Hollysys Automation Technologies Reports Unaudited Financial Results for Fiscal Year 2013 Third Quarter Ended March 31, 2013

PR Newswire
BEIJING
May 16, 2013

BEIJING, May 16, 2013 /PRNewswire-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 the fiscal year 2013 third quarter ended March 31, 2013 (see attached tables).

Q3 Financial Highlights

  • Quarterly revenues of $60.4 million, representing a decrease of 8.7% compared to $66.1 million  year over year, and a decrease of 30.8% compared to $87.2 million quarter over quarter.
  • Gross margin at 43.8%, as compared to 39.3% year over year, and 32.1% quarter over quarter.
  • Non-GAAP net income attributable to Hollysys of $11.7 million, a 0.6% increase compared to $11.6 million year over year, and a 13.9% decrease compared to $13.6 million quarter over quarter
  • Non-GAAP Diluted EPS at $0.21 reported for the quarter, as compared to $0.21 year over year, and $0.24 quarter over quarter.
  • Backlog of $374.0 million as of March 31, 2013, a 6.9% decrease compared to $401.8 million year over year, and 4.0% increase compared to $359.6 million quarter over quarter.
  • Quarterly DSO of 250 days, as compared to 160 days year over year, and 161 days quarter over quarter.
  • Inventory turnover days of 78 days for the current quarter compared to 68 days year over year, and 42 days quarter over quarter.
  • The total amount of cash and cash equivalents and time deposits with original maturities over three months were $128.9 million as of the current quarter end.

Dr. Changli Wang, Chairman and CEO of Hollysys, stated: "During this quarter, we unswervingly executed our originally set strategies to further intensify our marketing efforts in industrial automation, expand sales and service network across China and enhance our market position. We are glad to see that gradual recovery and new order increase of industrial automation business, which we believe will bring solid financial performance in the upcoming quarters; New products lines including 5th Generation DCS (Distributed Control System), SIS (Safety Instrumentation system), Batch, and other advanced control systems are gradually contributing more to the revenue growth, as these new products are supplementing our total solution providing and building up recognition from end customers; New businesses, like coaling mining safety solutions and machinery level control devices, are well in track for solid growth. Even though the economic downturn still extends negative impact to our industrial automation business, we continuously outperform market growth and we are not satisfied with the results achieved. Our efforts in intensifying marketing efforts to enhance market position in low-middle end market and organizing professional teams to tackle high-end market will gradually reflect on the revenue and net income growth. Besides, we believe that the intention to reduce labor cost and energy consumption, protect the environment, improve efficiency will be the major trends and will bring us tremendous business opportunities. With our solid R&D capability and profound industry knowledge, we believe Hollysys is in a superior position as we pursue future growth in industrial automation market.

"The high-speed rail business recovery is much slower than we expected, but it will be undoubtedly recovered to its normal construction pace as China is adhering to the 12th Five Year Plan for the high-speed rail construction given China's strong demand for rail transportation. In this quarter, we signed a contract to provide the Train Control Center (TCC) and Temporary Speed Restriction Server (TSRS) to Chongqing-Lichuan high-speed rail line valued at approximately 6.54 million. Besides our efforts in aggressively penetrating domestic high-speed rail and subway market, we are also exploring the overseas high-speed rail and subway opportunities, which we believe there will be fruitful results to be yield in the near future.

"More excitingly, on April 1 this year, we successfully completed the acquisition of 100% ownership of a Singapore headquartered company, Bond Corporation Pte. Ltd. and its group of companies ("Bond") to further establish our strong foothold in Southeast Asia. Bond provides complete mechanical and electrical solutions to a wide array of industries, including factories, data centers, banks, airports, commercial centers, residential buildings and infrastructure works with strong presence in Singapore and Malaysia. We are very pleased with this highly accretive and complementary acquisition, which will assist Hollysys in penetrating to the fast growing South-East Asia area. We are also excited to be able to retain a team of seasoned professionals through this acquisition, who will form the foundation of our international team to greatly enhance Hollysys capability to tackle the international market. Going into the future, Hollysys will leverage its strong proprietary technology and its capabilities accumulated from its leading positions in China's rail and industrial segments to enter and penetrate into the international market, through both organic growth and accretive acquisitions to maximize our shareholder value."

