Hollysys Automation Technologies Reports Unaudited Financial Results for the Third Quarter and First Nine Months of Fiscal Year 2015 Ended June 30, 2015

May 14, 2015

BEIJING, May 14, 2015 /PRNewswire/ --

Third Quarter of Fiscal Year 2015 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $29.6 million, an increase of 95.6% compared to the comparable prior year period.
  • Total revenues were $118.2 million, an increase of 23.4% compared to the comparable prior year.
  • Non-GAAP gross margin was at 46.0%, compared to 36.2% from the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.50, an increase of 92.3% compared to the comparable prior year period.
  • Net cash used in operating activities was $20.3 million for the current quarter.
  • Integrated Contracts Backlog was $498.7 million, a decrease of 17.3% compared to the comparable prior year period.
  • Quarterly DSO of 228 days, compared to 248 days from the comparable prior year period.
  • Inventory turnover days of 66 days, compared to 45 days from the comparable prior year period.

First Nine Months of Fiscal Year 2015 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $80.3 million, an increase of 30.8% compared to the comparable prior year period.
  • Total revenues were $389.2 million, an increase of 7.4% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 41.1%, compared to 34.7% from the comparable prior year period.
  • Non-GAAP diluted EPS were at $1.36, an increase of 29.5% compared to the comparable prior year period.
  • Net cash provided by operating activities of $2.9 million for the first nine month of fiscal year 2015.
  • DSO of 194 days, compared to 164 days from the comparable prior year period.
  • Inventory turnover days of 46 days, compared to 39 days from the comparable prior year period.

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 third quarter ended on March 31, 2015 (see attached tables). The management of Hollysys, stated: "In this quarter, 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 penetrate the high-end industrial automation market and provide more complete solution. In March 2015, we signed a significant contract to provide our Distributed Control System ("DCS") to 2*1000 MW ultra-supercritical Thermal Power Generating Units in Datang Sanmenxia Power Plant in Henan Province; this is the fourth contract we signed in the GW level thermal power industry, which demonstrate our leading technology and firm our market position in the high-end thermal power market in China.

Besides high-end thermal power market penetration, Hollysys also focused on penetrating into other high-end industries such as chemical, medical, food and beverage and environmental protection related industries, and providing total solution such as software solution, safety protection and critical hardware solution. We were also focusing on building strong after-sale department and setting long-term goals on improving after-sale services. Our total solution in reducing waste emission and environment protection proved successful. Even though in the short term we have pressure under the current weak external environment, but with our leading technology and proprietary customized solution, we have gradually recovered and performed better than the previous quarters.

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, we signed an approximately 95 million USD ATP contract in January and it partially contributed to this quarter's strong rail revenue performance. We believe there are more contracts to be expected in the next few months. We are quite confident of the whole fiscal year's strong rail revenue performance. Besides, we also won two ground-based signaling contracts which are for Jinhua-Wenzhou Line and Xi'an-Chengdu Line in the recent past few months, valued at approximately 20.1 million USD in total, which demonstrate our strong orders taking momentum in high-speed rail market.

We also worked to expand our rail products supply such as track circuit and interlocking system. We have finished one year testing of track circuit and the official admission progress and got the permit to enter track circuit market which is a another sizable market. We are entering into this market and expecting to gain our first track circuit contract in calendar year 2015.

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 as well as "one belt one road" policy, there is going to be an exciting prospect for Hollysys both domestically and abroad. As a well-recognized rail signaling system provider, we are confident that with our strong R&D capability, leading technologies, solid execution and reliable products, Hollysys will continue to penetrate into China and the world's vast rail and subway market and achieve significant results.

In the mechanical and electrical solution segment, it delivered solid growth during this quarter given solid local market position, abundant customer resources and strong execution in Southeast Asia and in Middle East. 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. With our proprietary technology and products, industry expertise and strong competitive advantages, 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 Third Quarter and First Nine Months 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



