offer innovative services in the New Retail era will continue to affect our results of operations.
Each of our service lines is also subject to trends specific to such services, including market demand and competitive landscape. Therefore, we also compete with companies providing similar services, especially with respect to more standard services such as express and freight services. This will affect the pricing of our services, our ability to acquire customers for such services and our results of operation. Due to intense competition, there historically have been and continue to be declines in fee rates for express services across our industry, and we continue to experience a decline in average selling price per parcel for BEST Express. We expect that this trend of intense competition and declining fee rates is likely to continue.
Service Offerings
We provide a variety of services to meet the needs of our customers. We plan to continue leveraging technology and business model innovation to expand and enhance our service offerings.
Each of our service offerings may have different revenue sources, cost structures and customer bases and may face different market conditions. Therefore, the ability to adjust our service offerings to adapt to changing market conditions may impact our results of operations.
Our consolidated results of operations may also be affected by the timing of the launch of new service offerings. We may incur start-up costs in the early stages. A certain amount of time may be needed to ramp up operations. The timing and trend in revenue growth and profitability of new services may vary over time.
Our ability to cross-sell various service offerings to existing and new customers will also affect our results of operations.
Operating Leverage and Efficiency
Our ability to control costs, increase operating efficiencies and scale our business effectively may affect our results of operations.
Costs to operate our businesses, including transportation, labor, lease and other costs are subject to factors such as fluctuations in fuel prices, increases in wage rates and leasing costs, among other things. These factors will affect our ability to control costs.
Our results of operations are also affected by our ability to (i) utilize latest technology to improve efficiencies across our business and data insights to drive optimization in our services, and (ii) take full advantage of our asset-light business model to expand our business operations in a cost-effective manner, leverage the resources and operating capabilities of our franchisee partners and transportation service providers, and dynamically adjust our network design and capacity.
The continued growth of our business and expansion of our market share will impact our ability to benefit from economies of scale, including optimization of our supply chain service network, reduction of unit costs and the strengthening of our bargaining power with suppliers and service providers.
Technology and Talent
We have made investments in developing our proprietary technology infrastructure. We believe the further enhancement of our technology infrastructure is important to our future performance. We expect to continue to make investments for development and implementation of new technologies. We will continue to hire, train and retain our talent to reinforce our culture of innovation. We have in the past granted and will in the future grant share-based awards to incentivize and retain talent. Costs for past granted share-based awards vesting upon the completion of this offering will be recognized at that time, and we will continue to recognize future share-based compensation expenses on an ongoing basis.
Strategic Acquisitions and Investments
We may selectively pursue acquisitions, investments, joint ventures and partnerships that we believe are strategic and complementary to our operations and technology. These acquisitions,investments, joint ventures and partnerships may affect our results of operations.
Results of Operations
The following table sets forth our consolidated statements of operations data for the periods indicated. The information for the years ended December 31, 2016, 2017 and 2018 has been derived from, and should be read together with, our audited consolidated financial statements incorporated by reference in this offering memorandum from the 2018 Annual Report. The information for the six months ended June 30, 2018 and 2019 has been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this offering memorandum. The operating results in any period are not necessarily indicative of the results you may expect for future periods.
