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Hollysys Automation Technologies Reports Unaudited Financial Results for Fiscal Year 2014 Second Quarter Ended on December 31, 2013

BEIJING, Feb. 17, 2014 /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 2014 second quarter ended on December 31, 2013 (see attached tables).

Q2 Financial Highlights

  • Quarterly revenues of $153.4 million, representing an increase of 75.9% compared to $87.2 million year over year, and an increase of 35.5% compared to $113.2 million quarter over quarter.
  • Gross margin at 31.0%, as compared to 32.1% year over year, and 35.7% quarter over quarter.
  • Non-GAAP net income attributable to Hollysys of $25.9 million, a 90.7% increase compared to $13.6 million year over year, and a 27.4% increase compared to $20.4 million quarter over quarter.
  • Non-GAAP Diluted EPS at $0.45 reported for the quarter, as compared to $0.24 year over year, and $0.35 quarter over quarter.
  • Backlog of $503.3 million as of December 31, 2013, a 40.0% increase compared to $359.6 million year over year, and 2.4% decrease compared to $515.9 million quarter over quarter.
  • Quarterly DSO of 156 days, as compared to 161 days year over year, and 175 days quarter over quarter.
  • Inventory turnover days of 27 days for the current quarter compared to 42 days year over year, and 43 days quarter over quarter.
  • The total amount of cash and cash equivalents and time deposits with original maturities over three months were $150.1 million as of the current quarter end.

The management of Hollysys stated: "We are very excited to report a solid financial and operational result for the second quarter of this fiscal year, here I would like to discuss some key events during this quarter:

"During this quarter, we insisted in executing our strategies to vertically penetrate in the high-end industrial automation market and improve our market share in mid to low end markets, and to horizontally explore the potentials of each customer to supply entire automation and control solutions and service leveraging our complete and mature products and platforms. Both new orders and revenue of industrial automation delivered strong growth, there were satisfied achievements in some particular industries, for instance, thermal power, chemical, petrol chemical, cement, metallurgy and etc. Going forward, we believe that we will increase our overall market share in the industrial automation, nurture and quickly take commanding height in our new businesses leveraging our advanced technologies, experienced professionals, profound industry expertise, and customization and innovation capability.

"In rail transportation, we have seen meaningful progress and consistent revenue contribution in high-speed rail signaling field. We are encouraged by the continuous contract wins to provide the Automatic Train Protection (ATP) equipment and system for 200-250km/h and 300-350km/h high-speed trains recently. Moreover, our proprietary ZPW-2000s Track Circuit was successfully applied in Beijing Xiaohongmen - Baiziwan trial railway line, and passed the trail operation examination by Beijing Railway Bureau. This will expand our products providing in the railway transportation market and will grow to be another revenue growth driver for Hollysys in the future. All in all, as a well-recognized rail signaling system provider, we are confident that with strong R&D capability, solid execution and reliable products, Hollysys will continue to penetrate China's vast railway construction market and explore international opportunities.

"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, 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."

The Second Quarter Ended December 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


Six months ended



December

31, 2013

December

31, 2012

%
Change


December

31, 2013

December

31, 2012

%
Change










Revenues

$

153,408

87,206

75.9%

$

266,639

175,272

52.1%

    Integrated contract revenue

$

147,560

81,182

81.8%

$

253,843

164,034

54.8%

    Product sales

$

5,848

6,024

(2.9)%

$

12,795

11,239

13.9%

Cost of revenues

$

103,854

59,195

75.4%

$

175,628

116,995

50.1%

Gross profit

$

49,554

28,010

76.9%

$

91,011

58,277

56.2%

Total operating expenses

$

20,189

13,269

52.2%

$

38,404

28,786

33.4%

    Selling

$

9,456

8,086

16.9%

$

16,053

14,679

9.4%

    General and administrative

$

8,909

4,143

115.0%

$

17,098

9,975

71.4%

    Research and development

$

12,240

8,334

46.9%

$

20,188

16,009

26.1%

    VAT refunds and government subsidies

$

(10,415)

(7,295)

42.8%

$

(14,934)

(11,878)

25.7%

Income from operations

$

29,365

14,742

99.2%

$

52,607

29,491

78.4%

Other income, net

$

1,169

902

29.6%

$

2,253

2,938

(23.3)%

Share of net (losses) income of equity

    investees

$

(1,155)