Mar 31, 2015

Mar 31, 2014

%
Change


Mar 31, 2015

Mar 31, 2014

%
Change










Revenues

$

118,229

95,842

23.4%

$

389,188

362,481

7.4%

    Integrated contract revenue

$

106,360

89,123

19.3%

$

353,865

341,045

3.8%

    Products sales

$

9,808

5,746

70.7%

$

28,992

18,541

56.4%

    Service rendered

$

2,062

973

111.8%

$

6,331

2,895

118.7%

Cost of revenues

$

63,828

61,193

4.3%

$

229,251

236,821

(3.2)%

Gross profit

$

54,402

34,649

57.0%

$

159,937

125,660

27.3%

Total operating expenses

$

17,417

15,998

8.9%

$

63,693

54,402

17.1%

    Selling

$

5,712

5,972

(4.4)%

$

19,686

22,025

(10.6)%

    General and administrative

$

8,972

7,356

22.0%

$

33,751

24,454

38.0%

    Research and development

$

9,369

7,855

19.3%

$

28,262

28,043

0.8%

    VAT refunds and government subsidies

$

(6,635)

(5,186)

27.9%

$

(18,006)

(20,120)

(10.5)%

Income from operations

$

36,985

18,651

98.3%

$

96,244

71,258

35.1%

Other income (expenses), net

$

613

(529)

(216.0)%

$

1,883

806

133.5%

Foreign exchange gains (losses)

$

661

156

323.3%

$

(8)

1,074

(100.7)%

Gains on disposal of investments in equity investees

$

80

-

-

$

80

-

-

Share of net (losses) of equity investees

$

(1,664)

(298)

458.7%

$

(4,151)

(1,777)

133.6%

Dividend income from cost investees

$

-

-

-

$

248

-

-

Interest income

$

735

821

(10.5)%

$

2,447

2,347

4.3%

Interest expenses

$

(328)

(206)

59.5%

$

(994)

(756)

31.5%

Income tax expenses

$

6,602

2,856

131.2%

$

13,735

10,280

33.6%

Net income attributable to non-controlling interest

$

904

617

46.5%

$

1,704

1,257

35.6%

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

$

29,575

15,122

95.6%

$

80,309

61,416

30.8%

Non-GAAP basic EPS

$

0.51

0.26

96.2%

$

1.38

1.06

30.2%

Non-GAAP diluted EPS

$

0.50

0.26

92.3%

$

1.36

1.05

29.5%










Share based compensation expenses

$

707

489

44.6%

$

1,638

2,116

(22.6)%

Amortization of acquired intangibles

$

655

926

(29.3)%

$

4,086

4,003

2.1%

Acquisition-related incentive share contingent consideration fair value adjustments

$

(2,862)

3,501

(181.7)%

$

(2,978)

6,206

(148.0)%

Acquisition-related cash contingent consideration fair value adjustments

$

-

196

(100.0)%

$

201

733

(72.6)%

Convertible bond related fair value adjustments

$

(567)

-

-


(486)

-

-

GAAP Net income attributable to Hollysys Automation Technologies Ltd.

$

31,642

10,011

216.1%

$

77,848

48,358

61.0%

GAAP basic EPS

$

0.54

0.17

217.6%

$

1.34

0.84

59.5%

GAAP diluted EPS

$

0.53

0.17

211.8%

$

1.32

0.83

59.0%










Basic weighted average common shares outstanding


58,275,396

58,259,337

0.0%


58,268,168

57,801,381

0.8%

Diluted weighted average common shares outstanding


59,181,311

58,862,467

0.5%


59,133,233

58,314,203

1.4%

 

Operational Results Analysis for the quarter ended March 31, 2015

Comparing to the third quarter of the prior fiscal year, the total revenues for the three months ended March 31, 2015 increased from $95.8 million to $118.2 million, representing an increase of 23.4%. Broken down by the revenue types, integrated contracts revenue increased by 19.3% to $106.4 million, products sales revenue increased by 70.7% to $9.8 million, and services revenue increased by 111.8% to $2.1 million.

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

 



Three months ended Mar 31,


Fiscal year ended Mar 31,



2015


2014


2015


2014



$

% to Total Revenue


$

% to Total Revenue


$

% to Total Revenue


$

% to Total Revenue

Industrial Automation


41.6

35.2%


39.6

41.3%


155.6

40.0%


163.0

45.0%

Rail Transportation Automation


56.1

47.4%


26.0

27.2%


130.6

33.5%


117.7

32.5%

Mechanical and Electrical Solution

16.0

13.5%


23.7

24.7%


92.9

23.9%


74.4

20.5%

Miscellaneous


4.5

3.9%


6.5

6.8%


10.1

2.6%


7.4

2.0%

Total


118.2

100.0%


95.8

100.0%


389.2

100.0%


362.5

100.0%

 

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 46.0% for the three months ended March 31, 2015, as compared to 36.2% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 43.4%, 71.7% and 56.0% for the three months ended March 31, 2015, as compared to 34.4%, 57.5%, and 73.7% 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 45.5% for the three months ended March 31, 2015, as compared to 35.2% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 42.8%, 71.7% and 56.0% for the three months ended March 31, 2015, as compared to 33.3%, 57.5%, and 73.7% for the same period of the prior year respectively.

