Hollysys Automation Technologies Reports Unaudited Financial Results for the Second Quarter and First Half of Fiscal Year 2015 Ended December 31, 2014

Feb 12, 2015

BEIJING, Feb. 12, 2015 /PRNewswire/ --

First Half of Fiscal Year 2015 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $50.7 million, an increase of 9.6% compared to the comparable prior year period.
  • Total revenues were $271.0 million, an increase of 1.6% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 39.0%, compared to 34.1% from the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.86, an increase of 7.5% compared to the comparable prior year period.
  • Net cash provided by operating activities of $23.2 million for the first half of fiscal year 2015.
  •  The total amount of cash and cash equivalents and time deposits with original maturities over three months were $215.8 million, an increase of 43.8% compared to the comparable prior year period..
  • DSO of 192 days, compared to 167 days from the comparable prior year period.
  • Inventory turnover days of 48 days, compared to 33 days from the comparable prior year period.

Second Quarter of Fiscal Year 2015 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $23.6 million, a decrease of 9.1% and 13.2% compared to the comparable prior year period and last quarter respectively.
  • Total revenues were $130.3 million, a decrease of 15.1% compared to the comparable prior year period and a decrease of 7.4% compared to last quarter.
  • Non-GAAP gross margin was at 38.3%, compared to 32.3% from the comparable prior year period, and 39.6% from last quarter.
  • Non-GAAP diluted EPS were at $0.40, a decrease of 11.1% and 14.9% compared to the comparable prior year period and last quarter respectively.
  • Net cash provided by operating activities of $24.0 million for the current quarter.
  • Integrated Contracts Backlog was $433.7 million, a decrease of 13.8% compared to the comparable prior year period and a decrease of 12.5% compared to last quarter.
  • Quarterly DSO of 206 days, compared to 156 days from the comparable prior year period, and 176 days from last quarter.
  • Inventory turnover days of 52 days, compared to 27 days from the comparable prior year period, and 41 days from last quarter.

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 2015 second quarter and first half ended on December 31, 2014 (see attached tables). The management of Hollysys, stated: "In the second quarter and last month, we achieved solid financial and operational result amid the weak general economic environment and made quite a few achievements and new contract wins, here I would like to discuss some key events during this quarter:

In industrial automation business, during this quarter, we continuously insisted in executing our strategies to vertically penetrate the high-end industrial automation market and provide more complete solutions horizontally. In the end of January 2015, we signed a significant contract to provide our Distributed Control System ("DCS") to 2*1000 MW Supercritical Coal Fire Power Generating Units for Guohua Shouguang Power Plant in Shandong Province; there are more than 40,000 points to be controlled in this project. Hollysys won this project from fierce competition with multinational and local competitors, which demonstrate our technology and firm our market position in the high-end coal fire power market in China.

Besides high-end market penetration, Hollysys also focused on reallocating our resources and putting more efforts in comparably high growth industries such as medical industry, food and beverage industry and environmental protection related industries, and reducing the resources on no growth or even declining industries such as cement manufacturing, metallurgy and etc. We were also focusing on building strong after-sale department and set long-term goals on improving after-sale services. Our solution in reducing waste emission and environment protection proved successful.

Externally, with China becoming an aging society and labor shortage tending to be a bigger problem, China is putting more efforts in automation to replace labor and improve efficiency to reduce emission and protect environment. We believe we will financially benefit more in the long run. Even though in the short term we got pressure under the current weak external environment, we are confident of the long term industrial automation growth.

Going forward, we will continue to expand our sales force and allocate more resources to high-growth industries, penetrate further into high-end market while increasing market share in the low to mid-end market, expand our products supply such as software and safety protection solution, increase our overall market share and grow the business in the industrial automation leveraging our advanced technologies, experienced professionals, profound industry expertise, customization and innovation capability.

In rail transportation, this quarter's rail revenue performance is because of its revenue's quarterly volatility due to the sizable contract signing process and afterwards revenue recognition. We are still very confident of the whole fiscal year's strong rail revenue performance. And excitingly, we achieved a few sizable contract wins in the recent past few months which will contribute to rail revenue afterwards.

