Hollysys Automation Technologies Reports Unaudited Financial Results for Fiscal Year 2011 Third Quarter Ended March 31, 2011

PR Newswire
BEIJING
May 9, 2011

BEIJING, May 9, 2011 /PRNewswire-Asia-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for its fiscal 2011 third quarter ended March 31, 2011 (see attached tables).

Financial Highlights

  • Quarterly revenues of $55.8 million, representing an increase of 67.2% compared to $33.4 million year-over-year
  • Gross margin at 40.3%, as compared to 37.2% year-over-year, and 36.0% quarter-over-quarter
  • Non-GAAP net income attributable to Hollysys of $9.6 million, as compared to $5.2 million and a 83.6% increase year-over-year
  • Diluted EPS at $0.17 reported for the quarter, as compared to $0.10 year-over-year
  • Backlog of $280.9 million as of March 31, 2011, a 15.9% increase compared to $242.3 million year-over-year
  • Quarterly DSO of 156 days, as compared to 192 days year-over-year
 

Dr. Changli Wang, Chairman and CEO of Hollysys, stated: "We are pleased to report another stellar quarter with solid financial and operational performance. I would like to take this opportunity to discuss some of the key events that took place during this quarter."

"In our industrial automation business, we achieved a significant breakthrough in successful commissioning of our proprietary DCS at Guohua Taishan Thermal Power Plant. This is the first-ever successful application of China-made large-scale DCS for 1 GW ultra-supercritical thermal power station in China. The mile-stone success reference will further widen our opportunities in high-end thermal power market segment. We will continue to leverage on our proprietary technology to provide better value to our customers in high-end markets, while increasing our foot-prints and coverage in low-end to mid-end markets to strive to be the market leader in China's burgeoning industrial automation market.

Our high-speed rail business also showed strong momentum in signing a US$ 24.3 million 200-250km/h ATP contract in April. Excluding this newly awarded contract of US$24.3 million, our high-speed rail backlog was reported at a high level of US$ 103 million as of March 31, 2011, which we believe would be mostly realized during the next twelve to fifteen months. To put this backlog balance in perspective, our reported high-speed rail backlog was fluctuating in the range of US$42 million and US$68 million between June 30, 2008 and September 30, 2010. With approximately 17,000 km of high-speed rail tracks under construction and the newly announced budget of RMB 2.8 trillion for the next five years, China is still investing heavily in building its high-speed rail network for the next five years as the next five year plan budget represents a significant increase compared to the actual spending of approximately RMB 1.9 trillion for the past five year. Ministry of Rail of China is planning to invest RMB 0.745 trillion in building rail network for 2011 and will have 45,000 km of high-speed rail network in operation by the end of 2015. We believe there is still a huge potential in high-speed rail signaling market for leading players like Hollysys to capture going forward. Driven by low carbon emission initiative internationally, we are also eyeing international opportunities to further increase our rail technology and product footprints. Hollysys will continuously execute on its well-set strategy in rail automation market, both national and metro, to strive to be a leading player in this field."

Dr. Wang continued: "In our nuclear business, we were encouraged to see the continuous flow of new orders from China Guangdong Nuclear Power Holding Co to our 50% nuclear JV for automation and control related services of #3 and #4 reactors of Yangjiang nuclear power station, of which the conventional island automation and control system is designed to be based on Hollysys proprietary HOLLiAS-N platform. This new order brought our nuclear JV's backlog to aggregated 14 reactors, which we believe will continuously flow to Hollysys within the next 24 months. Given the recent incident in Japan, the Management believes that China will have to rely on nuclear as a clean, economical power source compared to traditional coal-fired energy, and the heightened safety consciousness would benefit China's nuclear industry in a long run. With a 50% holding JV in place with the most leading nuclear station builder and operator in China, Hollysys will continuously enjoy its privileged position in China's nuclear automation and control market. "

Fiscal Year 2011 Third Quarter Unaudited Financial Results Summary

To facilitate a clear understanding of Hollysys operational result, a summary of unaudited non-GAAP financial results is shown as below:

In USD thousands, except share numbers and EPS

   
   

Three Months ended

 

Nine Months ended

 
   

March 31, 2011

March 31, 2010

%
Change

 

March 31, 2011

March 31, 2010

%
Change

 
                   

Revenues

$

55,765

33,362

67.2%

$

190,979

117,718

62.2%

 

   Integrated Contract Revenue

$

52,426

31,262

67.7%

$

180,998

111,102

62.9%

 

   Products Sales

$

3,339

2,100

59.0%

$

9,981

6,616

50.8%

 

Cost of Revenues

$

33,268

20,938

58.9%

$

120,525

76,691

57.2%

 

Gross Profit

$

22,497

12,424

81.1%

$

70,454

41,027

71.7%

 

Total Operating Expenses

$

12,707

6,563

93.6%

$

33,751

17,793

89.7%

 

   Selling

$

5,320

2,740

94.2%

$

14,275

9,039

57.9%

 

   General and Administrative

$

4,885

2,435

100.6%

$

13,370

8,876

50.6%

 

   Research and Development

$

3,854

2,963

30.1%

$

14,628

9,212

58.8%

 

   VAT refunds and government subsidy

$

(1,352)

(1,575)

(14.1)%

$

(8,522)

(9,334)

(8.7)%

 

Income from Operations

$

9,790

5,861

67.1%

$

36,703

23,234

58.0%

 

Other income (expense), net

$

(62)

(109)

(42.3)%

$

(616)

(63)

860.3%

 

Gain on disposal of an equity investee

$

23

-

 

$

1,451

-

   

Share of net gains of equity investees

$

406

44

816.8%

$

2,360

644

266.2%

 

Interest expense, net

$

(447)

(352)

27.0%

$

(1,168)

(948)

23.2%

 

Income Tax Expenses

$

169

190

(11.2)%

$

3,811

1,112

242.9%

 

Non-GAAP Net income attributable to non-controlling interest

$

(87)

11

(918.7)%

$

(75)

1,805

(104.2)%

 

Non-GAAP Net Income attributable to Hollysys Automation Technologies Ltd.

$

9,628

5,243

83.6%

$

34,994

19,950

75.4%

 

Basic Non-GAAP EPS

$

0.18

0.10

70.4%

$

0.64

0.40

61.7%

 

Diluted  Non-GAAP EPS

$

0.17

0.10

71.6%

$

0.64

0.39

62.4%

 
                   

Stock-based Compensation Cost

$

135

131

2.6%

$

396

393

0.9%

 

Net income attributable to Hollysys Automation Technologies Ltd.(GAAP)

$

9,493

5,112

85.7%

$

34,598

19,557

76.9%

 

Basic GAAP EPS

$

0.17

0.10

72.3%

$

0.64

0.39

63.1%

 

Diluted GAAP EPS

$

0.17

0.10

73.6%

$

0.63

0.39

63.7%

 
                   

Basic Weighted Average Common Shares Outstanding

 

54,671,818

50,727,316

7.8%

 

54,451,063

50,200,363

8.5%

 

Diluted Weighted Average Common Shares Outstanding

 

55,055,393

51,460,003

7.0%

 

54,876,540

50,793,407

8.0%

 
                 

 

Operational Results Analysis for the three months ended March 31, 2011

For the three months ended March 31, 2011, total revenues increased by 67.2% to $55.8 million, from $33.4 million in the comparable prior fiscal year period.  Of the total revenues, revenue from integrated contracts increased by 67.7% to $52.4 million, compared to $31.3 million for the same period of the prior year.  The Company's integrated contract revenue by segment was as followings:

(In USD million)

   
   

Three months ended March 31,

 

Nine months ended March 31,

 
   

2011

 

2010

 

2011

 

2010

 
   

$

% to Total
Revenue

 

$

% to Total
Revenue

 

$

% to Total
Revenue

 

$

% to Total
Revenue

 

Industrial Automation

 

24.9

47.4%

 

16.4

52.5%

 

90.2

49.8%

 

70.2

63.2%

 

Rail Automation

 

14.5

27.7%

 