Selling expenses were $5.7 million for the three months ended March 31, 2015, representing a decrease of $0.3 million or 4.4% compared to $6.0 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 4.8% and 6.2% for the three months ended March 31, 2015, and 2014, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $9.0 million for the quarter ended March 31, 2015, representing an increase of $1.6 million, or 22.0%, as compared to $7.4 million for the same period of the prior year. The increase was mainly due to an increase of $0.7 million in employee compensation expenses, and $0.3 million in amortization and depreciation expenses. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.6% and 7.7% for quarters ended March 31, 2015 and 2014 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $9.7 million and $7.8 million for the three months ended March 31, 2015 and 2014, respectively.

Research and development expenses were $9.4 million for the three months ended March 31, 2015, an increase of $1.5 million or 19.3% compared to $7.9 million for the same quarter of the prior year mainly due to the increased R&D activities. Presented as a percentage of total revenues, R&D expenses were 7.9% and 8.2% for the quarter ended March 31, 2015 and 2014, respectively.

The VAT refunds and government subsidies were $6.6 million for three months ended March 31, 2015, as compared to $5.2 million for the same period in the prior year, representing a $1.4 million or 27.9% increase which primarily due to the increase of the VAT refunds for $1.0 million.

The income tax expenses and the effective tax rate were $6.6 million and 16.9% for the three months ended March 31, 2015, as compared to $2.9 million and 21.2% for comparable prior year period. When excluding the impact of non-GAAP adjustments on the income before income taxes, the effective tax rate would have been 17.8% for the current quarter and 15.4% for the comparable prior year period.

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 $29.6 million or $0.50 per diluted share based on 59.2 million shares outstanding for the three months ended March 31, 2015. This represents a 95.6% increase over the $15.1 million or $0.26 per share based on 58.9 million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $31.6 million or $0.53 per diluted share representing an increase 216.1% over the $10.0 million or $0.17 per diluted share reported in the comparable prior year period.  

Integrated Contracts Backlog Highlights

Hollysys' backlog for integrated contracts as of March 31, 2015 was $498.7 million, representing an increase of 15.0% compared to $433.7 million as of December 31, 2014, and a decrease of 17.3% compared to $602.9 million as of March 31, 2014. The detailed breakdown of the backlog for integrated contracts by segments is shown below:

 






Quarter-over-Quarter Analysis


Year-over-Year Analysis



2015-03-31


2014-12-31


2014-03-31



$

% to Total Backlog


$

% to Total Backlog


%
Change


$

% to Total Backlog


%
Change

Industrial Automation


145.3

29.1%


139.3

32.1%


4.3%


172.2

28.5%


(15.6%)

Rail Transportation Automation

257.5

51.7%


219.7

50.7%


17.2%


278.3

46.2%


(7.5%)

Mechanical and Electrical Solution

95.9

19.2%


74.7

17.2%


28.4%


152.4

25.3%


(37.1%)

Total


498.7

100.0%


433.7

100.0%


15.0%


602.9

100.0%


(17.3%)

 

Cash Flow Highlights

For the three months ended March 31, 2015, the total net cash outflow was $37.6 million. The net cash used in operating activities was $20.3 million, of which $16.5 million cash was pledged as restricted cash in a bank to secure a short-term loan. Excluding the impact of this transaction, the net cash used in operating actives would have been $3.8 million. The net cash used in investing activities was $3.2 million. The net cash used in financing activities was $11.8 million which includes a dividend payout of $23.5 million, and repayment of long-term loan of $4.2 million, all of which was offset by the proceeds from short-term bank loans of $18.4 million

Balance Sheet Highlights

The total amount of cash and cash equivalents and time deposits with original maturities over three months were $179.7 million, $215.8 million, and $150.5 million as of March 31, 2015, December 31 and March 31, 2014, respectively. As of March 31, 2015, the company held $151.1 million in cash and cash equivalents and $28.6 million in time deposits with original maturities over three months.