In December 2014, we won our first contract to provide the CTCS-2 Train Control Centers with Automatic Train Operation ("ATO") technology to Foshan - Zhaoqing intercity high-speed railway line, one of the first two intercity high-speed railway lines with ATO technology currently open for bidding in China. Even though the contract size is not large, which is RMB 18.8 million or USD 3.1 million for this line of 79.7 km, this contract win demonstrates our leading technology, opens the gate to gain more ATO technology based intercity high-speed rail signaling system contracts in the future, lays the foundation for winning ATP with ATO function contracts of following projects, accumulates experience of C2+ATO type lines, and helps the company to further penetrate China's  future intercity high-speed rail market;

Besides, at the end of January 2015, we signed a very sizable contract to provide ATP equipment and system for two batches of high-speed trains in 200km/h and 300km/h running speed valued at RMB 580.0 million or USD 95.0 million, which demonstrates our solid technology capability and solid market position. The products delivery is expected to be finished around June 2015.

What's more, we also worked to expand our rail products supply such as track circuit. We have finished one year testing of this product and the official admission progress and got the permit to enter track circuit market. We are expecting to gain our first track circuit contract in calendar year 2015.

In addition, in December quarter 2014 we finished quite a few important high-speed rail projects and assisted the successful operation of Lanzhou-Xinjiang High-speed Rail Line, Qingdao-Rongcheng High-speed Rail Line, Guiyang-Guangzhou High-speed Rail Line Guiyang-Congjiang Section. We felt honored and excited in contributing for China's national rail construction and assisting in these artery lines' successful operation.

For subway business, we are following both domestic and overseas opportunities in both subway SCADA and subway signaling projects, we will continue to deliver quality works and work closely with subway authorities in the future to promote our SCADA system and future subway signaling technologies both in China and abroad.

With China's tremendous rail and subway construction nationwide, there is going to be an exciting prospect for Hollysys. As a well-recognized rail signaling system provider, we are confident that with our strong R&D capability, solid execution and reliable products, Hollysys will continue to penetrate China's vast rail and subway construction market and achieve significant results.

In the mechanical and electrical solution segment, Bond and Concord delivered solid growth during this quarter given their solid local market position, abundant customer resources and strong execution in Southeast Asia. For the overseas industrial automation and rail transportation expansion, we are sending qualified and experienced engineers from China to overseas, and recruiting local engineers to expand our overseas team. We have also established offices in Dubai and India to further expand our overseas business. With our proprietary technology and products, industry expertise and strong competitive advantages, together with our expanded local channels through Bond and Concord, we will continue to make exciting achievements in the international market in both industrial and rail transportation fields, and create value for our shareholders."

The Second Quarter and First Half of Fiscal Year 2015 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


Fiscal year ended



Dec 31, 2014

Dec 31, 2013

%
Change


Dec 31, 2014

Dec 31, 2013

%
Change










Revenues

$

130,296

153,408

(15.1)%

$

270,959

266,639

1.6%

    Integrated contract revenue

$

119,014

146,400

(18.7)%

$

247,505

251,922

(1.8)%

    Products sales

$

10,304

5,848

76.2%

$

19,185

12,795

49.9%

    Service rendered

$

978

1,160

(15.7)%

$

4,270

1,921

122.2%

Cost of revenues

$

80,451

103,854

(22.5)%

$

165,424

175,628

(5.8)%

Gross profit

$

49,845

49,554

0.6%

$

105,535

91,011

16.0%

Total operating expenses

$

27,762

20,189

37.5%

$

46,276

38,404

20.5%

    Selling

$

7,203

9,456

(23.8)%

$

13,975

16,053

(12.9)%

    General and administrative

$

15,466

8,909

73.6%

$

24,779

17,098

44.9%

    Research and development

$

10,109

12,240

(17.4)%

$

18,893

20,188

(6.4)%

    VAT refunds and government subsidies

$

(5,016)

(10,415)

(51.8)%

$

(11,371)

(14,934)

(23.9)%

Income from operations

$

22,083

29,365

(24.8)%

$

59,259

52,607

12.6%

Other income (expenses), net

$

713

883

(19.3)%

$

1,269

1,335

(4.9)%

Foreign exchange (losses) gains

$

30

286

(89.5)%

$

(668)

918

(172.8)%

Share of net (losses) of equity investees

$

24

(1,155)

(102.1)%

$

(2,487)

(1,479)

68.1%

Dividend income from cost investees

$

248

-

-

$

248

-

-

Interest income

$

857

728

17.8%

$

1,712

1,526

12.2%

Interest expenses

$

(336)

(249)

34.9%

$

(666)

(551)

21.0%

Income tax expenses

$

(282)

3,631

(107.8)%

$

7,133

7,424

(3.9)%

Net income attributable to non-controlling
   interest

$

325

292

11.2%

$

800

639

25.2%

Non-GAAP net income attributable to
   Hollysys Automation Technologies Ltd.