6.0

19.0%

 

47.6

26.3%

 

19.8

17.8%

 

Subway Automation

 

11.8

22.5%

 

8.0

25.7%

 

39.1

21.6%

 

13.7

12.3%

 

Nuclear automation and miscellaneous

 

1.2

2.4%

 

0.9

2.8%

 

4.1

2.3%

 

7.4

6.7%

 

Total

 

52.4

100.0%

 

31.3

100.0%

 

181.0

100.0%

 

111.1

100.0%

 
                         

 

As a percentage of total revenues, overall gross margin was 40.3% for the three months ended March 31, 2011, as compared to 37.2% for the same period of last year. The gross margin for integrated contracts and product sales were 38.8% and 65.1% for the three months ended March 31, 2011, as compared to 33.8% and 88.4% for the same period of last year respectively. The gross margin increase was mainly due to higher gross margin in rail and subway businesses, as a result of a few higher margin projects or portion of projects being recognized in the quarter.

For the three months ended March 31, 2011, selling expenses were $5.3 million, compared to $5.4 million quarter over quarter, and $2.7 million year over year. The increased was mainly due to the Company's expanded sales network and increased selling staffs.  As a percentage of total revenues, selling expenses were 9.5% and 8.2% for the three months ended March 31, 2011 and 2010, respectively.  On a cumulative basis for nine months ended March 31, 2011, selling expenses were $14.3 million and 7.5% of the total revenue, which is in line with our historical pattern.

General and administrative expenses, excluding non-cash stock-based compensation expense, were $4.9 million for the quarter ended March 31, 2011, compared to $4.7 million quarter over quarter, and $2.4 million year over year. As a percentage of total revenues, G&A expenses were 8.8% and 7.3% for the three months ended March 31, 2011 and 2010, respectively. On a cumulative basis for nine months ended March 31, 2011, general and administrative expenses were $13.4 million and 7% of the total revenue, which is in line with our historical pattern. Including the non-cash stock-based compensation cost of $134,388 and $131,019, general and administrative expenses were 5.0 million and 2.6 million for the quarter ended March 31, 2011 and 2010, respectively. The slight increase in stock-based compensation was mainly due to newly issued restricted stock compensation to two independent directors on appointment term renewal basis.

Research and development expenses were $3.9 million for the three months ended March 31, 2011, compared to $3.0 million for the same period of last year, increased by $0.9 million, or 30.1%, mainly due to the Company's increased R&D activities. As a percentage of total revenue, R&D expenses were 6.9% and 8.9% for three months ended March 31, 2011 and 2010, respectively. On a cumulative basis for nine months ended March 31, 2011, research and development expenses were $14.6 million and 7.7% of the total revenue.

The share of net gains from equity investees were $0.4 million for the three months ended March 31, 2011, of which, $0.3 million was from Beijing Techenergy Ltd., the 50/50 joint venture between Hollysys and China Guangdong Nuclear Power Corp., that mainly engages in providing automation and control products and services to China's nuclear industry.

The income tax expenses were $0.2 million the three months ended March 31, 2011, compared to $0.2 million for the prior year period. The effective tax rate was 1.8% and 3.6% for the three months ended March 31, 2011, and 2010, respectively.

For the three months ended March 31, 2011, the non-GAAP net income excluding non-cash stock compensation cost was $9.6 million or $0.17 per diluted share based on 55 million shares outstanding. This represents an increase of $4.4 million, or 83.6%, over the $5.2 million, or $0.10 per share based on 51 million shares outstanding, reported in the prior year period. On a GAAP basis, net income attributable to Hollysys was $9.5 million, or $0.17 per diluted share representing an increase of $4.4 million, or 85.7%, over the $5.1 million, or $0.10 per share reported in the prior year period.