|
|
For the year ended December 31, |
|
For the six months ended June 30, |
| ||||||||||
|
|
2016 |
|
2017 |
|
2018 |
|
2018 |
|
2019 |
| ||||
|
|
RMB |
|
RMB |
|
RMB |
|
US$ |
|
RMB |
|
RMB |
|
US$ |
|
|
|
(in thousands) |
| ||||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express |
|
5,388,833 |
|
12,786,279 |
|
17,702,869 |
|
2,574,776 |
|
7,401,961 |
|
9,709,833 |
|
1,414,397 |
|
Freight |
|
1,604,573 |
|
3,178,044 |
|
4,102,610 |
|
596,700 |
|
1,792,697 |
|
2,293,715 |
|
334,117 |
|
Supply Chain Management |
|
1,241,356 |
|
1,600,952 |
|
2,074,414 |
|
301,711 |
|
897,029 |
|
1,132,454 |
|
164,961 |
|
Store+ |
|
560,226 |
|
2,226,034 |
|
2,845,002 |
|
413,788 |
|
1,343,918 |
|
1,344,080 |
|
195,787 |
|
Others |
|
49,149 |
|
198,253 |
|
1,236,084 |
|
179,781 |
|
300,490 |
|
1,182,622 |
|
172,268 |
|
Total Revenue |
|
8,844,137 |
|
19,989,562 |
|
27,960,979 |
|
4,066,756 |
|
11,736,095 |
|
15,662,704 |
|
2,281,530 |
|
Cost of Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Express |
|
(5,671,356 |
) |
(12,435,550 |
) |
(16,915,801 |
) |
(2,460,301 |
) |
(7,143,725 |
) |
(9,338,694 |
) |
(1,360,334 |
) |
Freight |
|
(1,906,930 |
) |
(3,362,652 |
) |
(3,946,032 |
) |
(573,927 |
) |
(1,755,874 |
) |
(2,177,011 |
) |
(317,117 |
) |
Supply Chain Management |
|
(1,183,245 |
|
(1,502,570 |
) |
(1,970,105 |
) |
(286,540 |
) |
(838,976 |
) |
(1,059,832 |
) |
(154,382 |
) |
Store+ |
|
(569,557 |
|
(2,072,912 |
) |
(2,589,883 |
) |
(376,683 |
) |
(1,224,656 |
) |
(1,190,942 |
) |
(173,480 |
) |
Others |
|
(45,479 |
) |
(130,327 |
) |
(1,098,021 |
) |
(159,701 |
) |
(245,704 |
) |
(1,083,452 |
) |
(157,823 |
) |
Total Cost of Revenue |
|
(9,376,567 |
) |
(19,504,011 |
) |
(26,519,842 |
) |
(3,857,152 |
) |
(11,208,935 |
) |
(14,849,931 |
) |
(2,163,136 |
) |
Gross (Loss)/Profit |
|
(532,430 |
) |
485,551 |
|
1,441,137 |
|
209,604 |
|
527,160 |
|
812,773 |
|
118,394 |
|
Selling Expenses |
|
(370,017 |
) |
(694,852 |
) |
(893,859 |
) |
(130,006 |
) |
(420,094 |
) |
(406,489 |
) |
(59,212 |
) |
General and Administrative Expenses |
|
(521,237 |
) |
(928,188 |
) |
(1,020,671 |
) |
(148,450 |
) |
(482,397 |
) |
(588,246 |
) |
(85,688 |
) |
Research and Development Expenses |
|
(80,326 |
) |
(139,009 |
) |
(184,581 |
) |
(26,846 |
) |
(83,514 |
) |
(116,536 |
) |
(16,975 |
) |
Other Operating Income |
|
104,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
(867,533 |
) |
(1,762,049 |
) |
(2,099,111 |
) |
(305,302 |
) |
(986,005 |
) |
(1,111,271 |
) |
(161,875 |
) |
Loss from Operations |
|
(1,399,963 |
) |
(1,276,498 |
) |
(657,974 |
) |
(95,698 |
) |
(458,845 |
) |
(298,498 |
) |
(43,481 |
) |
Interest Income |
|
24,386 |
|
75,056 |
|
102,821 |
|
14,955 |
|
48,690 |
|
50,049 |
|
7,290 |
|
Interest Expense |
|
(21,379 |
) |
(47,154 |
) |
(75,060 |
) |
(10,917 |
) |
(34,799 |
) |
(40,744 |
) |
(5,935 |
) |
Foreign Exchange Loss |
|
(1,864 |
) |
(6,320 |
) |
(6,533 |
) |
(950 |
) |
(7,232 |
) |
(4,066 |
) |
(592 |
) |
Other Income |
|
44,409 |
|
56,035 |
|
171,370 |
|
24,925 |
|
31,422 |
|
53,635 |
|
7,813 |
|
Other Expense |
|
(8,542 |
) |
(18,507 |
) |
(30,672 |
) |
(4,461 |
) |
(8,296 |
) |
(7,920 |
) |
(1,154 |
) |
Loss before Income Tax and Share of Net Income/ (Loss) of Equity Investees |
|
(1,362,953 |
) |
(1,217,388 |
) |
(496,048 |
) |
(72,146 |
) |
(429,060 |
) |
(247,544 |
) |
(36,059 |
) |
