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

First Half Year of Fiscal Year 2016 Financial Highlights

Non-GAAP net income attributable to Hollysys was $64.1 million, an increase of 26.3% compared to the comparable prior year period.

Total revenues were $277.9 million, an increase of 2.5% compared to the comparable prior year period.

Non-GAAP gross margin was at 39.6%, compared to 38.9% for the comparable prior year period.

Non-GAAP diluted EPS were at $1.06, an increase of 23.3% compared to the comparable prior year period.

Net cash provided by operating activities was $53.6 million for the current period.

DSO of 158 days, compared to 192 days for the comparable prior year period.

Inventory turnover days of 38 days, compared to 48 days from the comparable prior year period.

Second Quarter of Fiscal Year 2016 Financial Highlights

Non-GAAP net income attributable to Hollysys was $36.8 million, an increase of 56.0% compared to the comparable prior year period.

Total revenues were $152.8 million, an increase of 17.3% compared to the comparable prior year period.

Non-GAAP gross margin was at 39.8%, compared to 38.3% for the comparable prior year period.

Non-GAAP diluted EPS were at $0.61, an increase of 52.5% compared to the comparable prior year period.

Net cash provided by operating activities was $46.7 million for the current quarter.

DSO of 138 days, compared to 206 days for the comparable prior year period.

Inventory turnover days of 34 days, compared to 52 days for the comparable prior year period.

Feb 03, 2016, 17:00 ET from Hollysys Automation Technologies, Ltd

BEIJING, Feb. 3, 2016 /PRNewswire/ --

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 2016 second quarter ended on December 31, 2015 (see attached tables). The management of Hollysys, stated:

"During this quarter, industrial automation business has being affected by weak external environment, with particular impacts on process control sector that we have not seen the recovery sign from the market. However, despite of challenging conditions, our strategy of developing after sales and services is proven successful which continuously taking larger percentage of our revenue. Besides, giving the new construction projects in the near future would be lack of sustainable, we have already focused on reconstruction or upgrading opportunities as supplement through sign maintenance and service contracts to lock potential customers, helping them to improve efficiency and saving the costs. Breaking down in industries, power is maintaining stable, we have taken several numbers of high level generator units, and signed large contract such as Jiujiang Shenhua 2X1052MW power units which are the highest level units in coal-fire power industry. While petro-chemical is still weak, the same as metallurgy and building materials. Overall speaking, we have to say that external environment brings large impact to our industrial automation business, but we will adjust ourselves through better internal management and control such as to insist keeping gross margin for long-term health development within industrial automation to better cope with this situation and try our best to gradually recover the business.

In high-speed railway, we signed a large contract to provide Automatic Train Protection (ATP) equipment and system to China Railways Corporation. We are quite confident of the steady high-speed rail revenue and backlog performance. As China is continuously investing a certain scale on supporting high-speed railway sector for the next five years, we will still benefit from the policy of 13th five-year-plan. Furthermore, we are also working to expand our rail new products & technologies such as track circuit which would make potential revenue contribution in the near future.

For subway business, we have signed quite a few SCADA contracts in the recent quarters and seeking opportunities to work with more local transportation bureaus. We will continue to deliver quality works and work closely with subway authorities in the future to build up our SCADA and subway signaling businesses both in China and abroad.

In the mechanical and electrical solution segment, seasonal lumpiness affected sector's performance in the short term. However, we are unshakable to penetrate Southeast Asia and Middle East markets and make progress on delayed projects. We also actively communicate with local customers to discuss new project opportunities and even seek business partners for further cooperation.

At last, for extending international business, we have recruited local engineers to support our overseas team. With our proprietary technologies and products, industry expertise and customer resources, we will continue to make exciting development and achievements in both industrial and rail transportation fields, and create value for our shareholders."

