2014

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

BEIJING, May 16, 2013 /PRNewswire-FirstCall/ -- Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for the fiscal year 2013 third quarter ended March 31, 2013 (see attached tables).

Q3 Financial Highlights

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

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

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

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

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

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

In USD thousands, except share numbers and EPS













Three months ended


Nine months ended



March 31,

2013

March 31,

2012

%

Change


March 31,

2013

March 31,

2012

%

Change










Revenues

$

60,351

66,135

(8.7)%


235,623

233,587

0.9%

    Integrated contract revenue

$

56,446

61,755

(8.6)%


220,480

221,138

(0.3)%

    Products sales

$

3,905

4,380

(10.9)%


15,143

12,449

21.6%

Cost of revenues

$

33,908

40,119

(15.5)%


150,904

143,747

5.0%

Gross profit

$

26,442

26,016

1.6%


84,719

89,840

(5.7)%

Total operating expenses

$

15,484

14,114

9.7%


44,270

40,499

9.3%

    Selling

$

5,345

6,106

(12.5)%


20,024

21,148

(5.3)%

    General and administrative

$

6,364

4,934

29.0%


16,340

17,177

(4.9)%

    Research and development

$

7,361

5,588

31.7%


23,370

18,538

26.1%

    VAT refunds and government

         subsidies

$

(3,586)

(2,513)

42.7%


(15,463)

(16,364)

(5.5)%

Income from operations

$

10,958

11,902

(7.9)%


40,449

49,341

(18.0)%

Other income, net

$

52

1,029

(95.0)%


2,988

1,292

131.4%

Gains on disposal of long term        

    investment

$

-

2,045

(100.0)%


-

2,042

(100.0)%

Share of net (loss) income of equity

    investees

$

(807)

(507)

59.2%


(518)

(355)

46.0%

Dividend income from cost

    investees

$

-

-

-


830

-

100.0%

Interest income

$

684

487

40.4%


2,416

1,116

116.5%

Interest expenses

$

(324)

(711)

(54.4)%


(1,561)

(2,502)

(37.6)%

Income tax expenses (credit)

$

(1,245)

2,540

(149.0)%


3,356

5,741

(41.5)%

Non-GAAP net income attributable

    to non-controlling interest

$

107

77

38.3%


200

300

(33.5)%

Non-GAAP net income attributable

    to Hollysys Automation

    Technologies Ltd.

$

11,701

11,628

0.6%


41,049

44,893

(8.6)%

Basic Non-GAAP EPS

$

0.21

0.21

0.0%


0.73

0.81

(9.9)%

Diluted  Non-GAAP EPS

$

0.21

0.21

0.0%


0.73

0.81

(9.9)%










Stock-based compensation expense

$

517

100

418.9%


1,570

414

279.0%

Net income attributable to Hollysys

    Automation Technologies

    Ltd.(GAAP)

$

11,184

11,529

(3.0)%


39,478

44,479

(11.2)%

Basic GAAP EPS

$

0.20

0.21

(4.8)%


0.70

0.80

(12.5)%

Diluted GAAP EPS

$

0.20

0.21

(4.8)%


0.70

0.80

(12.5)%










Basic weighted average common

    shares outstanding


56,068,084

55,933,984

0.2%


56,022,512

55,547,536

0.9%

Diluted weighted average common

    shares outstanding


56,468,567

56,046,907

0.8%


56,086,042

55,742,634

0.6%














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

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



Three months ended Mar 31,


Nine months ended Mar 31,



2013


2012


2013


2012



$

% to Total Revenue


$

% to Total Revenue


$

% to Total Revenue


$

% to Total Revenue

Industrial Automation


38.5

63.9%


38.6

58.3%


152.6

64.8%


141.5

60.6%

Rail Transportation


17.5

28.9%


21.7

32.8%


53.8

22.9%


72.1

30.9%

Miscellaneous


4.4

7.2%


5.8

8.9%


29.2

12.3%


19.9

8.5%

Total


60.4

100.0%


66.1

100.0%


235.6

100.0%


233.6

100.0%

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

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

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

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

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

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

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

Backlog Highlights

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






Quarter-over-Quarter Analysis


Year-over-Year Analysis



2013-3-31


2012-12-31


2012-3-31



$

% to Total Backlog


$

% to Total Backlog


%
Change


$

% to Total Backlog


%
Change

Industrial Automation


146.3

39.1%


125.4

34.9%


16.7%


144.8

36.0%


1.1%

Rail Transportation


202.9

54.3%


206.7

57.5%


(1.8%)