Income Tax Expense |
|
(570 |
) |
(9,856 |
) |
(11,887 |
) |
(1,729 |
) |
(4,000 |
) |
(8,102 |
) |
(1,180 |
) |
Loss before Share of Net Income/(Loss) of Equity Investees |
|
(1,363,523 |
) |
(1,227,244 |
) |
(507,935 |
) |
(73,875 |
) |
(433,060 |
) |
(255,646 |
) |
(37,239 |
) |
Share of Net Income/(Loss) of Equity Investees |
|
43 |
|
(816 |
) |
(456 |
) |
(66 |
) |
(290 |
) |
(136 |
) |
(20 |
) |
Net Loss |
|
(1,363,480 |
) |
(1,228,060 |
) |
(508,391 |
) |
(73,941 |
) |
(433,350 |
) |
(255,782 |
) |
(37,259 |
) |
Net loss attributable to non-controlling interests |
|
|
|
(167 |
) |
(403 |
) |
(59 |
) |
|
|
(5,430 |
) |
(791 |
) |
Net loss attributable to BEST Inc. |
|
(1,363,480 |
) |
(1,227,893 |
) |
(507,988 |
) |
(73,882 |
) |
(433,350 |
) |
(250,352 |
) |
(36,468 |
) |
Comparison of Six Months Ended June 30, 2019 and Six Months Ended June 30, 2018
Revenue
Our revenue in the six months ended June 30, 2019 increased by 33.5% to RMB15,662.7 million (US$2,281.5 million) from RMB11,736.1 million in the same period in 2018, due to increases in revenue across various service lines, particularly in our Express segment, as discussed below.
Express. Our express service revenue in the six months ended June 30, 2019 increased by 31.2% to RMB9,709.8 million (US$1,414.4 million) from RMB7,402.0 million in the same period in 2018. This increase in revenue was primarily due to a 45.6% increase in parcel volume, as a result of greater demand for express delivery services and increase in our market share, partially offset by a decline in average selling price per parcel due to intense market competition.
Freight. Our freight service revenue in the six months ended June 30, 2019 increased by 27.9% to RMB2,293.7 million (US$334.1 million) from RMB1,792.7 million in the same period in 2018. This increase in revenue was primarily the result of greater freight volume, which increased by 27.5%, and stable average revenue per tonne, which increased slightly by 0.3%, compared to the six months ended June 30, 2018.
Supply Chain Management. Our supply chain management service revenue in the six months ended June 30, 2019 increased by 26.2% to RMB1,132.5 million (US$165.0 million) from RMB897.0 million in the same period in 2018. Such increase was primarily attributable to an increase in fulfillment and transportation revenue from both existing and new customers.
Store+. Our BEST Store+ service revenue in the six months ended June 30, 2019 remained stable at RMB1,344.1 million (US$195.8 million) and RMB1,343.9 million in the same period in 2018, primarily due to fewer orders fulfilled for membership stores resulting from ongoing efforts to improve order quality and margins. The number of store orders fulfilled in the six months ended June 30, 2019 decreased by 10.2% compared to the same period in 2018. Such decrease was partially offset by an improvement in order quality and margins which resulted in more revenue being generated from fewer store orders fulfilled.
Others. Revenue from our other services in the six months ended June 30, 2019 increased by 293.6% to RMB1,182.6 million (US$172.3 million) from RMB300.5 million in the same period in 2018, primarily due to increased revenue generated from BEST UCargos external customers, BEST Globals expanded operations and BEST Capitals financing solutions to ecosystem participants.