First Half Year and the Second Quarter Ended December 31, 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 for number of shares and per share data)




Three months ended


Six months ended



Dec 31, 2015

Dec 31, 2014

%
Change


Dec 31, 2015

Dec 31, 2014

%
Change










Revenues

$

152,773

130,296

17.3%

$

277,864

270,960

2.5%

    Integrated contract revenue

$

134,159

119,014

12.7%

$

245,172

247,505

(0.9)%

    Products sales

$

15,393

10,304

49.4%

$

26,835

19,185

39.9%

    Service rendered

$

3,221

978

229.3%

$

5,857

4,270

37.2%

Cost of revenues

$

91,964

80,450

14.3%

$

167,875

165,424

1.5%

Gross profit

$

60,809

49,846

22.0%

$

109,989

105,536

4.2%

Total operating expenses

$

19,151

27,762

(31.0)%

$

37,305

46,277

(19.4)%

    Selling

$

7,096

7,203

(1.5)%

$

13,720

13,975

(1.8)%

    General and administrative

$

10,836

15,466

(29.9)%

$

19,752

24,780

(20.3)%

    Research and development

$

11,890

10,109

17.6%

$

19,600

18,893

3.7%

    VAT refunds and government subsidies

$

(10,671)

(5,016)

112.7%

$

(15,767)

(11,371)

38.7%

Income from operations

$

41,658

22,084

88.6%

$

72,684

59,259

22.7%

Other income, net

$

1,391

713

95.1%

$

1,777

1,269

40.0%

Foreign exchange (losses) gains

$

(850)

30

(2933.3)%

$

(814)

(668)

21.9%

Share of net (losses) income of equity
   investees

$

(217)

24

(1004.2)%

$

77

(2,487)

(103.1)%

Dividend income from cost investees

$

-

248

(100.0)%

$

-

248

(100.0)%

Interest income

$

1,102

857

28.6%

$

2,839

1,712

65.8%

Interest expenses

$

(384)

(336)

14.3%

$

(753)

(666)

13.1%

Income tax expenses (credit)

$

5,128

(282)

(1918.4)%

$

9,783

7,133

37.2%

Net income attributable to noncontrolling
   interests

$

785

325

141.5%

$

1,940

800

142.5%

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

$

36,787

23,577

56.0%

$

64,087

50,734

26.3%

Non-GAAP basic EPS

$

0.62

0.40

55.0%

$

1.08

0.87

24.1%

Non-GAAP diluted EPS

$

0.61

0.40

52.5%

$

1.06

0.86

23.3%










Share-based compensation expenses

$

1,243

466

166.7%

$

2,137

931

129.5%

Amortization of acquired intangible assets

$

230

1,535

(85.0)%

$

487

3,431

(85.8)%

Fair value adjustments of acquisition-related
   incentive share contingent consideration

$

2,366

2,389

(4.2)%

$

(1,745)

(117)

1391.5%

Fair value adjustments of acquisition-related
   cash contingent consideration

$

-

-

-

$

-

201

(100.0)%

Fair value adjustments of a bifurcated derivative

$

-

81

(100.0)%

$

-

81

(100.0)%

GAAP Net income attributable to Hollysys
   Automation Technologies Ltd.

$

32,948

19,106

72.4%

$

63,208

46,207

36.8%

GAAP basic EPS

$

0.56

0.33

69.7%

$

1.07

0.79

35.4%

GAAP diluted EPS

$

0.55

0.32

71.9%

$

1.05

0.78

34.6%










Basic weighted average common shares
    outstanding


59,071,520

58,271,021

1.4%


59,069,316

58,267,994

1.4%

Diluted weighted average common shares
   outstanding


60,619,909

59,157,335

2.5%


60,632,435

59,129,245

2.5%

Operational Results Analysis for the Second Quarter Ended December 31, 2015

Comparing to the second quarter of the prior fiscal year, the total revenues for the three months ended December 31, 2015 increased from $130.3 million to $152.8 million, representing an increase of 17.3%. Broken down by the revenue types, integrated contracts revenue increased by 12.7% to $134.2 million, products sales revenue increased by 49.4% to $15.4 million, and services revenue increased by 229.3% to $3.2 million.