208.4

51.9%


(2.6%)

Miscellaneous


24.8

6.6%


27.5

7.6%


(9.7%)


48.6

12.1%


(49.0%)

Total


374.0

100.0%


359.6

100.0%


4.0%


401.8

100.0%


(6.9%)

 

Cash Flow Highlights

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

Balance Sheet Highlights

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

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

Outlook for FY 2013

Dr. Wang concluded, "Due to the unexpected delay of high-speed rail orders and the weak macro-economy's impact, we are revising our previously communicated fiscal year 2013 revenue guidance of $385 million to $410 million, down to $335 million to $355 million, and non-GAAP net income guidance of $63 million to $67 million, down to $57 million to $60 million. Going into the near future, we believe with the recovery of high-speed rail construction, further penetration in the industrial automation and revenue supplement from overseas market, Hollysys is well positioned for stable and sustainable growth leveraging its leading proprietary technology, strong innovation and execution capabilities, to create long-term value for our shareholders."

Conference Call

Management will discuss the current status of the Company's operations during a conference call 9:00 a.m. Beijing Time on May 17, 2013 / 9:00 p.m. U.S. Eastern Time on May 16, 2013. Interested parties may participate in the call by dialing the following numbers approximately 10 minutes before the call is scheduled to begin and ask to be connected to the Hollysys Automation Technologies conference call. The conference call identification number is 46735356.

1-866-519-4004 (USA)

800-930-346 (HK)

+852-24750994 (HK)

800-819-0121 (China Landline)

400-620-8038 (China Mobile)

+ 65-67239381 (International)

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

http://www.hollysys.com.sg/home/index.php/investor-relations/events-a-webcast

About Hollysys Automation Technologies, Ltd.

Hollysys Automation Technologies is a leading provider of automation and control technologies and applications in China that enables its diversified industry and utility customers to improve operating safety, reliability, and efficiency. Founded in 1993, Hollysys has approximately 3,500 employees with nationwide presence in over 60 cities in China, with subsidiaries and offices in Singapore, Malaysia, Dubai, India, and serves over 5,000 customers more than 20,000 projects in the industrial, railway, subway & nuclear industries in China, South-East Asia, and the Middle East. Its proprietary technologies are applied in its industrial automation solution suite including DCS (Distributed Control System), PLC (Programmable Logic Controller), RMIS (Real-time Management Information System), HAMS (HolliAS Asset Management System), OTS (Operator Training System), HolliAS BATCH (Batch Application Package), HolliAS APC Suite (Advanced Process Control Package), SIS (Safety Instrumentation System), high-speed railway signaling system of TCC (Train Control Center), ATP (Automatic Train Protection), Subway Supervisory and Control platform, SCADA (Surveillance Control and Data Acquisition), nuclear conventional island automation and control system and other products.

SAFE HARBOUR:

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

Contact Information:

Hollysys Automation Technologies, Ltd.
www.hollysys.com

Investor Relations
+8610-58981386
investors@hollysys.com

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In US Dollars except for per-share data)












Three months ended


Nine months ended



March 31,


December 31,



2013


2012


2013


2012



(Unaudited)


(Unaudited)


(Unaudited)


 (Unaudited)

Revenues









Integrated contract revenue

$

56,445,995

$

61,754,657

$

220,479,657

$

221,138,496

Products sales


3,904,716


4,380,008


15,143,279


12,448,646

Total revenues


60,350,711


66,134,665


235,622,936


233,587,142










Cost of integrated contracts


32,429,992


38,361,214


145,470,976


139,510,271

Cost of products sold


1,478,315


1,757,506


5,432,623


4,237,085

Gross profit


26,442,404


26,015,945


84,719,337


89,839,786










Operating expenses









Selling


5,344,703


6,105,737


20,023,845


21,147,519

General and administrative


6,881,032


5,033,217


17,910,059


17,591,141

Research and development


7,361,126


5,587,796


23,369,833


18,538,206

VAT refunds and government subsidies


(3,585,679)


(2,513,331)


(15,463,226)


(16,363,865)