Cost of Revenue
Our cost of revenue in the six months ended June 30, 2019 increased by 32.5% to RMB14,849.9 million (US$2,163.1 million) from RMB11,208.9 million in the same period in 2018. The increase was primarily attributable to increases in cost of revenue across our various service lines, particularly in our Express segment, as discussed below. Cost of revenue as a percentage of revenue in the six months ended June 30, 2019 decreased to 94.8% from 95.5% in the same period in 2018, which was primarily attributable to increased operating leverage and continued efforts in cost reduction, network optimization and operational improvement.
Express. Cost of revenue for our express services in the six months ended June 30, 2019 increased by 30.7% to RMB9,338.7 million (US$1,360.3 million) from RMB7,143.7 million in the same period in 2018. This increase in cost of revenue in the six months ended June 30, 2019 was primarily attributable to a 45.6% increase in parcel volume to 3,247.4 million from 2,230.5 million in the same period in 2018, which resulted in higher transportation and labor costs. Cost of revenue as a percentage of revenue from our express delivery services in the six months ended June 30, 2019 decreased slightly to 96.2% from 96.5% in the same period in 2018, primarily due to economies of scale resulting from significant increase in our parcel volume, network optimization, as well as increased operational efficiency resulting from proactive cost-control measures and continuous technology improvements and applications.
Freight. Cost of revenue for our freight services in the six months ended June 30, 2019 increased by 24.0% to RMB2,177.0 million (US$317.1 million) from RMB1,755.9 million in the same period in 2018. This increase in cost of revenue was primarily attributable to increased freight volume in the six months ended June 30, 2019, which increased by 27.5% to 3.0 million tonnes from 2.4 million tonnes in the same period in 2018. Cost of revenue as a percentage of revenue from our freight services in the six months ended June 30, 2019 decreased to 94.9% from 97.9% in the same period in 2018, primarily due to economies of scale resulting from significant increase in our freight volume, as well as increased operational efficiency resulting from our proactive cost-control measures and continuous technology improvements and applications.
Supply Chain Management. Cost of revenue for our supply chain management services in the six months ended June 30, 2019 increased by 26.3% to RMB1,059.8 million (US$154.4 million) from RMB839.0 million in the same period in 2018. This increase in cost of revenue was primarily due to the 24.1% increase in the number of orders fulfilled by our self-operated Cloud OFCs which resulted in additional transportation and labor costs. The number of orders fulfilled by our self-operated Cloud OFCs in the six months ended June 30, 2019 increased to 89.5 million from 72.1 million in the same period in 2018. Cost of revenue as a percentage of revenue from our supply chain management services in the six months ended June 30, 2019 increased slightly to 93.6% from 93.5% in the same period in 2018, primarily due to start-up costs relating to opening of new self-operated Cloud OFCs.
Store+. Cost of revenue for our BEST Store+ services decreased by 2.8% to RMB1,190.9 million (US$173.5 million) from RMB1,224.7 million in the same period in 2018, primarily due to stable revenue generation and improved operating efficiency. Cost of revenue as a percentage of revenue from our BEST Store+ services in the six months ended June 30, 2019 decreased to 88.6% from 91.1% in the same period in 2018, primarily due to a reduction in average procurement cost driven by continuing efforts in improving order quality.
Others. Cost of revenue for our other services in the six months ended June 30, 2019 increased by 341.0% to RMB1,083.5 million (US$157.8 million) from RMB245.7 million in the same period in 2018, in connection with increased revenue generation from BEST UCargo, BEST Global and BEST Capital.
Operating Expenses
Operating expenses in the six months ended June 30, 2019 increased by 12.7% to RMB1,111.3 million (US$161.9 million) from RMB986.0 million in the same period in 2018. Operating expenses as a percentage of our total revenue in the six months ended June 30, 2019 decreased to 7.1% from 8.4% in the same period in 2018. This decrease was mainly due to economies of scale and improved operating efficiencies.