(451)

156.3%

$

(1,479)

288

(613.2)%

Dividend income from an cost investee

$

-

829

(100.0)%

$

-

829

(100.0)%

Interest income

$

728

751

(3.1)%

$

1,526

1,732

(11.9)%

Interest expenses

$

(249)

(521)

(52.2)%

$

(551)

(1,237)

(55.5)%

Income tax expenses

$

3,631

2,635

37.8%

$

7,424

4,601

61.3%

Non-GAAP net income attributable to non-

    controlling interest

$

292

18

1534.7%

$

639

93

589.8%

Non-GAAP net income attributable to Hollysys

    Automation Technologies Ltd.

$

25,934

13,597

90.7%

$

46,293

29,348

57.7%

Basic Non-GAAP EPS

$

0.45

0.24

87.5%

$

0.80

0.52

53.8%

Diluted  Non-GAAP EPS

$

0.45

0.24

87.5%

$

0.80

0.52

53.8%










Share based compensation expenses

$

1,192

527

126.3%

$

1,627

1,054

54.5%

Amortization of acquired intangibles

$

2,057

-

-

$

3,077

-

-

Acquisition-related incentive share contingent

    consideration fair value adjustments

$

3,987

-

-

$

2,705

-

-

Acquisition-related cash contingent

    consideration fair value adjustments

$

380

-

-

$

537

-

-

Net income attributable to Hollysys Automation

    Technologies Ltd.(GAAP)

$

18,318

13,071

40.1%

$

38,347

28,294

35.5%

Basic GAAP EPS

$

0.32

0.23

39.1%

$

0.67

0.51

31.4%

Diluted GAAP EPS

$

0.31

0.23

34.8%

$

0.66

0.50

32.0%










Basic weighted average common shares

    outstanding


57,607,508

56,001,526

2.9%


57,604,683

56,000,221

2.9%

Diluted weighted average common shares

    outstanding


58,155,762

56,070,948

3.7%


58,073,331

56,066,950

3.6%

Operational Results Analysis for the Second Quarter Ended December 31, 2013

For the three months ended December 31, 2013, total revenues increased by 75.9% to $153.4 million, from $87.2 million for the same period in the prior year. Of the total revenues, revenue from integrated contracts increased by 81.8% to $147.6 million, as compared to $81.2 million for the same period of the prior year; revenue from products sales decreased by 2.9% to $5.8 million, as compared to $6.0 million for the same period of the prior year. The Company's total revenue by segment was as follows:



Three months ended Dec 31,


Six months ended Dec 31,



2013


2012


2013


2012



$

% to

Total

Revenue


$

% to

Total

Revenue


$

% to

Total

Revenue


$

% to

Total

Revenue

Industrial Automation


65.3

42.6%


53.9

61.8%


123.3

46.3%


114.0

65.1%

Rail Transportation


55.2

36.0%


21.5

24.6%


91.7

34.4%


36.4

20.8%

Mechanical and Electrical Solutions


26.8

17.4%


3.9

4.5%


40.1

15.0%


13.0

7.3%

Miscellaneous


6.1

4.0%


7.9

9.1%


11.5

4.3%


11.9

6.8%

Total


153.4

100.0%


87.2

100.0%


266.6

100.0%


175.3

100.0%

As a percentage of total revenues, overall gross margin excluding non-cash amortization of acquired intangibles was 32.3% for the three months ended December 31, 2013, as compared to 32.1% for the same period of the prior year. The gross margin for integrated contracts and product sales excluding non-cash amortization of acquired intangibles were 30.6% and 74.2% for the three months ended December 31, 2013, as compared to 29.8% and 63.8% for the same period of the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. Including non-cash amortization of acquired intangibles, recorded on a GAAP basis, overall gross margin was 31.0% for the three months ended December 31, 2013, as compared to 32.1% for the same period of the prior year. The gross margin for integrated contracts and product sales including non-cash amortization of acquired intangibles, were 29.2% and 74.2% for the three months ended December 31, 2013, as compared to 29.8% and 63.8% for the same period of the prior year respectively.

For the three months ended December 31, 2013, selling expenses were $9.5 million, as compared to $8.1 million for the same quarter of the prior year, representing an increase of $1.4 million or 16.9% year over year. As a percentage of total revenues, selling expenses were 6.2% and 9.3% for the three months ended December 31, 2013, and 2012, respectively.