The Third Quarter Ended March 31, 2013 Unaudited Financial Results Summary

To facilitate a clear understanding of Hollysys' operational results, 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,

2013

March 31,

2012

%

Change

 

March 31,

2013

March 31,

2012

%

Change

                 

Revenues

$

60,351

66,135

(8.7)%

 

235,623

233,587

0.9%

    Integrated contract revenue

$

56,446

61,755

(8.6)%

 

220,480

221,138

(0.3)%

    Products sales

$

3,905

4,380

(10.9)%

 

15,143

12,449

21.6%

Cost of revenues

$

33,908

40,119

(15.5)%

 

150,904

143,747

5.0%

Gross profit

$

26,442

26,016

1.6%

 

84,719

89,840

(5.7)%

Total operating expenses

$

15,484

14,114

9.7%

 

44,270

40,499

9.3%

    Selling

$

5,345

6,106

(12.5)%

 

20,024

21,148

(5.3)%

    General and administrative

$

6,364

4,934

29.0%

 

16,340

17,177

(4.9)%

    Research and development

$

7,361

5,588

31.7%

 

23,370

18,538

26.1%

    VAT refunds and government

         subsidies

$

(3,586)

(2,513)

42.7%

 

(15,463)

(16,364)

(5.5)%

Income from operations

$

10,958

11,902

(7.9)%

 

40,449

49,341

(18.0)%

Other income, net

$

52

1,029

(95.0)%

 

2,988

1,292

131.4%

Gains on disposal of long term        

    investment

$

-

2,045

(100.0)%

 

-

2,042

(100.0)%

Share of net (loss) income of equity

    investees

$

(807)

(507)

59.2%

 

(518)

(355)

46.0%

Dividend income from cost

    investees

$

-

-

-

 

830

-

100.0%

Interest income

$

684

487

40.4%

 

2,416

1,116

116.5%

Interest expenses

$

(324)

(711)

(54.4)%

 

(1,561)

(2,502)

(37.6)%

Income tax expenses (credit)

$

(1,245)

2,540

(149.0)%

 

3,356

5,741

(41.5)%

Non-GAAP net income attributable

    to non-controlling interest

$

107

77

38.3%

 

200

300

(33.5)%

Non-GAAP net income attributable

    to Hollysys Automation

    Technologies Ltd.

$

11,701

11,628

0.6%

 

41,049

44,893

(8.6)%

Basic Non-GAAP EPS

$

0.21

0.21

0.0%

 

0.73

0.81

(9.9)%

Diluted  Non-GAAP EPS

$

0.21

0.21

0.0%

 

0.73

0.81

(9.9)%

                 

Stock-based compensation expense

$

517

100

418.9%

 

1,570

414

279.0%

Net income attributable to Hollysys

    Automation Technologies

    Ltd.(GAAP)

$

11,184

11,529

(3.0)%

 

39,478

44,479

(11.2)%

Basic GAAP EPS

$

0.20

0.21

(4.8)%

 

0.70

0.80

(12.5)%

Diluted GAAP EPS

$

0.20

0.21

(4.8)%

 

0.70

0.80

(12.5)%

                 

Basic weighted average common

    shares outstanding

 

56,068,084

55,933,984

0.2%

 

56,022,512

55,547,536

0.9%

Diluted weighted average common

    shares outstanding

 

56,468,567

56,046,907

0.8%

 

56,086,042

55,742,634

0.6%

                         

Operational Results Analysis for the Third Quarter Ended March 31, 2013

For the three months ended March 31, 2013, total revenues decreased by 8.7% to $60.4 million, from $66.1 million for the same period in the prior year. Of the total revenues, revenue from integrated contracts decreased by 8.6% to $56.4 million, as compared to $61.8 million for the same period of the prior year; revenue from products sales decreased by 10.9% to $4.0 million, as compared to $4.4 million for the same period of the prior year. The Company's total revenue by segment was as follows:

   

Three months ended Mar 31,

 

Nine months ended Mar 31,

   

2013

 

2012

 

2013

 

2012

   

$

% to Total Revenue

 