$

23,577

25,934

(9.1)%

$

50,734

46,293

9.6%

Non-GAAP basic EPS

$

0.40

0.45

(11.1)%

$

0.87

0.80

8.7%

Non-GAAP diluted EPS

$

0.40

0.45

(11.1)%

$

0.86

0.80

7.5%










Share based compensation expenses

$

466

1,192

(60.9)%

$

931

1,627

(42.8)%

Amortization of acquired intangibles

$

1,535

2,057

(25.4)%

$

3,431

3,077

11.5%

Acquisition-related incentive share
   contingent consideration fair value adjustments

$

2,389

3,987

(40.1)%

$

(117)

2,705

(104.3)%

Acquisition-related cash contingent
   consideration fair value adjustments

$

-

380

(100.0)%

$

201

537

(62.6)%

Convertible bond related fair value adjustments

$

81

-

-


81

-

-

GAAP Net income attributable to Hollysys
   Automation Technologies Ltd.

$

19,107

18,318

4.3%

$

46,206

38,347

20.5%

GAAP basic EPS

$

0.33

0.32

3.1%

$

0.79

0.67

17.9%

GAAP diluted EPS

$

0.32

0.31

3.2%

$

0.78

0.66

18.2%










Basic weighted average common shares
   outstanding


58,271,021

57,607,508

1.2%


58,267,994

57,604,683

1.2%

Diluted weighted average common shares
   outstanding


59,157,335

58,155,762

1.7%


59,129,245

58,073,331

1.8%

Operational Results Analysis for the quarter ended December 31, 2014

Comparing to the second quarter of the prior fiscal year, the total revenues for the three months ended December 31, 2014 decreased from $153.4 million to $130.3 million, representing a decrease of 15.1%. Broken down by the revenue types, integrated contracts revenue decreased by 18.7% to $119.0 million, products sales revenue increased by 76.2% to $10.3 million, and services revenue decreased by 15.7% to $1.0 million.

The Company's total revenues can also be presented in segments as shown in the following chart:



Three months ended Dec 31,




2014


2013




$

% to Total
Revenue


$

% to Total
Revenue


Industrial Automation


56.8

43.6%


65.3

42.6%


Rail Transportation Automation


33.6

25.7%


55.2

36.0%


Mechanical and Electrical Solution

37.0

28.4%


26.8

17.4%


Miscellaneous


2.9

2.3%


6.1

4.0%


Total


130.3

100.0%


153.4

100.0%


Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 38.3% for the three months ended December 31, 2014, as compared to 32.3% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 35.7%, 63.7% and 80.4% for the three months ended December 31, 2014, as compared to 30.7%, 74.2%, and 19.6% for the same period of the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 37.1% for the three months ended December 31, 2014, as compared to 31.0% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 34.4%, 63.7% and 80.4% for the three months ended December 31, 2014, as compared to 29.3%, 74.2%, and 19.6% for the same period of the prior year respectively.

Selling expenses were $7.2 million for the three months ended December 31, 2014, representing a decrease of $2.3 million or 23.8% compared to $9.5 million for the same quarter of the prior year mainly due to the Company's efforts in efficiency improvement. Presented as a percentage of total revenues, selling expenses were 5.5% and 6.2% for the three months ended December 31, 2014, and 2013, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $15.5 million for the quarter ended December 31, 2014, representing an increase of $6.6 million, or 73.6%, as compared to $8.9 million for the same period of the prior year. The increase was mainly due to an increase of $2.8 million in bad debt expenses, $2.4 million in employee compensation expenses, and $0.6 million in amortization and depreciation expenses. The increase in employee compensation expenses was mainly caused by the accrued bonus expenses. Presented as a percentage of total revenues, non-GAAP G&A expenses were 11.9% and 5.8% for quarters ended December 31, 2014 and 2013 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $15.9 million and $10.1 million for the three months ended December 31, 2014 and 2013, respectively.