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

(In USD thousands)



Three months ended Dec 31,


Six months ended Dec 31,



2015


2014


2015


2014



$

% to
Total
Revenue


$

% to
Total
Revenue


$

% to
Total
Revenue


$

% to
Total
Revenue

Industrial Automation


54,276

35.5%


56,798

43.6%


103,743

37.3%


113,942

42.0%

Rail Transportation


63,878

41.8%


33,631

25.8%


118,209

42.6%


74,453

27.5%

Mechanical and Electrical Solutions


29,710

19.4%


36,944

28.4%


45,268

16.3%


76,990

28.4%

Miscellaneous


4,909

3.3%


2,923

2.2%


10,644

3.8%


5,575

2.1%

Total


152,773

100.0%


130,296

100.0%


277,864

100.0%


270,960

100.0%

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 39.8% for the three months ended December 31, 2015, as compared to 38.3% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 37.2%, 57.4% and 65.2% for the three months ended December 31, 2015, as compared to 35.7%, 63.7% and 80.4% 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 39.7% for the three months ended December 31, 2015, as compared to 37.1% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 37.0%, 57.4% and 65.2% for the three months ended December 31, 2015, as compared to 34.4%, 63.7% and 80.5% for the same period of the prior year respectively.

Selling expenses were $7.1 million for the three months ended December 31, 2015, representing a decrease of $0.1 million or 1.5% compared to $7.2 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 4.6% and 5.5% for the three months ended December 31, 2015, and 2014, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $10.8 million for the quarter ended December 31, 2015, representing a decrease of 4.6 million, or 29.9%, as compared to $15.5 million for the same period of the prior year. The decrease was mainly due to the decrease of $2.1 million in bad debt expenses. Presented as a percentage of total revenues, non-GAAP G&A expenses were 7.1% and 11.9% for quarters ended December 31, 2015 and 2014 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $12.1 million and $15.9 million for the three months ended December 31, 2015 and 2014, respectively.

Research and development expenses were $11.9 million for the three months ended December 31, 2015, an increase of $1.8 million or 17.6% compared to $10.1 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 7.8% and 7.8% for the quarter ended December 31, 2015 and 2014, respectively.

The VAT refunds and government subsidies were $10.7 million for three months ended December 31, 2015, as compared to $5.0 million for the same period in the prior year, representing a $5.7 million or 112.7% increase which primarily due to the increase of the VAT refunds of $6.1 million.

The income tax expenses and the effective tax rate were $5.1 million and 13.2% for the three months ended December 31, 2015, as compared to a $(0.3) million and (1.5)% 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 12.0% for the current quarter and (1.2)% for the comparable prior year period. During the second quarter ended December 31, 2014, Beijing Hollysys & Hangzhou Hollysys were certified as HNTE effective for three years from January 1, 2014 to December 31, 2016, and are applied to the preferential EIT rate of 15%; and Beijing Hollysys and Hangzhou Hollysys accordingly recalculated the tax expenses accrual for calendar year 2014, based on the newly applied EIT rate of 15%, instead of 25%. Excluding the impact of the accrual adjustment, the effective tax rate for the three months ended December 31, 2014 was 15.2%.

The non-GAAP net income attributable to Hollysys, which excludes non-cash share-based compensation expenses, amortization of acquired intangibles and acquisition-related consideration fair value adjustments was $36.8 million or $0.61 per diluted share based on 60.6 million shares outstanding for the three months ended December 31, 2015. This represents a 56.0% increase over the $23.6 million or $0.40 per share based on 59.2 million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $32.9 million or $0.55 per diluted share representing an increase of 72.4% over the $19.1 million or $0.32 per diluted share reported in the comparable prior year period.  