For the three months ended March 31, 2015, Days Sales Outstanding ("DSO") was 228 days, as compared to 248 days from the comparable prior year period and 206 days from last quarter; and inventory turnover was 66 days, as compared to 45 days from the comparable prior year period and 52 days from last quarter.

Outlook for FY 2015

The management concluded, "Given our strong backlog currently on-hand, sales pipeline envisioned and operating margin expansion, we reiterate our fiscal year 2015 revenue guidance in the range of $565 million to $600 million, and revise up fiscal year 2015 non-GAAP net income guidance from $94 million to $98 million, to $100 million to 102 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 May 15, 2015 / 9:00 p.m. U.S. Eastern Time on May 14, 2015. 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 9153727.

 

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
March 31,


Fiscal year ended
March 31,



2015


2014


2015


2014



(Unaudited)


(Unaudited)


(Unaudited)


 (Audited)

Revenues









Integrated contract revenue

$

106,359,964

$

89,123,236

$

353,864,588

$

341,045,360

Products sales


9,807,621


5,745,651


28,992,364


18,540,902

Revenue from service


2,061,906


973,351


6,331,492


2,894,501

Total revenues


118,229,491


95,842,238


389,188,444


362,480,763










Costs of integrated contracts


60,802,216


59,420,678


222,620,556


232,315,106

Costs of products sold


2,772,973


2,442,915


8,355,635


6,573,666

Costs of services rendered


907,282


255,540


2,361,368


1,935,416

Gross profit


53,747,020


33,723,105


155,850,885


121,656,575










Operating expenses









Selling


5,711,668


5,972,423


19,686,168


22,025,155

General and administrative


9,678,206


7,844,673


35,389,036


26,569,703

Research and development


9,368,636


7,855,149


28,261,574


28,042,859

VAT refunds and government subsidies


(6,634,659)


(5,185,543)


(18,005,911)


(20,120,034)

Total operating expenses


18,123,851


16,486,702


65,330,867


56,517,683










Income from operations


35,623,169


17,236,403


90,520,018


65,138,892










Other incomes (expenses), net


3,475,025


(4,030,258)


4,860,924


(5,400,067)

Foreign exchange gains (losses)


660,655


156,089


(7,815)


1,074,381

Gains on disposal of investments in equity investees


79,784


-


79,784


-

Share of net (losses) of equity investees


(1,663,886)


(297,799)


(4,151,196)


(1,777,287)

Dividend income from cost investees


-


-


248,318


-

Interest income


734,844


820,661


2,446,733


2,346,967

Interest expenses


238,860


(401,230)


(709,245)


(1,488,847)

Income before income taxes


39,148,451


13,483,866


93,287,521


59,894,039










Income taxes expenses


6,602,195


2,856,030


13,734,925


10,279,913

Net income


32,546,256


10,627,836


79,552,596


49,614,126










Net income attributable to non-controlling interest


904,000


617,193


1,704,314


1,256,550

Net income attributable to Hollysys Automation Technologies Ltd. stockholders

$

31,642,256

$

10,010,643

$

77,848,282

$

48,357,576










Other comprehensive income, net of tax of nil









Translation adjustments


(6,383,196)


(2,465,494)


(8,369,451)


459,156

Comprehensive income


26,163,060


8,162,342


71,183,145


50,073,282










Comprehensive income attributable to non-controlling interest


530,375


597,263


886,923


1,262,713

Comprehensive income attributable to Hollysys Automation Technologies Ltd. stockholders

$

25,632,685

$

7,565,079

$

70,296,222

$

48,810,569










Net income per ordinary share:









Basic


0.54


0.17


1.34


0.84

Diluted


0.53


0.17


1.32


0.83

Weighted average ordinary shares used in income per share computation:









Basic


58,275,396


58,259,337


58,268,168


57,801,381

Diluted


59,181,311


58,862,467


59,133,233


58,314,203

 


 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In US Dollars)












Mar 31,


Dec 31,





2015


2014





(Unaudited)


(Unaudited)