General and administrative expenses, excluding non-cash share-based compensation expense, were $8.9 million for the quarter ended December 31, 2013, representing an increase of $4.8 million, or 115.0%, as compared to $4.1 million for the same period of the prior year. The increase was mainly consisted of an increase of $1.5 million from the newly acquired company Bond Corporation Pte. Ltd. and its subsidiaries (Bond), and an increase of $1.9 million in bad debt allowance. As a percentage of total revenues, G&A expenses were 5.8% and 4.8% for the three months ended December 31, 2013 and 2012, respectively. Including the non-cash share-based compensation expense, recorded on a GAAP basis, G&A expenses were $10.1 million and $4.7 million for the three months ended December 31, 2013 and 2012, respectively.

Research and development expenses were $12.2 million for the three months ended December 31, 2013, as compared to $8.3 million for the same quarter of the prior year, representing a year over year increase of $3.9 million, or 46.9%. The increase was mainly due to an increase in certification fees. As a percentage of total revenues, R&D expenses were 8.0% and 9.6% for the quarter ended December 31, 2013 and 2012, respectively.

The VAT refunds and government subsidies amounted to $10.4 million for three months ended December 31, 2013, as compared to $7.3 million for the same period in the prior year.  

The income tax expenses and the effective tax rate were $3.6 million and 16.3% for the three months ended December 31, 2013, as compared to $2.6 million and 16.8% for the same prior year period.

For the three months ended December 31, 2013, the non-GAAP net income attributable to Hollysys excluding non-cash stock compensation expenses, amortization of acquired intangibles and acquisition-related consideration fair value adjustments was $25.9 million or $0.45 per diluted share based on 58.2 million shares outstanding. This represents an increase of $12.3 million, or 90.7%, over the $13.6 million, or $0.24 per share based on 56.1 million shares outstanding, reported in the prior year period. On a GAAP basis, net income attributable to Hollysys was $18.3 million, or $0.32 per diluted share representing an increase of $5.2 million or 40.1%, over the $13.1 million, or $0.23 per diluted share reported in the prior year period.  

Backlog Highlights

Hollysys' backlog as of December 31, 2013 was $503.3 million, representing a decrease of 2.4% compared to $515.9 million as of September 30, 2013, and an increase of 40.0% compared to $359.6 million as of December 31, 2013. The detailed breakdown of the backlog by segment was as follows:






Quarter-over-Quarter Analysis


Year-over-Year Analysis



2013-12-31


2013-9-30


2012-12-31



$

% to

Total

Backlog


$

% to

Total

Backlog


%
Change


$

% to Total

Backlog


%
Change

Industrial Automation


149.4

29.7%


162.8

31.6%


(8.2%)


125.4

34.9%


19.1%

Rail Transportation


223.3

44.3%


232.4

45.0%


(3.9%)


206.7

57.5%


8.1%

M&E


106.5

21.2%


92.9

18.0%


14.6%


-

-


-

Miscellaneous


24.1

4.8%


27.9

5.4%


(13.6%)


27.5

7.6%


(12.3%)

Total


503.3

100.0%


515.9

100.0%


(2.4%)


359.6

100.0%


40.0%

Cash Flow Highlights

The net cash provided by operating activities was $24.4 million for the three months ended December 31, 2013; including investing and financing activities, the total net cash inflows for this quarter was $22.4 million. Of the total net cash inflows, there was a net cash inflow of matured time deposits with original maturities over three months amounting to $2.4 million and proceeds from bank loan amounting to $3.8 million, a net cash outflow of repayment bank loans amounting to $4.3 million.

Balance Sheet Highlights

The total amount of cash and cash equivalents and time deposits with original maturities over three months were $150.1 million, $129.4 million, and $133.5 million as of December 31, September 30, 2013, and December 31, 2012, respectively. Of the total $150.1 million as of December 31, 2013, cash and cash equivalents were $135.1 million, and time deposits with original maturities over three months were $15.0 million.

For the three months ended December 31, 2013, Days Sales Outstanding ("DSO") was 156 days, as compared to 161 days year over year and 175 days quarter over quarter; and inventory turnover was 27 days, as compared to 42 days year over year and 44 days quarter over quarter.