Backlog Highlights

Hollysys' backlog as of March 31, 2011 was $280.9 million, compared to $288.5 million on December 31, 2010, and $242.3 million on March 31, 2010. The detailed breakdown of the backlog by segment is as followings:

(In USD million)

   
         

Quarter-over-Quarter Analysis

 

Year-over-Year Analysis

 
   

2011-3-31

 

2010-12-31

     

2010-3-31

     
   

$

% to
Total
Backlog

 

$

% to
Total
Backlog

 

%
Change

 

$

% to
Total
Backlog

 

%
Change

 

Industrial Automation

 

91.5

32.6%

 

81.6

28.3%

 

12.1%

 

62.7

25.9%

 

45.9%

 

Rail Automation

 

102.9

36.6%

 

112.3

38.9%

 

-8.4%

 

53.8

22.2%

 

91.3%

 

Subway Automation

 

71.7

25.5%

 

81.0

28.1%

 

-11.5%

 

115.0

47.4%

 

-37.7%

 

Nuclear automation and miscellaneous

 

14.8

5.3%

 

13.6

4.7%

 

8.9%

 

10.8

4.5%

 

36.5%

 

Total

 

280.9

100.0%

 

288.5

100.0%

 

-2.6%

 

242.3

100.0%

 

15.9%

 
                           

 

In backlog segment breakdown, both industrial automation backlog and nuclear automation backlog set a historical high in Hollysys' history.

Cash Flow Highlights

The net cash used in operating activities was $3.9 million for the three months ended March 31, 2011, mainly due to increased inventories, which was built up for one material high-speed rail project to enable the Company to meet the required delivery deadline. This project is expected to be completed delivery in June quarter. Including investing and financing activities, the total net cash inflow for this quarter was $0.9 million.

Balance Sheet Highlights

As of March 31, 2011, Hollysys' cash and cash equivalents were $95.9 million, compared to $95.0 million on December 31, 2010. Days Sales Outstanding ("DSO") for this quarter is 156 days, as compared to 192 days year-over-year and 104 days quarter-over-quarter. Inventory turnover is 101 days for the three months ended March 31 2011, as compared to 94 days for the prior year period.

Outlook for FY 2011

Dr. Wang concluded, "Given our strong financial performance to date and backlog currently on-hand, we are again revising up our fiscal 2011 revenues and net income guidance from $243M to $247M and $39 million to $41 million to $255 million to $259 million and $41 million to 42 million respectively. It is worth noting that this is the second time in a row that management has to revise up the previously provided fiscal year guidance. The management has taken note of recent pressure on Company's stock price due to market conditions caused by misperception and firmly believes that our stock price will eventually reflect our intrinsic value over the longer term. Hollysys will continue to leverage on its core growth pillar foundations of its proprietary technology and strategic alliance with leading organization to penetrate and increase its market share in respective high-growth end markets. At the right conditions, Hollysys will also rely on M&A to accelerate its growth pace and penetrate into the new market, to create long-term value for our shareholders."

Conference Call

Management will discuss the current status of the Company's operations during a conference call at 9:00 AM ET/9:00 PM Beijing time on Tuesday, May 10, 2011. Interested parties may participate in the call by dialing the following numbers approximately 10 minutes before the call is scheduled to begin and ask to be connected to the Hollysys Automation Technologies conference call.  The conference call identification number is 62043796.

1-866-519-4004 (USA)

 

800-930-346 (HK)

 

+852-24750994 (HK)

 

800-819-0121 (China Landline)

 

400-620-8038 (China Mobile)

 

+ 65-67239381 (International

 
 

 

In addition, a recorded replay of the conference call will be accessible within 24 hours via Hollysys' website at: http://www.hollysys.com.sg/home/index.php/investor-relations/events-a-webcast

About Hollysys Automation Technologies, Ltd.

Hollysys Automation Technologies is a leading provider of automation and control technologies and applications in China that enables its diversified industry and utility customers to improve operating safety, reliability, and efficiency. Founded in 1993, Hollysys has approximately 3000 employees with nationwide Presence in 29 cities in China and serves over 1700 customers in the industrial, railway, subway & nuclear industries. Its proprietary technologies are applied in product lines including Distributed Control System (DCS) and Programmable Logic Controller (PLC) for industrial sector, high-speed railway signaling system of TCC (Train Control Center) and ATP (Automatic Train Protection), subway supervisory and control platform (SCADA), and nuclear conventional island automation and control system.