Research and development expenses were $10.1 million for the three months ended December 31, 2014, a decrease of $2.1 million or 17.4% compared to $12.2 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 7.8% and 8.0% for the quarter ended December 30, 2014 and 2013, respectively.

The VAT refunds and government subsidies were $5.0 million for three months ended December 31, 2014, as compared to $10.4 million for the same period in the prior year, representing a $5.4 million or 51.8% decrease which primarily due to the decrease of the VAT refunds for $5.7 million.

The income tax (credit) expenses and the effective tax rate were ($0.3 million) and (1.5)% for the three months ended December 31, 2014, as compared to $3.6 million and 16.3% for comparable prior year period. During the second quarter of FY 2015, Beijing Hollysys & Hangzhou Hollysys were certified as HNTE effective for three years from January 1, 2014 to December 31, 2014, and are applied to the preferential EIT rate of 15%. In the current quarter, Beijing Hollysys and Hangzhou Hollysys accordingly recalculated the tax expenses accrual for calendar year 2014, based on the newly applied EIT rate of 15%, instead of 25%. Excluding the impact of the accrual adjustment for the prior fiscal year, the effective tax rate for the current period was 15.2%.

The non-GAAP net income attributable to Hollysys, which excludes non-cash share-based compensation expenses, amortization of acquired intangibles and acquisition-related consideration fair value adjustments was $23.6 million or $0.40 per diluted share based on 59.2 million shares outstanding for the three months ended December 31, 2014. This represents a 11.1% decrease over the $25.9 million or $0.45 per share based on 58.2 million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $19.1 million or $0.32 per diluted share representing an increase 4.3% over the $18.3 million or $0.31 per diluted share reported in the comparable prior year period.  

Integrated Contracts Backlog Highlights

Hollysys' backlog for integrated contracts as of December 31, 2014 was $433.7 million, representing a decrease of 12.5% compared to $495.7 million as of September 30, 2014, and a decrease of 13.8% compared to $503.3 million as of December 31, 2013. The detailed breakdown of the backlog for integrated contracts by segments is shown below:






Quarter-over-Quarter Analysis


Year-over-Year Analysis



2014-12-31


2014-09-30


2013-12-31



$

% to Total Backlog


$

% to Total Backlog


%
Change


$

% to Total Backlog


%
Change

Industrial Automation


139.3

32.1%


161.9

32.7%


(14.0%)


149.4

29.7%


(6.7%)

Rail Transportation Automation

219.7

50.7%


244.4

49.3%


(10.1%)


223.3

44.4%


(1.6%)

Mechanical and Electrical Solution

74.7

17.2%


89.4

18.0%


(16.5%)


106.5

21.1%


(29.8%)

Miscellaneous


-

0.0%


-

0.0%


-


24.1

4.8%


(100.0%)

Total


433.7

100.0%


495.7

100.0%


(12.5%)


503.3

100.0%


(13.8%)

Cash Flow Highlights

For the three months ended December 31, 2014, the total net cash inflow was $25.8 million. The net cash provided by operating activities was $24.0 million. The net cash provided by investing activities was $1.4 million. The net cash used in financing activities was $0.4 million

Balance Sheet Highlights

The total amount of cash and cash equivalents and time deposits with original maturities over three months were $215.8 million, $191.1 million, and $150.1 million as of December 31, September 30, 2014, and December 31, 2013, respectively. As of December 31, 2014, the company held $188.7 million in cash and cash equivalents and $27.1 million in time deposits with original maturities over three months.

For the three months ended December 31, 2014, Days Sales Outstanding ("DSO") was 206 days, as compared to 156 days from the comparable prior year period and 176 days from last quarter; and inventory turnover was 52 days, as compared to 27 days from the comparable prior year period and 41 days from last quarter.

Outlook for FY 2015

The management concluded, "Given our strong backlog currently on-hand and sales pipeline envisioned so far, we reiterate our guidance for fiscal year 2015 with revenue in the range of $565 million to $600 million and non-GAAP net income in the range of $94 million to $98 million."

Conference Call

Management will discuss the current status of the Company's operations during a conference call at 9:00 a.m. Beijing Time on February 13, 2015 / 8:00 p.m. U.S. Eastern Time on February 12, 2014. 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 1136057.