Outlook for FY 2014

Hollysys management concluded, "In view of solid industrial automation growth, strong recovery of high-speed rail signaling segment, and future exciting growth momentum envisioned, we are revising up our fiscal year 2014 revenue guidance from previous $460 million to $490 million, to $500 million to $530 million and non-GAAP net income guidance from previous $65 million to $69 million, to $84 million to $86 million. Going into the future, Hollysys will continue to leverage on its core growth pillar foundations of its proprietary technology, profound industry expertise and solution capabilities to increase its market share in respective high-growth end markets. Besides, Hollysys will continue to set up strategic alliance with industry leading organizations to penetrate into the new market and accelerate its growth pace, to create long-term value for our shareholders."

Conference Call

Management will discuss the current status of the Company's operations during a conference call at 9:00 a.m. Beijing Time on February 18, 2014 / 8:00 p.m. U.S. Eastern Time on February 17, 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 7665757.

4001-200-539 (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)

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

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 3,800 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 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
[email protected]

     


HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In US Dollars except for per-share data)




Three months ended
December 31,


Six months ended
December 31,



2013


2012


2013


2012



(Unaudited)


(Unaudited)


(Unaudited)


 (Unaudited)

Revenues









Integrated contract revenue

$

147,559,907

$

81,181,627

$

253,843,274


164,033,662

Product sales


5,847,987


6,023,980


12,795,251


11,238,563

Total revenues


153,407,894


87,205,607


266,638,525


175,272,225










Cost of integrated contracts


104,400,802


57,013,225


174,574,304


113,040,984

Cost of products sold


1,510,158


2,182,121


4,130,751


3,954,308

Gross profit


47,496,934


28,010,261


87,933,470


58,276,933










Operating expenses









Selling


9,455,667


8,086,257


16,052,732


14,679,142

General and administrative


10,100,717


4,670,168


18,725,030


11,029,027

Research and development


12,239,559


8,334,000


20,187,710


16,008,707

VAT refunds and government subsidies


(10,415,163)


(7,294,961)


(14,934,491)


(11,877,547)

Total operating expenses


21,380,780


13,795,464


40,030,981


29,839,329










Income from operations


26,116,154


14,214,797


47,902,489


28,437,604










Other (expenses) income, net


(2,817,923)


901,645


(451,517)


2,938,308

Share of net (losses) income of equity investees


(1,155,157)


(450,755)


(1,479,488)


288,263

Dividend income from an cost investee


-


828,567


-


828,567

Interest income


727,502


750,727


1,526,306


1,732,438

Interest expenses


(629,496)


(521,475)


(1,087,617)


(1,237,306)

Income before income taxes


22,241,080


15,723,506


46,410,173


32,987,874










Income taxes expenses


3,630,956


2,635,096


7,423,883


4,601,152

Net income


18,610,124


13,088,410


38,986,290


28,386,722










Net income attributable to non-controlling interests


292,128


17,870


639,357


92,694

Net income attributable to Hollysys Automation

    Technologies Ltd. stockholders

$

18,317,996

$

13,070,540

$

38,346,933


28,294,028










Other comprehensive income, net of tax









Foreign currency translation adjustments, net of nil tax


2,616,275


1,804,697


2,924,650


(112,757)

Comprehensive income


21,226,399


14,893,107


41,910,940


28,273,965










Comprehensive income attributable to non-controlling

    interest


308,629


31,476


665,450


99,437

Comprehensive income attributable to Hollysys

    Automation Technologies Ltd. stockholders

$

20,917,770

$

14,861,631

$

41,245,490


28,174,528










Net income per ordinary share:









Basic


0.32


0.23


0.67


0.51

Diluted


0.31


0.23


0.66


0.50

Weighted average ordinary shares used in income

    per share computation:









Basic


57,607,508


56,001,526


57,604,683


56,000,221

Diluted


58,155,762


56,070,948


58,073,331


56,066,950

     

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In US Dollars)












December 31,


September 30,





2013


2013





(Unaudited)


(Unaudited)