Total operating expenses


16,001,182


14,213,419


45,840,511


40,913,001










Income from operations


10,441,222


11,802,526


38,878,826


48,926,785










Other income, net


51,554


1,029,217


2,988,233


1,291,613

Gains on disposal of long term investment


-


2,045,042


-


2,042,015

Share of net (loss) income of equity investees


(806,570)


(506,650)


(518,307)


(354,953)

Dividend income from cost investees


-


-


830,196


-

Interest income


683,783


487,005


2,416,221


1,116,120

Interest expenses


(323,999)


(710,607)


(1,561,305)


(2,501,621)

Income before income taxes


10,045,990


14,146,533


43,033,864


50,519,959










Income taxes (credit) expenses


(1,245,065)


2,540,429


3,356,087


5,741,077

Net income


11,291,055


11,606,104


39,677,777


44,778,882










Net income attributable to non-controlling interests


106,922


77,294


199,616


300,162

Net income attributable to Hollysys

    Automation Technologies Ltd. stockholders

$

11,184,133

$

11,528,810

$

39,478,161

$

44,478,720










Other comprehensive income, net of tax









Foreign currency translation adjustments, net of nil

    tax


872,847


594,719


760,090


6,248,591

Comprehensive income


12,163,902


12,200,823


40,437,867


51,027,473










Comprehensive income attributable to non-

    controlling interest


111,610


78,486


211,047


327,351

Comprehensive income attributable to

    Hollysys Automation Technologies Ltd. 

    stockholders

$

12,052,292

$

12,122,337


40,226,820


50,700,122










Net income per ordinary share:









Basic


0.20


0.21


0.70


0.80

Diluted


0.20


0.21


0.70


0.80

Weighted average ordinary shares used in

    income per share computation:









Basic


56,068,084


55,933,984


56,022,512


55,547,536

Diluted


56,468,567


56,046,907


56,086,042


55,742,634

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In US Dollars)












March 31,


December 31,





2013


2012





(Unaudited)


(Unaudited)

ASSETS






Current Assets







Cash and cash equivalents

$

110,359,795

$

125,262,261



Time deposits with original maturities over three months


18,577,775


8,187,751



Restricted cash


3,413,890


3,175,576



Accounts receivable, net of allowance for doubtful accounts of

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

    December 31,2012, respectively


166,852,870


168,168,878



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

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

    31, 2013 and December 31, 2012, respectively


115,370,719


118,625,168



Other receivables, net of allowance for doubtful accounts of

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

    2012, respectively


8,281,165


6,967,259



Advances to suppliers


6,970,029


6,981,527



Amount due from related parties


16,541,775


14,739,788



Inventories, net


28,804,797


25,756,160



Prepaid expenses


657,296


858,274



Income tax recoverable


2,839,206


102,655



Deferred tax assets


1,855,436


1,994,575


Total current assets


480,524,753


480,819,872










Advance payment for acquisition of a subsidiary


16,390,000


-



Restricted cash


571,227


1,195,548



Prepaid expenses


148,654


29,205



Property, plant and equipment, net


70,089,301


70,510,908



Prepaid land leases


6,813,099


6,829,996



Acquired intangible assets, net


339,696


371,836



Investments in equity investees


13,469,942


14,055,037



Investments in cost investees


3,662,343


3,650,290



Goodwill


27,239,280


27,686,774



Deferred tax assets


1,762,784


466,170









Total assets


621,011,079


605,615,636








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Current portion of long-term loans


7,986,000


7,959,768



Accounts payable


81,249,797


85,760,172



Construction cost payable


3,998,158


4,213,860



Deferred revenue


76,304,883


72,606,208



Accrued payroll and related expense


6,611,280


9,989,855



Income tax payable


3,266,278


3,068,458



Warranty liabilities


3,871,383


3,827,355



Other tax payables


20,287,484


18,183,202



Accrued liabilities


14,616,857


8,464,522



Amounts due to related parties


1,825,832


1,594,749



Deferred tax liabilities


213,268


200,452


Total current liabilities


220,231,220


215,868,601










Long-term bank loans


18,874,414


20,804,534



Deferred tax liabilities


126,608


223,368


Total liabilities


239,232,242


236,896,503









Commitments and contingencies













Equity







Ordinary shares


56,087


56,029



Additional paid-in capital


153,491,661


152,595,661



Statutory reserves


23,144,776


23,128,214



Retained earnings


170,228,187


159,060,872



Accumulated other comprehensive income


33,463,215


32,595,056


Total Hollysys Automation Technologies Ltd. stockholder's equity


380,383,926


367,435,832










Non-controlling interests


1,394,911


1,283,301


Total equity


381,778,837


368,719,133









Total liabilities and equity

$

621,011,079

$

605,615,636

 