Selling Expenses. Selling expenses in the six months ended June 30, 2019 decreased by 3.2% to RMB406.5 million (US$59.2 million) from RMB420.1 million in the same period in 2018. This decrease was primarily attributable to the decrease of shipping and handling costs in relation to our BEST Store+ business.
General and Administrative Expenses. General and administrative expenses in the six months ended June 30, 2019 increased by 21.9% to RMB588.2 million (US$85.7 million) from RMB482.4 million in the same period in 2018. This increase was primarily attributable to increased staff costs in connection with the growth of our operations.
Research and Development Expenses. Research and development expenses in the six months ended June 30, 2019 increased by 39.5% to RMB116.5 million (US$17.0 million) from RMB83.5 million in the same period in 2018. This increase was primarily due to increased investments in research and development and information technology professionals.
Interest Income
Our interest income in the six months ended June 30, 2019 increased to RMB50.0 million (US$7.3 million) from RMB48.7 million in the same period in 2018, primarily due to higher yields generated from our cash and cash equivalents, restricted cash and short-term investment balances.
Interest Expense
Our interest expenses in the six months ended June 30, 2019 increased to RMB40.7 million (US$5.9 million) from RMB34.8 million in the same period in 2018, primarily a result of increased short-term bank loan balances in the six months ended June 30, 2019 compared with the same period in 2018. We incurred multiple Renminbi-denominated bank borrowings to satisfy working capital requirements while we held a significant amount of bank deposits in foreign currencies outside China.
Foreign Exchange Loss
We recorded a foreign exchange loss in the six months ended June 30, 2019 of RMB4.1 million (US$0.6 million) as compared to RMB7.2 million in the same period in 2018, primarily due to changes in exchange rates between Renminbi and U.S. dollars during the respective periods.
Other Income
Other income in the six months ended June 30, 2019 increased to RMB53.6 million (US$7.8 million) from RMB31.4 million in the same period in 2018, primarily due to an increase in government subsidies and other miscellaneous fees.
Other Expense
Other expenses in the six months ended June 30, 2019 decreased to RMB7.9 million (US$1.2 million) from RMB8.3 million in the same period in 2018, primarily reflecting reductions in miscellaneous expenses.
Income Tax Expense
Income tax expense in the six months ended June 30, 2019 increased to RMB8.1 million (US$1.2 million) from RMB4.0 million in the same period in 2018, reflecting increased taxable income from certain of our subsidiaries.
Net Loss
As a result of the foregoing, net loss in the six months ended June 30, 2019 decreased to RMB255.8 million (US$37.3 million) from RMB433.4 million in the same period in 2018.
Liquidity and Capital Resources
Our primary sources of liquidity have been issuance of equity securities and redeemable convertible preferred shares, short-term borrowings and issuance of asset backed securities, which have historically been sufficient to meet our working capital and capital expenditure requirements.
As of June 30, 2019, we had cash and cash equivalents of RMB1,575.3 million (US$229.5 million) and restricted cash (current portion) of RMB1,224.0 million (US$178.3 million). As of June 30, 2019, we had short-term bank loans of RMB2,271.5 million (US$330.9 million), of which RMB940.0 million (US$136.9 million) were cash-collateralized as of June 30, 2019. The weighted average interest rate for the outstanding borrowings as of June 30, 2019 was approximately 4.43%.