ASSETS






Current Assets







Cash and cash equivalents

$

135,085,593

$

112,666,619



Time deposits with original maturities over three months


15,035,316


16,769,482



Restricted cash


7,618,795


3,165,635



Accounts receivable, net of allowance for doubtful accounts of

    $23,745,875 and $21,529,390 as of December 31, 2013 and

    September 30, 2013, respectively


263,443,090


211,939,374



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

    for doubtful accounts of $2,900,924 and $2,895,850  as of

    December 31, 2013 and September 30, 2013, respectively


165,498,207


159,158,183



Other receivables, net of allowance for doubtful accounts of

    $280,499 and $348,118  as of December 31, 2013 and

    September 30, 2013, respectively


9,800,695


11,561,822



Advances to suppliers


9,539,263


10,043,176



Amount due from related parties


22,150,884


28,417,610



Inventories, net


27,526,001


33,034,122



Prepaid expenses


902,317


778,081



Income tax recoverable


228,503


1,818,281



Deferred tax assets


6,375,846


3,094,984



Assets held for sale


2,777,865


2,806,821


Total current assets


665,982,375


595,254,190










Restricted cash


6,547,708


6,789,912



Prepaid expenses


417,532


342,436



Property, plant and equipment, net


83,926,203


81,147,457



Prepaid land leases


12,491,977


12,607,573



Acquired intangible assets, net


8,715,403


10,869,006



Investments in equity investees


16,590,675


15,919,888



Investments in cost investees


4,800,234


3,734,363



Goodwill


65,574,520


66,205,646



Deferred tax assets


744,481


958,238









Total assets


865,791,108


793,828,709








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Short-term bank loans


6,656,597


6,942,396



Current portion of long-term loans


10,607,340


8,471,546



Accounts payable


143,246,660


120,481,718



Construction cost payable


6,521,670


6,580,511



Deferred revenue


107,970,201


90,355,074



Accrued payroll and related expense


13,561,845


8,069,346



Income tax payable


9,771,145


6,584,444



Warranty liabilities


2,181,282


1,778,479



Other tax payables


25,908,451


26,608,999



Accrued liabilities


18,433,648


18,962,295



Amounts due to related parties


2,880,393


2,323,540



Deferred tax liabilities


236,054


2,153,993



Current portion of acquisition-related payment


26,284,773


-


Total current liabilities


374,260,059


299,312,341










Long-term bank loans


14,498,587


16,775,048



Deferred tax liabilities


2,826,399


3,615,147



Long-term warranty liabilities


2,076,652


2,384,416



Long-term acquisition-related payment


13,116,010


35,146,657


Total liabilities


406,777,707


357,233,609









Commitments and contingencies













Equity







Ordinary shares


57,555


57,555



Additional paid-in capital


172,406,716


171,214,814



Statutory reserves


23,293,011


23,146,671



Retained earnings


221,073,738


202,902,082



Accumulated other comprehensive income


39,770,224


37,170,450


Total Hollysys Automation Technologies Ltd. stockholder's equity


456,601,244


434,491,572










Non-controlling interests


2,412,157


2,103,528


Total equity


459,013,401


436,595,100









Total liabilities and equity

$

865,791,108

$

793,828,709

      

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US Dollars)










Three months ended
December 31, 2013


Six months ended

December 31, 2013




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

18,610,124

$

38,986,290

Adjustments to reconcile net income to net cash provided by (used in)

operating activities:






Depreciation of property, plant and equipment


1,416,419


3,478,625


Amortization of prepaid land leases


52,108


101,853


Amortization of intangible assets


2,056,570


3,077,112


Allowance for doubtful accounts


1,462,204


4,330,063


Gain on disposal of property, plant and equipment


(485,883)


(30,751)


Share of net loss from equity investees


1,155,157


1,479,488


Share based compensation expenses


1,191,902


1,627,466


Deferred income tax expenses


(5,730,921)


(4,954,377)


Acquisition-related contingent consideration fair value adjustments


4,367,113


3,241,871

Changes in operating assets and liabilities:






Accounts receivable


(52,041,622)


(88,792,890)


Costs and estimated earnings in excess of billings


(5,576,193)


(20,757,974)


Inventories 


5,751,009


6,992,302


Advances to suppliers


566,162


(840,746)


Other receivables 


1,849,512


2,044,944


Deposits and other assets


(4,405,022)


(3,772,884)


Due from related parties


6,222,253


4,340,798


Accounts payable


22,332,628


31,175,376


Deferred revenue


17,143,153


40,093,970


Accruals and other payable


4,019,549


2,996,709


Due to related parties


541,226


773,506


Income tax payable


4,774,473


4,922,633


Other tax payables


(869,698)