SAFE HARBOUR:

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical fact included herein are "forward-looking statements," including statements regarding: the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties.  Such forward-looking statements, based upon the current beliefs and expectations of Hollysys' management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements.  Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For further information, please send an email to:

 

investors@hollysys.com

 

Hollysys Automation Technologies, Ltd.

 

www.hollysys.com

 
 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

(In US Dollars)

 
                   
   

Three months ended
March 31,

 

Nine months ended
March 31,

 
   

2011

 

2010

 

2011

 

2010

 
   

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

Revenues

                 

Integrated contract revenue

$

52,426,094

$

31,261,552

$

180,997,840

$

111,101,929

 

Products sales

 

3,339,012

 

2,100,144

 

9,980,879

 

6,616,482

 

Total revenues

 

55,765,106

 

33,361,696

 

190,978,719

 

117,718,411

 
                   

Cost of integrated contracts

 

32,102,736

 

20,694,888

 

115,984,582

 

74,639,421

 

Cost of products sold

 

1,165,022

 

243,227

 

4,540,308

 

2,052,009

 

Gross profit

 

22,497,348

 

12,423,581

 

70,453,829

 

41,026,981

 
                   

Operating expenses

                 

Selling

 

5,320,126

 

2,739,835

 

14,274,548

 

9,038,955

 

General and administrative

 

5,019,553

 

2,566,057

 

13,766,858

 

9,269,398

 

Research and development

 

3,854,212

 

2,963,496

 

14,628,051

 

9,212,101

 

VAT refunds and government subsidy

 

(1,351,983)

 

(1,574,613)

 

(8,522,489)

 

(9,334,483)

 

Total operating expenses

 

12,841,908

 

6,694,775

 

34,146,968

 

18,185,971

 
                   

Income from operations

 

9,655,440

 

5,728,806

 

36,306,861

 

22,841,010

 
                   

Other income, net

 

(62,881)

 

(108,918)

 

(615,693)

 

(64,117)

 

Gain on disposal of an equity investee

 

23,086

 

-

 

1,450,627

 

-

 

Share of net gains of equity investees

 

406,303

 

44,318

 

2,359,630

 

644,292

 

Interest expense, net

 

(447,235)

 

(352,039)

 

(1,167,705)

 

(947,571)

 

Income before income taxes

 

9,574,713

 

5,312,167

 

38,333,720

 

22,473,614

 
                   

Income taxes expenses

 

168,574

 

189,778

 

3,811,422

 

1,111,584

 

Net income

 

9,406,139

 

5,122,389

 

34,522,298

 

21,362,030

 
                   

Less: Net income attributable to non-controlling interest

 

(87,072)

 

10,636

 

(75,428)

 

1,804,930

 

Net income attributable to Hollysys Automation Technologies Ltd.

$

9,493,211

$

5,111,753

$

34,597,726

$

19,557,100

 
                   

Weighted average number of common shares

 

54,671,818

 

50,727,316

 

54,451,063

 

50,200,363

 
                   

Weighted average number of diluted common shares

 

55,055,393

 

51,460,003

 

54,876,540

 

50,793,407

 
                   

Basic earnings per share attributable to Hollysys Automation Technologies Ltd.

 

0.17

 

0.10

 

0.64

 

0.39

 
                   

Diluted earnings per share attributable to Hollysys Automation Technologies Ltd.

 

0.17

 

0.10

 

0.63

 

0.39

 
                   

Other comprehensive income

                 

Net income

 

9,406,139

 

5,122,389

 

34,522,298

 

21,362,030

 

Translation adjustments

 

2,461,800

 

31,923

 

7,894,021

 

149,811

 

Comprehensive income

 

11,867,939

 

5,154,312

 

42,416,319

 

21,511,841

 
                   

Less: Comprehensive income attributable to non-controlling interest

 

(79,906)

 

12,355

 

(47,166)

 

1,825,598

 

Comprehensive income attributable to Hollysys Automation Technologies Ltd.