$

% to Total Revenue

 

$

% to Total Revenue

 

$

% to Total Revenue

Industrial Automation

 

38.5

63.9%

 

38.6

58.3%

 

152.6

64.8%

 

141.5

60.6%

Rail Transportation

 

17.5

28.9%

 

21.7

32.8%

 

53.8

22.9%

 

72.1

30.9%

Miscellaneous

 

4.4

7.2%

 

5.8

8.9%

 

29.2

12.3%

 

19.9

8.5%

Total

 

60.4

100.0%

 

66.1

100.0%

 

235.6

100.0%

 

233.6

100.0%

As a percentage of total revenues, overall gross margin was 43.8% for the three months ended March 31, 2013, as compared to 39.3% for the same period of the prior year. The gross margin for integrated contracts and product sales were 42.5% and 62.1% for the three months ended March 31, 2013, as compared to 37.9% and 59.9% for the same period of the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin.

For the three months ended March 31, 2013, selling expenses were $5.3 million, compared to $6.1 million for the same quarter of the prior year, representing a decrease of $0.8 million or 12.5% year over year. As a percentage of total revenues, selling expenses were 8.9% and 9.2% for the three months ended March 31, 2013, and 2012, respectively.

General and administrative expenses, excluding non-cash stock-based compensation expense, were $6.4 million for the quarter ended March 31, 2013, representing an increase of $1.4 million, or 29.0%, as compared to $4.9 million for the same period of the prior year, mainly due to a increase of 1.1 million of bad debt allowance. As a percentage of total revenues, G&A expenses were 10.5% and 7.5% for the three months ended March 31, 2013 and 2012, respectively. Including the non-cash stock-based compensation cost recorded on a GAAP basis, G&A expenses were $6.9 million and $5.0 million for the three months ended March 31, 2013 and 2012, respectively.

Research and development expenses were $7.4 million for the three months ended March 31, 2013, compared to $5.6 million for the same quarter of the prior year, representing a year over year increase of $1.8 million, or 31.7%. The increase was mainly due to the Company's increased R&D activities. As a percentage of total revenues, R&D expenses were 12.2% and 8.4% for the quarter ended March 31, 2013 and 2012, respectively.

The VAT refunds and government subsidies amounted to $3.6 million for three months ended March 31, 2013, as compared to $2.5 million for the same period in the prior year, representing an increase of $1.1 million.

The income tax credit was 1.2 million for the three months ended March 31, 2013, as compared to income tax expense of $2.5 million for the same period of the prior year. During this quarter, Beijing Hollysys, one of our subsidiaries, was certified as a Key Software Enterprise for calendar year 2011 and 2012, and applied to a preferential income tax rate of 10% retroactively from January 2011 to December 2012. The company thus recognized an income tax credit of $2.7 million during this quarter. Excluding this impact, the income tax expense and the effective rate were 1.5 million and 14.5% for the three months ended March 31, 2013.

For the three months ended March 31, 2013, the non-GAAP net income attributable to Hollysys excluding non-cash stock compensation expenses was $11.7 million or $0.21 per diluted share based on 56.4 million shares outstanding. This represents a slight increase of $0.1 million, or 0.6%, over the $11.6 million, or $0.21 per share based on 56.0 million shares outstanding, reported in the prior year period. On a GAAP basis, net income attributable to Hollysys was $11.2 million, or $0.20 per diluted share representing a decrease of $0.3 million or 3.0%, over the $11.5 million, or $0.21 per diluted share reported in the prior year period. 

Backlog Highlights

Hollysys' backlog as of March 31, 2013 was $374.0 million, representing an increase of 4.0% compared to $359.6 million as of December 31, 2012, and a decrease of 6.9% compared to $401.8 million as of March 31, 2012.The detailed breakdown of the backlog by segment was as follows:

         

Quarter-over-Quarter Analysis

 

Year-over-Year Analysis

   

2013-3-31

 

2012-12-31

 

2012-3-31

   

$

% to Total Backlog

 

$

% to Total Backlog

 

%
Change

 

$

% to Total Backlog

 

%
Change

Industrial Automation

 

146.3

39.1%

 

125.4

34.9%

 

16.7%

 