3,581,097


Net cash provided by operating activities


24,402,223


34,094,481







Cash flows from investing activities:






Time deposits placed with banks


(676,790)


(4,859,284)


Purchases of property, plant and equipment


(2,946,842)


(5,153,126)


Proceeds from disposal of property, plant and equipment


10,079


10,309


Maturity of time deposits


2,433,183


10,807,370


Acquisition of a subsidiary, net of cash acquired


-


(5,510,000)


Investment of an equity investee


(3,906,886)


(3,906,886)


Investment of a cost investee


(1,031,106)


(1,031,106)


Dividend from an equity investee


2,409,247


2,409,247


Net cash used in investing activities


(3,709,115)


(7,233,476)







Cash flows from financing activities:






Proceeds from short-term bank loans


1,829,147


3,846,542


Repayments of short-term bank loans


(2,046,635)


(5,499,334)


Proceeds from long-term bank loans


2,016,109


2,016,109


Repayments of long-term bank loans


(2,294,601)


(4,959,096)


Net cash used in financing activities


(495,980)


(4,595,779)








Effect of foreign exchange rate changes


2,221,846


591,788


Net increase in cash and cash equivalents

$

22,418,974

$

22,857,014








Cash and cash equivalents, beginning of period

$

112,666,619

$

112,228,579


Cash and cash equivalents, end of period


135,085,593


135,085,593

Non-GAAP Measures

In evaluating our results, the non-GAAP measures of "Non-GAAP general and administrative expenses (hereafter "Non-GAAP G&A expenses"), "Non-GAAP cost of integrated contracts", "Non-GAAP other income, net", "Non-GAAP interest expenses", "Non-GAAP net income attributable to Hollysys" and "Non-GAAP earnings per share" serve as additional indicators of our operating performance and not as a replacement for other measures in accordance with US GAAP. We believe these non-GAAP measures are useful to investors, as they exclude the 1) share-based compensation expenses, 2) amortization of acquired intangibles and 3) acquisition-related consideration adjustments. 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 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


Six months ended




December 31,


December 31,




2013


2012


2013


2012




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Cost of integrated contracts

$

104,400,802


57,013,225


174,574,304


113,040,984

Less: amortization of acquired intangibles


2,056,569


-


3,077,112


-

Non-GAAP cost of integrated contracts

$

102,344,233


57,013,225


171,497,192


113,040,984











General and administrative expenses

$

10,100,717

$

4,670,168


18,725,030

$

11,029,027

Less: Share based compensation costs


1,191,902


526,773


1,627,466


1,053,545

Non-GAAP general and administrative expenses

$

8,908,815

$

4,143,395


17,097,564

$

9,975,482











Other (expenses) income, net

$

(2,817,923)


901,645


(451,517)


2,938,308

Add: acquisition-related incentive share contingent

    consideration fair value adjustments


3,986,737


-


2,704,833


-

Non-GAAP Other income, net

$

1,168,814


901,645


2,253,316


2,938,308











Interest expenses

$

(629,496)


(521,475)


(1,087,617)


(1,237,306)

Add: acquisition-related cash consideration

    adjustments


380,376


-


537,038


-

Non-GAAP Interest expenses

$

(249,120)

$

(521,475)


(550,579)

$

(1,237,306)

Net income attributable to Hollysys Automation

    Technologies Ltd. stockholders

$

18,317,996

$

13,070,540


38,346,933

$

28,294,028

Add:










Share based compensation expenses


1,191,902


526,773


1,627,466


1,053,545


Amortization of acquired intangible assets


2,056,569


-


3,077,112


-


Acquisition-related consideration adjustments


4,367,114


-


3,241,871


-

Non-GAAP net income attributable to Hollysys

    Automation Technologies Ltd. stockholders

$

25,933,581

$

13,597,313


46,293,382

$

29,347,573












Weighted average number of basic ordinary

    shares


57,607,508


56,001,526


57,604,683


56,000,221


Weighted average number of diluted ordinary

    shares


58,155,762


56,070,948


58,073,331


56,066,950

Non-GAAP basic earnings per share

$

0.45

$

0.24


0.80

$

0.52

Non-GAAP diluted earnings per share

$

0.45

$

0.24


0.80

$

0.52

 

SOURCE Hollysys Automation Technologies, Ltd.

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