$

11,947,845

$

5,141,957

$

42,463,485

$

19,686,243

 
                 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

 

CONSOLIDATED BALANCE SHEETS

 

(In US Dollars)

 
               
       

March 31,

 

December 31,

 
       

2011

 

2010

 
       

(Unaudited)

 

(Unaudited)

 

ASSETS

         
 

Current Assets

         
   

Cash and cash equivalents

$

95,879,217

$

94,952,089

 
   

Contract commitment deposit in banks

 

6,389,531

 

6,194,005

 
   

Accounts receivable, net of allowance for doubtful accounts of $10,092,861 and $9,793,698

 

86,731,112

 

86,246,393

 
   

Cost and estimated earnings in excess of billings, net of allowance for doubtful accounts of $1,252,882 and $1,131,539

 

86,072,030

 

84,607,121

 
   

Other receivables, net of allowance for doubtful accounts of $195,186 and $153,043

 

4,710,432

 

3,708,422

 
   

Advances to suppliers

 

8,507,834

 

15,222,850

 
   

Amount due from related parties

 

12,360,848

 

11,783,932

 
   

Inventories, net of provision of $2,441,954 and $2,183,416

 

39,661,665

 

30,097,403

 
   

Prepaid expenses

 

1,009,817

 

964,330

 
   

Deferred tax assets

 

1,374,861

 

707,023

 
   

Assets held for sale

 

8,830,015

 

8,741,354

 
   

Income tax recoverable

 

1,021,787

 

-

 
 

Total current assets

 

352,549,149

 

343,224,922

 
               
 

Property, plant and equipment, net

 

61,430,634

 

61,507,308

 
 

Long term investments

 

17,099,657

 

16,690,181

 
 

Deferred tax assets

 

725,155

 

730,260

 
               
 

Total assets

 

431,804,595

 

422,152,671

 
               

LIABILITIES AND STOCKHOLDERS' EQUITY

         
 

Current liabilities

         
   

Short-term bank loans

 

4,464,801

 

489,801

 
   

Current portion of long-term loans

 

4,194,375

 

3,019,825

 
   

Accounts payable

 

58,987,254

 

61,646,943

 
   

Deferred revenue

 

36,551,287

 

35,679,412

 
   

Accrued payroll and related expense

 

4,436,779

 

6,440,471

 
   

Income tax payable

 

3,251,754

 

5,310,560

 
   

Warranty liabilities

 

2,383,474

 

2,298,221

 
   

Other tax payables

 

11,906,234

 

12,772,541

 
   

Accrued liabilities

 

4,807,093

 

4,329,403

 
   

Amounts due to related parties

 

3,407,299

 

3,743,103

 
   

Deferred tax liabilities

 

-

 

555,835

 
   

Construction cost payable

 

6,885,517

 

6,817,059

 
 

Total current liabilities

 

141,275,867

 

143,103,174

 
               
   

Long-term bank loans

 

33,173,693

 

34,727,989

 
               
 

Total liabilities

 

174,449,560

 

177,831,163

 
               
 

Commitments and contingencies

         
               
 

Stockholder's equity

         
   

Common stock, par value $0.001 per share, 100,000,000 shares authorized, 54,692,129 and 54,454,129 shares issued and outstanding

 

54,693

 

54,455

 
   

Additional paid-in capital

 

140,218,045

 

139,052,695

 
   

Appropriated earnings

 

24,380,097

 

17,396,777

 
   

Retained earnings

 

66,551,198

 

64,041,307

 
   

Accumulated comprehensive income - translation adjustments

 

25,423,303

 

22,968,669

 
 

Total Hollysys Automation Technologies Ltd. stockholder's equity

 

256,627,336

 

243,513,903

 
               
   

Non-controlling interest

 

727,699

 

807,605

 
 

Total equity

 

257,355,035

 

244,321,508

 
               
 

Total liabilities and stockholders' equity

$

431,804,595

$

422,152,671

 
   
             

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In US Dollars)

 
             
     

Three months ended
March 31, 2011

 

Nine months ended
March 31, 2011

 
     

(Unaudited)

 

(Unaudited)

 