144.8

36.0%

 

1.1%

Rail Transportation

 

202.9

54.3%

 

206.7

57.5%

 

(1.8%)

 

208.4

51.9%

 

(2.6%)

Miscellaneous

 

24.8

6.6%

 

27.5

7.6%

 

(9.7%)

 

48.6

12.1%

 

(49.0%)

Total

 

374.0

100.0%

 

359.6

100.0%

 

4.0%

 

401.8

100.0%

 

(6.9%)

 

Cash Flow Highlights

The net cash provided by operating activities was $13.4 million for the three months ended March 31, 2013; including investing and financing activities, the total net cash outflows for this quarter was $14.9 million, mainly due to $12.0 million deposited in banks from current accounts to time deposits with maturities between six months and one year, and $16.4 million prepaid for the acquisition of Bond Group.

Balance Sheet Highlights

The total amount of cash and cash equivalents and time deposits with original maturities over three months were $128.9 million, $133.5 million, and $126.2 million as of March 31, 2013, December 31, 2012, and March 31, 2012, respectively. Of the total $128.9 million as of March 31, 2013, cash and cash equivalents were $110.4 million, and time deposits with original maturities over three months were $18.5 million.

For the three months ended March 31, 2013, Days Sales Outstanding ("DSO") was 250 days, as compared to 160 days year over year and 161 days quarter over quarter; and inventory turnover was 78 days, as compared to 68 days year over year and 42 days quarter over quarter. The increase of DSO in the quarter was mainly due to the decrease of total revenue compared with last quarter, the account receivables as of March 31, 2013 only increased $0.1 million as compared to the end of last quarter.

Outlook for FY 2013

Dr. Wang concluded, "Due to the unexpected delay of high-speed rail orders and the weak macro-economy's impact, we are revising our previously communicated fiscal year 2013 revenue guidance of $385 million to $410 million, down to $335 million to $355 million, and non-GAAP net income guidance of $63 million to $67 million, down to $57 million to $60 million. Going into the near future, we believe with the recovery of high-speed rail construction, further penetration in the industrial automation and revenue supplement from overseas market, Hollysys is well positioned for stable and sustainable growth leveraging its leading proprietary technology, strong innovation and execution capabilities, 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 9:00 a.m. Beijing Time on May 17, 2013 / 9:00 p.m. U.S. Eastern Time on May 16, 2013. 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 46735356.

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 3,500 employees with nationwide presence in over 60 cities in China, with subsidiaries and offices in Singapore, Malaysia, Dubai, India, and serves over 5,000 customers more than 20,000 projects in the industrial, railway, subway & nuclear industries in China, South-East Asia, and the Middle East. Its proprietary technologies are applied in its industrial automation solution suite including DCS (Distributed Control System), PLC (Programmable Logic Controller), RMIS (Real-time Management Information System), HAMS (HolliAS Asset Management System), OTS (Operator Training System), HolliAS BATCH (Batch Application Package), HolliAS APC Suite (Advanced Process Control Package), SIS (Safety Instrumentation System), high-speed railway signaling system of TCC (Train Control Center), ATP (Automatic Train Protection), Subway Supervisory and Control platform, SCADA (Surveillance Control and Data Acquisition), nuclear conventional island automation and control system and other products.

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.

Contact Information:

Hollysys Automation Technologies, Ltd.
www.hollysys.com

Investor Relations
+8610-58981386
investors@hollysys.com

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In US Dollars except for per-share data)

                 
   

Three months ended

 

Nine months ended

   

March 31,

 

December 31,

   

2013

 

2012

 

2013

 

2012

   

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 (Unaudited)

Revenues

               

Integrated contract revenue

$

56,445,995

$

61,754,657

$

220,479,657

$

221,138,496

Products sales

 

3,904,716

 

4,380,008

 

15,143,279

 

12,448,646

Total revenues

 

60,350,711

 

66,134,665

 

235,622,936

 

233,587,142

                 

Cost of integrated contracts

 

32,429,992

 

38,361,214

 

145,470,976

 

139,510,271

Cost of products sold

 

1,478,315

 

1,757,506

 

5,432,623

 

4,237,085

Gross profit

 

26,442,404

 