The following table sets forth a summary of the movements of our cash and cash equivalents for the periods indicated:
|
|
For the year ended December 31, |
|
For the six months ended June 30, |
| ||||||||||
|
|
2016 |
|
2017 |
|
2018 |
|
2018 |
|
2019 |
| ||||
|
|
RMB |
|
RMB |
|
RMB |
|
US$ |
|
RMB |
|
RMB |
|
US$ |
|
|
|
(in thousands) |
| ||||||||||||
Net Cash Generated from/(Used in) Operating Activities |
|
(623,363 |
) |
25,602 |
|
637,204 |
|
92,677 |
|
(178,094 |
) |
128,692 |
|
18,746 |
|
Net Cash (Used In)/Generated from Investing Activities |
|
(843,844 |
) |
(4,105,923 |
) |
(1,230,953 |
) |
(179,035 |
) |
266,714 |
|
(827,251 |
) |
(120,503 |
) |
Net Cash Generated from Financing Activities |
|
4,207,616 |
|
3,730,859 |
|
557,149 |
|
81,034 |
|
79,552 |
|
661,497 |
|
96,358 |
|
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash |
|
158,657 |
|
(48,241 |
) |
53,179 |
|
7,735 |
|
1,262 |
|
(70 |
) |
(10 |
) |
Net Increase/(Decrease) in Cash and Cash Equivalents, and Restricted Cash |
|
2,899,066 |
|
(397,703 |
) |
16,579 |
|
2,411 |
|
169,434 |
|
(37,132 |
) |
(5,409 |
) |
Cash and Cash Equivalents, and Restricted Cash at Beginning of year/period |
|
481,466 |
|
3,380,532 |
|
2,982,829 |
|
433,835 |
|
2,982,829 |
|
2,999,408 |
|
436,913 |
|
Cash and Cash Equivalents, and Restricted Cash at End of year/period |
|
3,380,532 |
|
2,982,829 |
|
2,999,408 |
|
436,246 |
|
3,152,263 |
|
2,962,276 |
|
431,504 |
|
Operating Activities
Net cash generated from operating activities was RMB128.7 million (US$18.7 million) in the six months ended June 30, 2019, primarily due to a net loss of RMB255.8 million (US$37.3 million), adjusted for non-cash items including depreciation and amortization of RMB277.8 million (US$40.5 million), share-based compensation of RMB48.3 million (US$7.0 million) and allowance for doubtful accounts and inventory provision of RMB42.7 million (US$6.2 million). Additional major factors that caused operating cash inflow included: (i) increase in customer advances and deposits of RMB109.8 million (US$16.0 million) consistent with our revenue growth; and (ii) increase in accounts and notes payable of RMB48.3 million (US$7.0 million) mainly because we incurred more transportation and operating costs to support business expansion. The above factors were partially offset by a decrease in accrued expenses and other liabilities of RMB210.9 million (US$30.7 million) primarily due to a decrease in accrued expenses amounting to RMB238.3 million (US$34.6 million).
Investing Activities
Net cash used in investing activities was RMB827.3 million (US$120.5 million) in the six months ended June 30, 2019, which was primarily due to (i) payments for purchase of property and equipment of RMB585.7 million (US$85.3 million), which property and equipment were used in the expansion and optimization of our express service, freight service and supply chain service network; (ii) payments for purchase of leased equipment of RMB398.0 million (US$58.0 million), for finance lease services provided to franchisee partners and transportation service providers; and (iii) a net change in short-term investments of RMB77.8 million (US$11.3 million), which were payments for purchase of short-term investments of RMB1,281.4 million (US$186.7 million) offset by proceeds from maturities of short-term investments of RMB1,203.7 million (US$175.3 million). The above factors were partially offset by proceeds from repayment of financing leases of RMB313.3 million (US$45.6 million).
Financing Activities
Net cash generated from financing activities was RMB661.5 million (US$96.4 million) in the six months ended June 30, 2019, which was mainly due to (i) proceeds from short-term bank loans of RMB1,571.5 million (US$228.9 million), partially offset by repayment of short-term bank loans of RMB1,132.9 million (US$165.0 million); and (ii) net proceeds from issuance of asset-backed securities of RMB218.4 million (US$31.8 million).
Adoption of Certain Accounting Standards
On January 1, 2018, we adopted ASC 606, Revenues from Contracts with Customers (ASC 606) and elected to apply the modified retrospective approach to contracts that are not completed as of this date. The cumulative effect of initially applying ASC 606 resulted in an increase to opening accumulated deficit of RMB25.1 million, which has been recognized on the day of initial application and prior periods were not retrospectively adjusted. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which it has the right to invoice for services performed.