4001-200-539

(Mainland China)

+1-855-298-3404

(United States)

800-905-927

(Hong Kong)

+852-5808-3202

(Hong Kong)

0800-015-9725

(United Kingdom)

+44(0)20 3078 7622

(United Kingdom)

800-616-3222

(Singapore)

+65 6823 2299

(Singapore/International)

In addition, a recorded replay of the conference call will be accessible within 24 hours via Hollysys' website at: ir.hollysys.com  

About Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI)

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 3,600 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 power plant 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
December 31,


Fiscal year ended
December 31,



2014


2013


2014


2013



(Unaudited)


(Unaudited)


(Unaudited)


 (Audited)

Revenues









Integrated contract revenue

$

119,013,627

$

146,399,611

$

247,504,624

$

251,922,124

Products sales


10,304,442


5,847,987


19,184,743


12,795,251

Revenue from service


977,857


1,160,296


4,269,586


1,921,150

Total revenues


130,295,926


153,407,894


270,958,953


266,638,525










Costs of integrated contracts


78,057,783


103,468,056


161,818,340


172,894,428

Costs of products sold


3,736,156


1,510,158


5,582,662


4,130,751

Costs of services rendered


191,491


932,746


1,454,086


1,679,876

Gross profit


48,310,496


47,496,934


102,103,865


87,933,470










Operating expenses









Selling


7,202,659


9,455,667


13,974,500


16,052,732

General and administrative


15,931,931


10,100,717


25,710,830


18,725,030

Research and development


10,109,460


12,239,559


18,892,938


20,187,710

VAT refunds and government subsidies


(5,016,252)


(10,415,163)


(11,371,252)


(14,934,491)

Total operating expenses


28,227,798


21,380,780


47,207,016


40,030,981










Income from operations


20,082,698


26,116,154


54,896,849


47,902,489










Other incomes, net


(1,675,894)


(3,103,551)


1,385,899


(1,369,809)

Foreign exchange gains (losses)


30,022


285,628


(668,470)


918,292

Share of net gain (losses) of equity investees


24,277


(1,155,157)


(2,487,318)


(1,479,488)

Dividend income from cost investees


248,326


-


248,326


-

Interest income


857,086


727,502


1,711,889


1,526,306

Interest expenses


(416,870)


(629,496)


(948,105)


(1,087,617)

Income before income taxes


19,149,645


22,241,080


54,139,070


46,410,173










Income taxes expenses


(282,109)


3,630,956


7,132,730


7,423,883

Net income


19,431,754


18,610,124


47,006,340


38,986,290










Net income attributable to non-controlling interest


324,755


292,128


800,314


639,357

Net income attributable to Hollysys
   Automation Technologies Ltd. stockholders

$

19,106,999

$

18,317,996

$

46,206,026

$

38,346,933










Other comprehensive income, net of tax of nil









Translation adjustments


(55,304)


2,616,275


(1,986,255)


2,924,650

Comprehensive income


19,376,450


21,226,399


45,020,085


41,910,940










Comprehensive income attributable to non-controlling
   interest


(119,201)


308,629


356,548


665,450

Comprehensive income attributable to Hollysys
   Automation Technologies Ltd. stockholders

$

19,495,651

$

20,917,770

$

44,663,537

$

41,245,490










Net income per ordinary share:









Basic


0.33


0.32


0.79


0.67

Diluted


0.32


0.31


0.78


0.66

Weighted average ordinary shares used in income
   per share computation:









Basic


58,271,021


57,607,508


58,267,994


57,604,683

Diluted


59,157,335


58,155,762


59,129,245


58,073,331

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In US Dollars)












Dec 31,


Sep 30,





2014


2014





(Unaudited)


(Unaudited)

ASSETS






Current Assets







Cash and cash equivalents

$

188,682,777

$

162,902,989



Time deposits with maturities over three months


27,127,919


28,160,859



Restricted cash


8,150,841


8,253,800



Accounts receivable, net of allowance for doubtful accounts of $28,942,205 and
   $26,393,600 as of December 31 and September 30, 2014, respectively


305,602,392


278,767,228



Costs and estimated earnings in excess of billings, net of allowance for doubtful
   accounts of $5,730,272 and $6,162,041 as of December 31 and September 30, 2014,
   respectively