 


HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US Dollars)












Three months


Nine months





ended


ended





March 31, 2013


March 31, 2013





(Unaudited)


(Unaudited)


Cash flows from operating activities:







Net income

$

11,291,055

$

39,677,777


Adjustments to reconcile net income to net cash provided

        by (used in) operating activities:







Depreciation of property, plant and equipment


1,377,522


4,394,473



Amortization of prepaid land leases


39,371


117,650



Amortization of intangible assets


26,074


200,109



Allowance for doubtful accounts


1,979,863


3,121,620



Gain on disposal of property, plant and equipment


(165,429)


(140,263)



Share of net loss from equity investees


806,570


518,307



Stock dividends from cost investees


-


(830,196)



Gain on disposal of a subsidiary


-


(136,795)



Share based compensation expenses


516,858


1,570,403



Deferred income tax expenses


(1,234,620)


(2,504,290)


Changes in operating assets and liabilities:







Accounts receivable


111,624


(32,113,458)



Costs and estimated earnings in excess of billings


3,013,606


605,366



Inventories 


(2,972,436)


(1,880,776)



Advances to suppliers


44,503


3,417,638



Other receivables 


(1,342,703)


(874,214)



Deposits and other assets


419,993


1,738,305



Due from related parties


(1,927,912)


(653,117)



Accounts payable


(4,678,405)


2,268,845



Deferred revenue


3,598,932


16,407,831



Accruals and other payable


2,778,248


6,041,882



Due to related parties


224,560


(155,990)



Income tax payable


(2,549,241)


(3,064,162)



Other tax payables


2,043,456


1,895,967



Net cash provided by operating activities


13,401,489


39,622,912









Cash flows from investing activities:







Time deposits placed with banks


(11,999,910)


(17,289,447)



Purchases of property, plant and equipment


(976,126)


(6,264,243)



Maturity of time deposits


1,722,523


20,492,325



Acquisition of a subsidiary, net of cash acquired


(16,390,000)


(16,390,000)



Proceeds from disposal of a subsidiary


-


111,748



Net cash used in investing activities


(27,643,513)


(19,339,617)









Cash flows from financing activities:







Repayments of long-term bank loans


(1,992,052)


(5,953,382)



Proceeds from exercise of share options


379,200


616,200



Net cash used in financing activities


(1,612,852)


(5,337,182)










Effect of foreign exchange rate changes


952,410


(919,280)



Net (decrease) increase in cash and cash equivalents

$

(14,902,466)

$

14,026,833










Cash and cash equivalents, beginning of period

$

125,262,261

$

96,332,962



Cash and cash equivalents, end of period


110,359,795


110,359,795

Non-GAAP Measures

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

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




Three months ended


Nine months ended




March 31,


March 31,




2013


2012


2013


2012




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)











General and administrative expenses

$

6,881,032

$

5,033,217

$

17,910,059

$

17,591,141

Minus:










Stock-based compensation cost


516,858


99,606


1,570,403


414,318

Non-GAAP general and administrative expenses

$

6,364,174

$

4,933,611

$

16,339,656

$

17,176,823











Net income attributable to Hollysys Automation

     Technologies Ltd. stockholders

$

11,184,133

$

11,528,810

$

39,478,161

$

44,478,720

Add:










Stock-based compensation cost


516,858


99,606


1,570,403


414,318

Non-GAAP net income attributable to Hollysys

     Automation Technologies Ltd. stockholders

$

11,700,991

$

11,628,416

$

41,048,564

$

44,893,038












Weighted average number of ordinary shares


56,068,084


55,933,984


56,022,512


55,547,536


Weighted average number of diluted ordinary shares


56,468,567


56,046,907


56,086,042


55,742,634

Non-GAAP basic earnings per share

$

0.21

$

0.21

$

0.73

$

0.81

Non-GAAP diluted earnings per share

$

0.21

$

0.21

$

0.73

$

0.81

 

SOURCE Hollysys Automation Technologies, Ltd.



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