Holding Company Structure
BEST Inc. is a holding company with no material operations of its own. We are a corporation separate and apart from our subsidiaries and our VIE and, therefore, must provide for our own liquidity. We conduct our operations in China primarily through our PRC subsidiaries and VIE. As a result, our ability to pay dividends and to finance any debt we may incur depends upon dividends paid by our subsidiaries. If our PRC subsidiaries or any newly formed PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our PRC subsidiaries are permitted to pay dividends to us only out of their respective retained earnings, if any, as determined in accordance with Chinese accounting standards and regulations. Under applicable PRC laws and regulations, our PRC subsidiaries are each required to set aside a portion of its after-tax profits each year to fund certain statutory reserves, and funds from such reserves may not be distributed to us as cash dividends except in the event of liquidation of such subsidiaries. These statutory limitations affect, and future covenant debt limitations might affect, our PRC subsidiaries ability to pay dividends to us. We currently believe that such limitations will not impact our ability to meet our ongoing short-term cash obligations although we cannot assure you that such limitations will not affect our ability in the future to meet our short-term cash obligations and to distribute dividends to our shareholders. See Risk Factors Risks Related to Doing Business in the Peoples Republic of China We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries to fund offshore cash and financing requirements. Any limitation on the ability of our operating subsidiaries to make payments to us could have a material and adverse impact on our ability to operate our business.
Off-Balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any unconsolidated third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholders equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Contractual Obligations
The following table sets forth our contractual obligations and commercial commitments as of June 30, 2019:
|
|
Payment due by period |
| ||||||||
|
|
Total |
|
Less than |
|
1 3 Years |
|
3 5 Years |
|
More than |
|
|
|
(in thousands of RMB) |
| ||||||||
Short-term borrowings |
|
2,271,500 |
|
2,271,500 |
|
|
|
|
|
|
|
Securitization debt |
|
224,843 |
|
154,836 |
|
70,007 |
|
|
|
|
|
Capital lease obligations |
|
4,551 |
|
1,525 |
|
2,341 |
|
685 |
|
|
|
Capital expenditure commitments |
|
636,920 |
|
636,920 |
|
|
|
|
|
|
|
Operating lease commitments |
|
5,548,830 |
|
1,213,106 |
|
1,937,745 |
|
1,378,963 |
|
1,019,016 |
|
Total |
|
8,686,644 |
|
4,277,887 |
|
2,010,093 |
|
1,379,648 |
|
1,019,016 |
|
BEST Inc. Announces Proposed Offering of US$175 Million Convertible Senior Notes
HANGZHOU, China, September 12, 2019 BEST Inc. (NYSE: BEST) (BEST or the Company), a leading integrated smart supply chain solutions and logistics services provider in China, today announced that it proposes to offer up to US$175 million in aggregate principal amount of convertible senior notes due 2024 (the Notes) (the Notes Offering). The interest rate, the initial conversion rate and other terms of the Notes have not been finalized and will be determined at the time of pricing of the Notes Offering. The Company intends to grant the initial purchasers in the Notes Offering a 30-day option to purchase up to an additional US$25 million in principal amount of the Notes. The Notes Offering is subject to market conditions and other factors. An entity affiliated with Alibaba Group Holding Limited, one of the Companys principal shareholders (the Alibaba Purchaser), has indicated an interest in purchasing minimum US$100 million principal amount of the Notes in the Notes Offering on the same terms as the other Notes being offered. The Company and the initial purchasers are currently under no obligation to sell notes to the Alibaba Purchaser.
When issued, the Notes will be senior, unsecured obligations of BEST and will mature on October 1, 2024, unless earlier redeemed, repurchased or converted in accordance with their terms. The Notes will be convertible into American Depositary Shares (ADSs) of the Company, at the option of the holders, in integral multiples of US$1,000 principal amount, at any time prior to the close of business on the second scheduled trading day immediately preceding October 1, 2024. BEST will not have the right to redeem the Notes prior to maturity, unless certain changes in tax law or related events occur. Holders of the Notes have the right to require the Company to repurchase for cash all or part of their Notes on September 30, 2022 at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding such repurchase date.