26,015,945

 

84,719,337

 

89,839,786

                 

Operating expenses

               

Selling

 

5,344,703

 

6,105,737

 

20,023,845

 

21,147,519

General and administrative

 

6,881,032

 

5,033,217

 

17,910,059

 

17,591,141

Research and development

 

7,361,126

 

5,587,796

 

23,369,833

 

18,538,206

VAT refunds and government subsidies

 

(3,585,679)

 

(2,513,331)

 

(15,463,226)

 

(16,363,865)

Total operating expenses

 

16,001,182

 

14,213,419

 

45,840,511

 

40,913,001

                 

Income from operations

 

10,441,222

 

11,802,526

 

38,878,826

 

48,926,785

                 

Other income, net

 

51,554

 

1,029,217

 

2,988,233

 

1,291,613

Gains on disposal of long term investment

 

-

 

2,045,042

 

-

 

2,042,015

Share of net (loss) income of equity investees

 

(806,570)

 

(506,650)

 

(518,307)

 

(354,953)

Dividend income from cost investees

 

-

 

-

 

830,196

 

-

Interest income

 

683,783

 

487,005

 

2,416,221

 

1,116,120

Interest expenses

 

(323,999)

 

(710,607)

 

(1,561,305)

 

(2,501,621)

Income before income taxes

 

10,045,990

 

14,146,533

 

43,033,864

 

50,519,959

                 

Income taxes (credit) expenses

 

(1,245,065)

 

2,540,429

 

3,356,087

 

5,741,077

Net income

 

11,291,055

 

11,606,104

 

39,677,777

 

44,778,882

                 

Net income attributable to non-controlling interests

 

106,922

 

77,294

 

199,616

 

300,162

Net income attributable to Hollysys

    Automation Technologies Ltd. stockholders

$

11,184,133

$

11,528,810

$

39,478,161

$

44,478,720

                 

Other comprehensive income, net of tax

               

Foreign currency translation adjustments, net of nil

    tax

 

872,847

 

594,719

 

760,090

 

6,248,591

Comprehensive income

 

12,163,902

 

12,200,823

 

40,437,867

 

51,027,473

                 

Comprehensive income attributable to non-

    controlling interest

 

111,610

 

78,486

 

211,047

 

327,351

Comprehensive income attributable to

    Hollysys Automation Technologies Ltd. 

    stockholders

$

12,052,292

$

12,122,337

 

40,226,820

 

50,700,122

                 

Net income per ordinary share:

               

Basic

 

0.20

 

0.21

 

0.70

 

0.80

Diluted

 

0.20

 

0.21

 

0.70

 

0.80

Weighted average ordinary shares used in

    income per share computation:

               

Basic

 

56,068,084

 

55,933,984

 

56,022,512

 

55,547,536

Diluted

 

56,468,567

 

56,046,907

 

56,086,042

 

55,742,634

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In US Dollars)

             
       

March 31,

 

December 31,

       

2013

 

2012

       

(Unaudited)

 

(Unaudited)

ASSETS

       
 

Current Assets

       
   

Cash and cash equivalents

$

110,359,795

$

125,262,261

   

Time deposits with original maturities over three months

 

18,577,775

 

8,187,751

   

Restricted cash

 

3,413,890

 

3,175,576

   

Accounts receivable, net of allowance for doubtful accounts of

    $16,829,999 and $15,443,730 as of March 31,2013 and

    December 31,2012, respectively

 

166,852,870

 

168,168,878

   

Cost and estimated earnings in excess of billings, net of allowance

    for doubtful accounts of $2,122,147 and $1,489,477  as of March

    31, 2013 and December 31, 2012, respectively

 

115,370,719

 

118,625,168

   

Other receivables, net of allowance for doubtful accounts of

    $301,526 and $272,361 as of March 31, 2013 and December 31,

    2012, respectively

 

8,281,165

 

6,967,259

   

Advances to suppliers

 

6,970,029

 

6,981,527

   

Amount due from related parties

 

16,541,775

 

14,739,788

   

Inventories, net

 

28,804,797

 

25,756,160

   

Prepaid expenses

 

657,296

 

858,274

   

Income tax recoverable

 