ASSETS






Current Assets







Cash and cash equivalents

$

151,063,311

$

188,682,777



Time deposits with maturities over three months


28,646,799


27,127,919



Restricted cash


25,214,796


8,150,841



Accounts receivable, net of allowance for doubtful accounts of $27,528,076 and $28,942,205 as of March 31, 2015 and December 31, 2014, respectively


292,682,961


305,602,392



Costs and estimated earnings in excess of billings, net of allowance for doubtful accounts of $5,407,275 and $5,730,272 as of March 31, 2015 and December 31, 2014, respectively


176,116,858


144,688,733



Other receivables, net of allowance for doubtful accounts of $350,304 and $352,119 as of March 31, 2015 and December 31, 2014, respectively


11,937,148


10,373,442



Advances to suppliers


18,735,026


15,256,808



Amounts due from related parties


35,183,119


26,169,275



Inventories


42,298,185


51,531,193



Prepaid expenses


832,744


1,097,836



Income tax recoverable


569,560


545,356



Deferred tax assets


3,199,181


77,549


Total current assets


786,479,688


779,304,121










Restricted cash


4,099,829


4,449,060



Prepaid expenses


114,529


118,874



Property, plant and equipment, net


79,674,808


81,763,216



Prepaid land leases


11,624,025


11,951,384



Acquired intangible assets, net


2,032,994


2,826,758



Investments in equity investees


10,669,485


12,452,704



Investments in cost investees


4,443,513


4,460,361



Goodwill


60,467,663


62,993,822



Deferred tax assets


6,492,217


4,069,646









Total assets


966,098,751


964,389,946








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Short-term bank loans


17,511,507


2,866,408



Current portion of long-term bank loans


13,310,276


13,419,360



Accounts payable


113,218,265


138,400,477



Construction costs payable


1,153,702


1,158,076



Deferred revenue


151,474,903


122,014,199



Accrued payroll and related expenses


8,426,077


17,102,400



Income tax payable


3,623,251


4,923,010



Warranty liabilities


6,150,083


5,651,796



Other tax payables


24,008,077


20,994,255



Accrued liabilities


25,821,073


24,459,038



Amounts due to related parties


1,915,186


12,316,931



Deferred tax liabilities


5,489,064


1,501,991



Current portion of acquisition-related consideration


12,469,975


15,331,731


Total current liabilities


384,571,439


380,139,672










Long-term bank loans


23,405,587


28,194,151



Deferred tax liabilities


1,080,476


1,287,743



Long-term warranty liabilities


2,743,618


2,983,027


Total liabilities


411,801,120


412,604,593









Commitments and contingencies


-


-









Equity







Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized; 58,249,021 and 58,203,521 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively


58,250


58,204



Additional paid-in capital


190,940,710


189,927,575



Statutory reserves


28,546,910


28,725,711



Retained earnings


301,462,749


293,119,714



Accumulated other comprehensive income


27,986,461


35,538,521


Total Hollysys Automation Technologies Ltd. stockholder's equity

548,995,080


547,369,725










Non-controlling interest


5,302,551


4,415,628


Total equity


554,297,631


551,785,353









Total liabilities and equity

$

966,098,751

$

964,389,946


 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US Dollars)










Three months ended
Mar 31, 2015


Fiscal year ended Mar 31, 2015




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

32,546,256

$

79,552,596

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






Depreciation of property, plant and equipment


1,935,038


6,884,831


Amortization of prepaid land leases


48,993


149,464


Amortization of intangible assets


654,895


4,086,166


Allowance for doubtful accounts


309,769


6,901,823


(Gains) Losses on disposal of property, plant and equipment


(440,580)


492,454


Share of net loss from equity investees


1,663,878


4,151,196


Share-based compensation expenses


706,610


1,637,987


Deferred income tax (benefits) expenses


(1,704,658)


1,609,373


Acquisition-related consideration adjustments


(2,861,756)


(2,777,160)


Convertible bond related fair value adjustment


(566,765)


(486,052)

Changes in operating assets and liabilities:






Accounts receivable


10,125,439


(43,899,579)


Costs and estimated earnings in excess of billings


(32,621,584)


2,076,495


Inventories 


9,094,618


(7,198,991)


Advances to suppliers


(3,532,939)


(7,156,294)


Other receivables


(1,649,303)