144,688,733


217,840,962



Other receivables, net of allowance for doubtful accounts of $352,119 and $302,426 as
   of December 31 and September 30, 2014, respectively


10,373,442


12,688,366



Advances to suppliers


15,256,808


14,403,497



Amounts due from related parties


26,169,275


36,785,020



Inventories


51,531,193


40,333,850



Prepaid expenses


1,097,836


830,085



Income tax recoverable


545,356


634,175



Deferred tax assets


77,549


2,869,798



Assets held for sale


-


2,795,286


Total current assets


779,304,121


807,265,915










Restricted cash


4,449,060


4,526,327



Prepaid expenses


118,874


13,356



Property, plant and equipment, net


81,763,216


80,263,697



Prepaid land leases


11,951,384


12,221,696



Acquired intangible assets, net


2,826,758


4,508,871



Investments in equity investees


12,452,704


12,361,443



Investments in cost investees


4,460,361


4,436,074



Goodwill


62,993,822


65,394,200



Deferred tax assets


4,069,646


1,906,858









Total assets


964,389,946


992,898,437








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Short-term bank loans


2,866,408


3,351,538



Current portion of long-term bank loans


13,419,360


13,290,311



Accounts payable


138,400,477


144,256,566



Construction costs payable


1,158,076


1,977,723



Deferred revenue


122,014,199


162,246,374



Accrued payroll and related expenses


17,102,400


11,651,942



Income tax payable


4,923,010


9,459,171



Warranty liabilities


5,651,796


5,330,086



Other tax payables


20,994,255


25,367,995



Accrued liabilities


24,459,038


23,890,207



Amounts due to related parties


12,316,931


10,834,417



Deferred tax liabilities


1,501,991


1,753,339



Current portion of acquisition-related consideration


15,331,731


28,174,168


Total current liabilities


380,139,672


441,583,837










Long-term bank loans


28,194,151


28,109,401



Deferred tax liabilities


1,287,743


1,648,021



Long-term warranty liabilities


2,983,027


3,048,420


Total liabilities


412,604,593


474,389,679









Commitments and contingencies


-


-









Equity







Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized;
   58,203,521 and 57,554,824 shares issued and outstanding as of December 31 and
   September 30, 2014, respectively


58,204


57,555



Additional paid-in capital


189,927,575


174,572,687



Statutory reserves


28,725,711


23,288,778



Retained earnings


293,119,714


279,449,648



Accumulated other comprehensive income


35,538,521


37,081,010


Total Hollysys Automation Technologies Ltd. stockholder's equity

547,369,725


514,449,678










Non-controlling interest


4,415,628


4,059,080


Total equity


551,785,353


518,508,758









Total liabilities and equity

$

964,389,946

$

992,898,437


 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US Dollars)










Three months ended
Dec 31, 2014


Fiscal year ended
Dec 31, 2014




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

19,431,754

$

47,006,340

Adjustments to reconcile net income to net cash provided by operating
   activities:






Depreciation of property, plant and equipment


2,256,576


4,949,793


Amortization of prepaid land leases


48,897


100,471


Amortization of intangible assets


1,534,559


3,431,271


Allowance for doubtful accounts


5,006,961


6,592,054


Gain on disposal of property, plant and equipment


140,778


933,034


Share of (gains) net loss from equity investees


(24,277)


2,487,318


Share-based compensation expenses


465,688


931,377


Deferred income tax expenses


149,825


3,314,031


Acquisition-related consideration adjustments


2,388,969


84,596


Convertible bond related fair value adjustment


80,713


80,713

Changes in operating assets and liabilities:






Accounts receivable


(32,463,766)


(54,025,018)


Costs and estimated earnings in excess of billings


73,818,024


34,698,079


Inventories 


(11,011,822)


(16,293,609)


Advances to suppliers


(802,892)


(3,623,355)


Other receivables


2,231,579


535,844


Deposits and other assets


(297,916)


2,822,482


Due from related parties


10,737,047


(2,142,077)


Accounts payable


(5,422,001)


3,690,341


Deferred revenue


(40,685,110)


(9,022,754)


Accruals and other payable


3,849,566


2,007,965


Due to related parties


1,460,677


8,306,492


Income tax payable


(4,427,103)