2,839,206

 

102,655

   

Deferred tax assets

 

1,855,436

 

1,994,575

 

Total current assets

 

480,524,753

 

480,819,872

             
   

Advance payment for acquisition of a subsidiary

 

16,390,000

 

-

   

Restricted cash

 

571,227

 

1,195,548

   

Prepaid expenses

 

148,654

 

29,205

   

Property, plant and equipment, net

 

70,089,301

 

70,510,908

   

Prepaid land leases

 

6,813,099

 

6,829,996

   

Acquired intangible assets, net

 

339,696

 

371,836

   

Investments in equity investees

 

13,469,942

 

14,055,037

   

Investments in cost investees

 

3,662,343

 

3,650,290

   

Goodwill

 

27,239,280

 

27,686,774

   

Deferred tax assets

 

1,762,784

 

466,170

             
 

Total assets

 

621,011,079

 

605,615,636

             

LIABILITIES AND STOCKHOLDERS' EQUITY

       
 

Current liabilities

       
   

Current portion of long-term loans

 

7,986,000

 

7,959,768

   

Accounts payable

 

81,249,797

 

85,760,172

   

Construction cost payable

 

3,998,158

 

4,213,860

   

Deferred revenue

 

76,304,883

 

72,606,208

   

Accrued payroll and related expense

 

6,611,280

 

9,989,855

   

Income tax payable

 

3,266,278

 

3,068,458

   

Warranty liabilities

 

3,871,383

 

3,827,355

   

Other tax payables

 

20,287,484

 

18,183,202

   

Accrued liabilities

 

14,616,857

 

8,464,522

   

Amounts due to related parties

 

1,825,832

 

1,594,749

   

Deferred tax liabilities

 

213,268

 

200,452

 

Total current liabilities

 

220,231,220

 

215,868,601

             
   

Long-term bank loans

 

18,874,414

 

20,804,534

   

Deferred tax liabilities

 

126,608

 

223,368

 

Total liabilities

 

239,232,242

 

236,896,503

             
 

Commitments and contingencies

       
             
 

Equity

       
   

Ordinary shares

 

56,087

 

56,029

   

Additional paid-in capital

 

153,491,661

 

152,595,661

   

Statutory reserves

 

23,144,776

 

23,128,214

   

Retained earnings

 

170,228,187

 

159,060,872

   

Accumulated other comprehensive income

 

33,463,215

 

32,595,056

 

Total Hollysys Automation Technologies Ltd. stockholder's equity

 

380,383,926

 

367,435,832

             
   

Non-controlling interests

 

1,394,911

 

1,283,301

 

Total equity

 

381,778,837

 

368,719,133

             
 

Total liabilities and equity

$

621,011,079

$

605,615,636

 

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US Dollars)

             
       

Three months

 

Nine months

       

ended

 

ended

       

March 31, 2013

 

March 31, 2013

       

(Unaudited)

 

(Unaudited)

 

Cash flows from operating activities:

       
   

Net income

$

11,291,055

$

39,677,777

 

Adjustments to reconcile net income to net cash provided

        by (used in) operating activities:

       
   

Depreciation of property, plant and equipment

 

1,377,522

 

4,394,473

   

Amortization of prepaid land leases

 

39,371

 

117,650

   

Amortization of intangible assets

 

26,074

 

200,109

   

Allowance for doubtful accounts

 

1,979,863

 

3,121,620

   

Gain on disposal of property, plant and equipment

 

(165,429)

 

(140,263)

   

Share of net loss from equity investees

 

806,570

 

518,307

   

Stock dividends from cost investees

 

-

 

(830,196)

   

Gain on disposal of a subsidiary

 

-

 

(136,795)

   

Share based compensation expenses

 

516,858

 

1,570,403

   

Deferred income tax expenses

 

(1,234,620)

 

(2,504,290)

 

Changes in operating assets and liabilities:

       
   

Accounts receivable

 

111,624

 

(32,113,458)

   

Costs and estimated earnings in excess of billings

 

3,013,606

 

605,366

   

Inventories 

 

(2,972,436)

 

(1,880,776)

   

Advances to suppliers

 

44,503

 

3,417,638

   