Cash flows from operating activities:

         
 

Net income

$

9,406,139

$

34,522,298

 

Adjustments to reconcile net income to net cash

         

provided by (used in) operating activities:

         
 

Depreciation and amortization

 

1,276,817

 

3,438,104

 
 

Allowance for doubtful accounts

 

575,144

 

2,226,164

 
 

Impairment loss on long-term assets

 

-

 

176,095

 
 

Gain on disposal of property, plant and equipment

 

178,917

 

101,831

 
 

Gain on disposal of an equity investee

 

(23,086)

 

(1,450,627)

 
 

Share of net gains from equity investees

 

(406,303)

 

(2,359,630)

 
 

Amortization of expenses accrued for bond payable

 

-

 

31,879

 
 

Stock-based compensation

 

134,388

 

396,426

 
 

Deferred tax assets (liabilities), net

 

(1,201,570)

 

(407,203)

 

Changes in operating assets and liabilities:

         
 

Accounts receivable

 

394,663

 

(19,989,967)

 
 

Cost and estimated earnings in excess of billings

 

(1,586,252)

 

(25,294,840)

 
 

Inventories  

 

(9,319,296)

 

(15,264,876)

 
 

Advance to suppliers

 

6,826,048

 

2,550,191

 
 

Other receivables  

 

(999,256)

 

(434,291)

 
 

Deposits and other assets

 

(185,106)

 

(1,831,369)

 
 

Due from related parties

 

(367,894)

 

(532,554)

 
 

Accounts payable

 

(3,119,077)

 

15,761,682

 
 

Deferred revenue

 

522,922

 

1,798,244

 
 

Accruals and other payable

 

(1,504,401)

 

(346,924)

 
 

Due to related parties

 

(373,684)

 

(365,272)

 
 

Tax payable

 

(4,108,310)

 

(1,939,007)

 
 

Net cash used in operating activities

 

(3,879,197)

 

(9,213,646)

 
             

Cash flows from investing activities:

         
 

Purchase of property, plant and equipment

 

(586,829)

 

(13,852,609)

 
 

Proceeds from disposing property, plant and equipment

 

(5,069)

 

5,529

 
 

Receipt  from related parties

 

-

 

27

 
 

Proceeds from disposal of an investee

 

86,522

 

3,765,492

 
 

Dividends from an equity investee

 

-

 

91,514

 
 

Net cash used in investing activities

 

(505,376)

 

(9,990,047)

 
             

Cash flows from financing activities:

         
 

Proceeds from (Repayments of) short-term loans

 

3,959,686

 

2,939,574

 
 

Repayments of bonds payable

 

-

 

(12,201,818)

 
 

Repayments of long-term loans

 

(762,614)

 

(762,614)

 
 

Proceeds from options exercised

 

1,031,200

 

1,070,700

 
 

Net cash used in financing activities

 

4,228,272

 

(8,954,158)

 
             
 

Effect of foreign exchange rate changes

 

1,083,429

 

4,535,123

 
 

Net decrease in cash and cash equivalents

$

927,128

$

(23,622,728)

 
             
 

Cash and cash equivalents, beginning of period

$

94,952,089

$

119,501,945

 
 

Cash and cash equivalents, end of period

 

95,879,217

 

95,879,217

 
   
           

 

Reconcile GAAP Net Income to Non-GAAP Net Income

The following table provides more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

   
     

Three months ended
March 31,

 

Nine months ended
March 31,

 
     

2011

 

2010

 

2011

 

2010

 
     

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 
                     

Net income attributable to Hollysys Automation Technologies Ltd.

$

9,493,211

$

5,111,753

$

34,597,726

$

19,557,100

 

Adjustments:

                 
 

Stock-based compensation cost for options

 

134,388

 

131,019

 

396,426

 

         393,057

 

Non-Gaap Net Income attributable to Hollysys Automation Technologies Ltd.

$

9,627,599

$

5,242,772

$

34,994,152

$

19,950,157

 
                   

 

SOURCE Hollysys Automation Technologies, Ltd.

Web Site: http://www.hollysys.com


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