CORRESP 1 filename1.htm

 

 

Cheetah Mobile Inc.

Fosun International Center Tower

No. 237 Chaoyang North Road

Chaoyang District, Beijing 100022

People’s Republic of China

 

August 10, 2015

 

VIA EDGAR

 

Craig D. Wilson, Senior Assistant Chief Accountant

Eiko Yaoita Pyles, Staff Accountant

Division of Corporation Finance

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

 

Re:                           Cheetah Mobile Inc.

Form 20-F for Fiscal Year Ended December 31, 2014 (the “2014 Form 20-F”)

Filed April 21, 2015 (File No. 001-36427)                                                             

 

Ladies and Gentlemen:

 

This letter sets forth the Company’s response to the comment contained in the letter dated July 27, 2015 from the staff of the Securities and Exchange Commission (the “Staff”) regarding the 2014 Form 20-F.  The “Company” is used in this letter to refer to Cheetah Mobile Inc., its subsidiaries, variable interest entities and the subsidiary of a variable interest entity.  The comments are repeated below and followed by the response thereto.  Capitalized terms used but not defined herein have the meanings set forth in the 2014 Form 20-F.

 

Operating and Financial Review and Prospects

 

A. Operating Results

 

Results of Operations, page 91

 

1.                                We note your response to comment 2. Please quantify the impact of the foreign rate differentials, tax holiday and preferential tax treatments on the effective tax rate by jurisdiction for each period presented and tell us how the income or loss mix changed in fiscal year 2014 as compared to prior periods. As part of your response, please confirm that you will include this information in future filings.

 

In response to the Staff’s comment, the Company confirms that it will add the disclosure set forth immediately after this paragraph, with any appropriate updates, in its future Form 20-F filings to disclose the income or loss before tax, and the impact of the foreign rate differentials, tax holiday and preferential tax treatments on the effective tax rate by jurisdiction for each reported period.

 


 

The following table sets forth our income (loss) before income tax and the effect of differing tax rates in different jurisdictions on our income tax expenses in each applicable jurisdiction, for the years ended December 31, 2012, 2013 and 2014.

 

 

 

 

 

Year ended December 31,

 

 

 

 

 

2012

 

2013

 

2014

 

 

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

 

 

 

 

(in thousands)

 

Cayman Islands

 

Loss before income tax*

 

(20,172

)

(51,299

)

(203,456

)

(32,791

)

 

Income tax expenses computed at the PRC statutory tax rate of 25%

 

(5,043

)

(12,825

)

(50,863

)

(8,198

)

 

Income tax expenses computed at Cayman Islands statutory tax rate of 0%

 

—

 

—

 

—

 

—

 

 

Effect of differing tax rates in different jurisdictions

 

5,043

 

12,825

 

50,863

 

8,198

 

 

 

 

 

 

 

 

 

 

 

 

 

USA

 

Income (loss) before income tax

 

—

 

(5,897

)

3,042

**

490

**

 

Income tax expenses computed at the PRC statutory tax rate of 25%

 

—

 

(1,474

)

761

 

123

 

 

Income tax expenses computed at the USA statutory tax rate of 35%

 

—

 

(2,064

)

1,065

 

172

 

 

Effect of differing tax rates in different jurisdictions

 

—

 

(590

)

304

 

49

 

 

 

 

 

 

 

 

 

 

 

 

 

Hong Kong

 

Income (loss) before income tax

 

(2,079

)

6,346

 

(97,876

)

(15,775

)

 

Income tax expenses computed at the PRC statutory tax rate of 25%

 

(519

)

1,586

 

(24,470

)

(3,944

)

 

Income tax expenses computed at the Hong Kong statutory tax rate of 16.5%

 

(343

)

1,047

 

(16,150

)

(2,605

)

 

Effect of differing tax rates in different jurisdictions

 

176

 

(539

)

8,320

 

1,339

 

 

 

 

 

 

 

 

 

 

 

 

 

PRC

 

Income before income tax

 

37,021

 

161,550

 

388,704

 

62,648

 

 

Income tax expenses computed at the PRC statutory tax rate of 25%

 

9,255

 

40,388

 

97,176

 

15,662

 

 

Income tax expenses computed at the PRC statutory tax rate of 25%

 

9,255

 

40,388

 

97,176

 

15,662

 

 

Effect of differing tax rates in different jurisdictions

 

—

 

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

British Virgin Islands

 

Income (loss) before income tax

 

(11

)

(12

)

490

 

79

 

 

Income tax expenses computed at the PRC statutory tax rate of 25%

 

(3

)

(3

)

123

 

20

 

 

Income tax expenses computed at the BVI statutory tax rate of 0%

 

—

 

—

 

—

 

—

 

 

Effect of differing tax rates in different jurisdictions

 

3

 

3

 

(123

)

(20

)

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Income before income tax

 

14,759

 

110,688

 

90,904

 

14,651

 

 

Income tax expenses computed at the PRC statutory tax rate of 25%

 

3,690

 

27,672

 

22,727

 

3,663

 

 

Income tax expenses computed at the statutory tax rate of different jurisdictions

 

8,912

 

39,371

 

82,091

 

13,229

 

 

Effect of differing tax rates in different jurisdictions

 

5,222

 

11,699

 

59,364

 

9,566

 

 

*                    The losses before income tax recorded under Cheetah Mobile Inc. for tax purposes included share-based compensation expenses for the Company.

**             The Company’s U.S. subsidiary, Cheetah Mobile America, Inc., recorded an income before tax for 2014 but did not have assessable profit for the same year due to losses carried forward from previous years.

 


 

The following table sets forth the effect of tax holiday and preferential tax treatments on our income tax expenses in each applicable jurisdiction, for the years ended December 31, 2012, 2013 and 2014.

 

 

 

Year ended December 31,

 

 

 

2012

 

2013

 

2014

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

 

 

(In thousands)

 

Cayman Islands

 

—

 

—

 

—

 

—

 

USA

 

—

 

—

 

—

 

—

 

Hong Kong

 

—

 

—

 

—

 

—

 

PRC*

 

(4,201

)

(4,885

)

(54,944

)

(8,855

)

British Virgin Islands

 

—

 

—

 

—

 

—

 

Total

 

(4,201

)

(4,885

)

(54,944

)

(8,855

)

 

*                    Certain of our PRC entities were entitled to tax holiday as new software development enterprise or to the preferential income tax rate of 15% as high new technology enterprise.  For details, see page F-49 of this annual report.

 


 

*                                         *                                         *

 

The Company hereby acknowledges that

 

·                                the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

 

·                                Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

 

·                                the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

 

If you have any additional questions or comments regarding the 2014 Form 20-F, please contact the undersigned at +86-10-6292-7779 or the Company’s U.S. counsel, Z. Julie Gao of Skadden, Arps, Slate, Meagher & Flom LLP at +852 3740-4863.

 

 

Very truly yours,

 

 

 

 

 

/s/ Ka Wai Andy Yeung

 

Ka Wai Andy Yeung

 

Chief Financial Officer

 

cc:                                Sheng Fu, Chief Executive Officer and Director, Cheetah Mobile Inc.

Z. Julie Gao, Esq., Partner, Skadden, Arps, Slate, Meagher & Flom LLP

King Li, Partner, Ernst & Young Hua Ming LLP

Will H. Cai, Esq., Partner, Skadden, Arps, Slate, Meagher & Flom LLP