Other receivables 

 

(1,342,703)

 

(874,214)

   

Deposits and other assets

 

419,993

 

1,738,305

   

Due from related parties

 

(1,927,912)

 

(653,117)

   

Accounts payable

 

(4,678,405)

 

2,268,845

   

Deferred revenue

 

3,598,932

 

16,407,831

   

Accruals and other payable

 

2,778,248

 

6,041,882

   

Due to related parties

 

224,560

 

(155,990)

   

Income tax payable

 

(2,549,241)

 

(3,064,162)

   

Other tax payables

 

2,043,456

 

1,895,967

   

Net cash provided by operating activities

 

13,401,489

 

39,622,912

             
 

Cash flows from investing activities:

       
   

Time deposits placed with banks

 

(11,999,910)

 

(17,289,447)

   

Purchases of property, plant and equipment

 

(976,126)

 

(6,264,243)

   

Maturity of time deposits

 

1,722,523

 

20,492,325

   

Acquisition of a subsidiary, net of cash acquired

 

(16,390,000)

 

(16,390,000)

   

Proceeds from disposal of a subsidiary

 

-

 

111,748

   

Net cash used in investing activities

 

(27,643,513)

 

(19,339,617)

             
 

Cash flows from financing activities:

       
   

Repayments of long-term bank loans

 

(1,992,052)

 

(5,953,382)

   

Proceeds from exercise of share options

 

379,200

 

616,200

   

Net cash used in financing activities

 

(1,612,852)

 

(5,337,182)

             
   

Effect of foreign exchange rate changes

 

952,410

 

(919,280)

   

Net (decrease) increase in cash and cash equivalents

$

(14,902,466)

$

14,026,833

             
   

Cash and cash equivalents, beginning of period

$

125,262,261

$

96,332,962

   

Cash and cash equivalents, end of period

 

110,359,795

 

110,359,795

Non-GAAP Measures

In evaluating our results, the non-GAAP measures of "Non-GAAP general and administrative expenses", "Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. stockholders", "Non-GAAP basic earnings per share", and "Non-GAAP diluted earnings per share" serve as additional indicators of our operating performance and not as a replacement for other measures in accordance with U.S. GAAP. We believe these non-GAAP measures are useful to investors, as they exclude the stock-based compensation expenses, which is calculated based on the number of shares or options granted and the fair value as of the grant date. It will not result in any cash inflows or outflows. We believe that using non-GAAP measures help our shareholders to have a better understanding of our operating results and growth prospects. In addition, given the business nature of Hollysys, it has been a common practice for investors and analysts to use such non-GAAP measures to evaluate the Company.

The following table provides a reconciliation of U.S. GAAP measures to the non-GAAP measures for the periods indicated:

     

Three months ended

 

Nine months ended

     

March 31,

 

March 31,

     

2013

 

2012

 

2013

 

2012

     

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

                   

General and administrative expenses

$

6,881,032

$

5,033,217

$

17,910,059

$

17,591,141

Minus:

               
 

Stock-based compensation cost

 

516,858

 

99,606

 

1,570,403

 

414,318

Non-GAAP general and administrative expenses

$

6,364,174

$

4,933,611

$

16,339,656

$

17,176,823

                   

Net income attributable to Hollysys Automation

     Technologies Ltd. stockholders

$

11,184,133

$

11,528,810

$

39,478,161

$

44,478,720

Add:

               
 

Stock-based compensation cost

 

516,858

 

99,606

 

1,570,403

 

414,318

Non-GAAP net income attributable to Hollysys

     Automation Technologies Ltd. stockholders

$

11,700,991

$

11,628,416

$

41,048,564

$

44,893,038

                   
 

Weighted average number of ordinary shares

 

56,068,084

 

55,933,984

 

56,022,512

 

55,547,536

 

Weighted average number of diluted ordinary shares

 

56,468,567

 

56,046,907

 

56,086,042

 

55,742,634

Non-GAAP basic earnings per share

$

0.21

$

0.21

$

0.73

$

0.81

Non-GAAP diluted earnings per share

$

0.21

$

0.21

$

0.73

$

0.81

 

SOURCE Hollysys Automation Technologies, Ltd.

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


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