The Company intends to use the net proceeds from the Notes Offering to pay the cost of the capped call transactions described below, and use the remaining net proceeds for general corporate purposes.
The Notes, the ADSs deliverable upon conversion of the Notes prior to the resale restriction termination date and the Class A ordinary shares represented thereby have not been and will not be registered under the Securities Act of 1933, as amended (the Securities Act), or any state securities laws. They may not be offered or sold within the United States or to U.S. persons absent registration, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act and/or to certain non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act.
In connection with the pricing of the Notes, the Company intends to enter into capped call transactions with one or more of the initial purchasers and/or their respective affiliates and/or other financial institutions (the Option Counterparties). The capped call transactions are generally expected to reduce potential dilution to existing holders of the Class A ordinary shares and ADSs of the Company upon conversion of the Notes, with such reduction subject to a cap, and subject to the Companys ability to elect, subject to certain conditions, to settle the capped call transactions in cash (in which case the Company would not receive any ADSs from the Option Counterparties upon settlement of the capped call transactions). If the initial purchasers exercise their option to purchase additional Notes, the Company expects to enter into additional capped call transactions. As part of establishing their initial hedges of the capped call transactions, the Option Counterparties or their respective affiliates expect to trade the ADSs and/or enter into various derivative transactions with respect to the Companys ADSs concurrently with, or shortly after, the pricing of the Notes. This activity could increase (or reduce the size of any decrease in) the market price of the ADSs or the price of the Notes at that time. The effect, if any, of this activity, including the direction or magnitude, on the market price of the Companys ADSs or the price of the Notes will depend on a variety of factors, including market conditions, and cannot be ascertained at this time. If any such capped call transactions fail to become effective, whether or not the Notes Offering is completed, the Option Counterparties may unwind their hedge positions with respect to the ADSs, which could adversely affect the value of the ADSs and, if the Notes have been issued, the value of the Notes.
In addition, the Option Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to the Companys ADSs, the Notes or other securities of the Company and/or purchasing or selling the Companys ADSs, the Notes or other securities of the Company in secondary market transactions following the pricing of the Notes and prior to the maturity of the Notes (and are likely to do so following any conversion of the Notes, or repurchase of the Notes by the Company on any fundamental change repurchase date, the repurchase date or otherwise, in each case, if the Company exercises the relevant election under the capped call transactions). This activity could also cause or avoid an increase or a decrease in the market price of the ADSs or the price of the Notes, which could affect noteholders decision to convert the Notes and, to the extent the activity occurs around the time of any conversion of the Notes, could affect the amount and value of the consideration that noteholders will receive upon conversion of such Notes.
This press release shall not constitute an offer to sell or a solicitation of an offer to purchase any of these securities, nor shall there be a sale of the securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.
This press release contains information about the pending Notes Offering and the capped call transactions, and there can be no assurance that either of the Notes Offering or the capped call transactions will be completed.
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. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, believes, estimates and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as BESTs strategic and operational plans and expectations regarding participation of an entity affiliated with Alibaba Group Holding Limited in the Notes Offering, contain forward-looking statements. BEST may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the SEC), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about BESTs beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: BESTs goals and strategies; BESTs future business development, results of operations and financial condition; BEST s ability to maintain and enhance its ecosystem; BESTs ability to continue to innovate, meet evolving market trends, adapt to changing customer demands and maintain its culture of innovation; and fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in BESTs filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and BEST does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
ABOUT BEST INC.
BEST Inc. (NYSE: BEST) is a leading integrated smart supply chain solutions and logistics services provider in China. Through its proprietary technology platform and extensive networks, BEST offers a comprehensive set of logistics and value-add services, including express and freight delivery, supply chain management and last-mile services, truckload service brokerage, international logistics and financial services. BESTs mission is to empower business and enrich life by leveraging technology and business model innovation to create a smarter, more efficient supply chain. For more information, please visit: http://www.best-inc.com/en/.
For investor and media inquiries, please contact:
For Investors:
Jane Zeng
ir@best-inc.com
For Media:
Jill Mao
mmj@best-inc.com