(6,939,212)


Other tax payables


(4,506,972)


(6,760,116)


Net cash provided by operating activities


23,959,754


23,166,060







Cash flows from investing activities:






Time deposits placed with banks


135,580


(3,273,355)


Purchases of property, plant and equipment


(547,963)


(1,812,953)


Proceeds from disposal of property, plant and equipment


1,180,317


1,249,992


Maturity of time deposits


611,626


3,985,495


Acquisition of shares of an equity investee


-


(14,600,000)


Net cash provided by (used in) investing activities


1,379,560


(14,450,821)







Cash flows from financing activities:






Proceeds from short-term bank loans


3,121,792


6,127,551


Repayments of short-term bank loans


(3,478,531)


(7,552,555)


Proceeds from long-term bank loans


172,891


722,952


Proceeds from convertible bond


-


20,000,000


Repayments of long-term bank loans


(228,919)


(2,410,023)


Net cash (used in) provided by financing activities


(412,767)


16,887,925








Effect of foreign exchange rate changes


853,241


920,515


Net increase in cash and cash equivalents

$

25,779,788

$

26,523,679








Cash and cash equivalents, beginning of period

$

162,902,989

$

162,159,098


Cash and cash equivalents, end of period


188,682,777


188,682,777

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 non-cash share-based compensation expenses, which is calculated based on the number of shares or options granted and the fair value as of the grant date, amortization of acquired intangibles, acquisition-related consideration fair value adjustments and convertible bond related fair value adjustment. They 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 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


Fiscal year ended




Dec 31,


Dec 31,




2014


2013


2014


2013




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)











Cost of integrated contracts

$

78,057,783

$

103,468,056

$

161,818,340

$

172,894,428

Less: amortization of acquired intangibles


1,534,560


2,056,569


3,431,271


3,077,112

Non-GAAP cost of integrated contracts

$

76,523,223

$

101,411,486

$

158,387,069

$

169,817,316











General and administrative expenses

$

15,931,931

$

10,100,717

$

25,710,830

$

18,725,030

Less: Share-based compensation expenses


465,688


1,191,902


931,377


1,627,466

Non-GAAP general and administrative expenses

$

15,466,243

$

8,908,815

$

24,779,453

$

17,097,564











Other (expenses) income, net

$

(1,675,894)

$

(3,103,551)

$

1,385,899

$

(1,369,809)

Add: acquisition-related incentive share contingent
   consideration fair value adjustments


2,388,969


3,986,737


(116,515)


2,704,833

Non-GAAP other income, net

$

713,075

$

883,186

$

1,269,384

$

1,335,024











Interest expenses

$

(416,870)

$

(629,496)

$

(948,105)

$

(1,087,617)

Add: acquisition-related cash consideration adjustments


-


380,376


201,111


537,038

Add: convertible bond related fair value adjustment


80,713


-


80,713


-

Non-GAAP Interest expenses

$

(336,157)

$

(249,120)

$

(666,280)

$

(550,579)











Net income attributable to Hollysys Automation
   Technologies Ltd.
 stockholders

$

19,106,999

$

18,317,996

$

46,206,026

$

38,346,933

Add:










Share based compensation expenses


465,688


1,191,902


931,377


1,627,466


Amortization of acquired intangible assets


1,534,560


2,056,569


3,431,271


3,077,112


Acquisition-related consideration adjustments


2,388,969


4,367,114


84,596


3,241,871


Convertible bond related fair value adjustment


80,713


-


80,713


-

Non-GAAP net income attributable to Hollysys
   Automation Technologies Ltd. stockholders

$

23,576,928

$

25,933,581

$

50,733,984

$

46,293,382












Weighted average number of basic ordinary shares


58,271,021


57,607,508


58,267,994


57,604,683


Weighted average number of diluted ordinary shares


59,157,335


58,155,762


59,129,245


58,073,331

Non-GAAP basic earnings per share

$

0.40

$

0.45

$

0.87

$

0.80

Non-GAAP diluted earnings per share

$

0.40

$

0.45

$

0.86

$

0.80

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hollysys-automation-technologies-reports-unaudited-financial-results-for-the-second-quarter-and-first-half-of-fiscal-year-2015-ended-december-31-2014-300035096.html

SOURCE Hollysys Automation Technologies, Ltd


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