(1,113,459)


Deposits and other assets


(16,670,601)


(13,848,119)


Due from related parties


(9,103,931)


(11,246,008)


Accounts payable


(23,699,527)


(20,009,186)


Deferred revenue


30,172,974


21,150,220


Accruals and other payable


(6,213,927)


(4,205,962)


Due to related parties


(10,386,597)


(2,080,105)


Income tax payable


(1,212,940)


(8,152,152)


Other tax payables


3,144,437


(3,615,679)


Net cash (used in) provided by operating activities


(20,262,201)


2,903,859







Cash flows from investing activities:






Time deposits placed with banks


(7,455,743)


(10,729,098)


Purchases of property, plant and equipment


(249,593)


(2,062,546)


Proceeds from disposal of property, plant and equipment


(1,085,958)


164,034


Maturity of time deposits


5,546,950


9,532,445


Acquisition of shares of an equity investee


-


(14,600,000)


Net cash (used in) investing activities


(3,244,344)


(17,695,165)







Cash flows from financing activities:






Proceeds from short-term bank loans


18,387,801


24,515,352


Repayments of short-term bank loans


(2,791,768)


(10,344,323)


Proceeds from long-term bank loans


-


722,952


Proceeds from convertible loan


-


20,000,000


Repayments of long-term bank loans


(4,209,828)


(6,619,851)


Proceeds from exercise of share options


306,570


306,570


Payment of dividends


(23,478,022)


(23,478,022)


Net cash (used in) provided by financing activities


(11,785,247)


5,102,678








Effect of foreign exchange rate changes


(2,327,674)


(1,407,159)


Net decrease in cash and cash equivalents

$

(37,619,466)

$

(11,095,787)








Cash and cash equivalents, beginning of period

$

188,682,777

$

162,159,098


Cash and cash equivalents, end of period


151,063,311


151,063,311

 


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




Mar 31,


Mar 31,




2015


2014


2015


2014




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)











Cost of integrated contracts

$

60,802,216

$

59,420,678

$

222,620,556

$

232,315,106

Less: amortization of acquired intangibles


654,894


925,856


4,086,166


4,002,967

Non-GAAP cost of integrated contracts

$

60,147,322

$

58,494,822

$

218,534,390

$

228,312,139











General and administrative expenses

$

9,678,206

$

7,844,673

$

35,389,036

$

26,569,703

Less: Share-based compensation expenses


706,610


488,551


1,637,987


2,116,017

Non-GAAP general and administrative expenses

$

8,971,596

$

7,356,122

$

33,751,049

$

24,453,686











Other income (expenses), net

$

3,475,025

$

(4,030,258)

$

4,860,924

$

(5,400,067)

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


(2,861,756)


3,501,487


(2,978,271)


6,206,320

Non-GAAP other income, net

$

613,269

$

(528,771)

$

1,882,653

$

806,253











Interest expenses

$

238,860

$

(401,230)

$

(709,245)

$

(1,488,847)

Add: acquisition-related cash consideration adjustments


-


195,609


201,111


732,647

Add: convertible bond related fair value adjustment


(566,765)


-


(486,052)


-

Non-GAAP Interest expenses

$

(327,905)

$

(205,621)

$

(994,186)

$

(756,200)











Net income attributable to Hollysys Automation Technologies Ltd. stockholders

$

31,642,256

$

10,010,643

$

77,848,282

$

48,357,576

Add:










Share based compensation expenses


706,610


488,551


1,637,987


2,116,017


Amortization of acquired intangible assets


654,894


925,856


4,086,166


4,002,967


Acquisition-related consideration adjustments


(2,861,756)


3,697,096


(2,777,160)


6,938,968


Convertible bond related fair value adjustment


(566,765)


-


(486,052)


-

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

$

29,575,240

$

15,122,146

$

80,309,223

$

61,415,528












Weighted average number of basic ordinary shares


58,275,396


58,259,337


58,268,168


57,801,381


Weighted average number of diluted ordinary shares


59,181,311


58,862,467


59,133,233


58,314,203

Non-GAAP basic earnings per share

$

0.51

$

0.26

$

1.38

$

1.06

Non-GAAP diluted earnings per share

$

0.50

$

0.26

$

1.36

$

1.05

 

SOURCE Hollysys Automation Technologies, Ltd


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