Integrated Contracts Backlog Highlights

Hollysys' backlog for integrated contracts as of December 31, 2015 was $527.0 million, representing an increase of 7.5% compared to $490.4 million as of September 30, 2015, and an increase of 21.5% compared to $433.7 million as of December 31, 2014. The detailed breakdown of the backlog for integrated contracts by segments is shown below:

(In USD thousands)




Quarter-over-Quarter Analysis


Year-over-Year Analysis



2015/12/31


2015/9/30


2014/12/31



$

% to
Total
Backlog


$

% to
Total
Backlog


%
Change


$

% to
Total
Backlog


%
Change

Industrial Automation


105,805

20.1%


127,270

26.0%


(16.9%)


139,310

32.1%


(24.1%)

Rail Transportation


301,571

57.2%


245,280

50.0%


22.9%


219,680

50.7%


37.3%

Mechanical and Electrical Solutions


119,617

22.7%


117,800

24.0%


1.5%


74,710

17.2%


60.1%

Total


526,993

100.0%


490,350

100.0%


7.5%


433,700

100.0%


21.5%

Cash Flow Highlights

For the three months ended December 31, 2015, the total net cash outflow was $1.8 million. The net cash provided by operating activities was $46.7 million. The net cash used in investing activities was $45.5 million, mainly consisted of $47.2 million placed as time deposits with original maturities over three months in banks. The net cash provided by financing activities was $0.4 million.

Balance Sheet Highlights

The total amount of cash and cash equivalents and time deposits with original maturities over three months were $275.6 million, $234.9 million, and $215.8 million as of December 31, September 30, 2015 and December 31, 2014, respectively. As of December 31, 2015, the company held $188.7 million in cash and cash equivalents and $86.9 million in time deposits with original maturities over three months.

For the three months ended December 31, 2015, Days Sales Outstanding ("DSO") was 138 days, as compared to 206 days for the comparable prior year period and 179 days for the last quarter; and inventory turnover was 34 days, as compared to 52 days for the comparable prior year period and 42 days for the last quarter.

Outlook for FY 2016

The management concluded, "Given our strong backlog currently on-hand and sales pipeline envisioned so far, we reiterate our guidance for fiscal year 2016 with revenue in the range of $565 million to $600 million and non-GAAP net income in the range of $110 million to $120 million."

Conference Call

The Company will host a conference call at 8:00 p.m. U.S. Eastern Time on February 3, 2016 / 9:00 a.m. Beijing Time on February 4, 2016, to discuss the financial results for the fiscal year 2016 second quarter ended December 31, 2015 and business outlook.

To participate, please call the following numbers ten minutes before the scheduled start of the call. The conference call identification number is 2220095.

4001-200-539

(China)

0080 161 5189

(Taiwan)

+1-855-298-3404

(United States)

+1 631 5142 526

(US - New York)

0800 916 599

(France)

0800 1899 399

(Germany)

0800 837 001

(Switzerland)

1800 801 825

(Australia)

800-905-927

(Hong Kong)

+852-5808-3202

(Hong Kong)

0800-015-9725

(United Kingdom)

+44(0)20 3078 7622

(United Kingdom - London)

800-616-3222

(Singapore)

+65 6823 2299

(Singapore/International)

In addition, a recording of the conference call will be accessible within 48 hours via Hollysys' website at: http://ir.hollysys.com/ or http://hollysys.investorroom.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 6,000 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.

For further information, please contact:

Hollysys Automation Technologies, Ltd.
www.hollysys.com
+86-10-5898-1386
investors@hollysys.com

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In USD thousands except for number of shares and per share data)




Three months ended
December 31,


Six months ended
December 31,



2015


2014


2015


2014



(Unaudited)


(Unaudited)


(Unaudited)


 (Audited)

Revenues









Integrated contract revenue

$

134,159

$

119,014

$

245,172

$

247,505

Products sales


15,393


10,304


26,835


19,185

Revenue from service


3,221


978


5,857


4,270

Total revenues


152,773


130,296


277,864


270,960










Costs of integrated contracts


84,520


78,058


154,349


161,818

Costs of products sold


6,554


3,736


11,982


5,583

Costs of services rendered


1,120


191


2,031


1,454

Gross profit


60,579


48,311


109,502


102,105










Operating expenses









Selling


7,096


7,203


13,720


13,975

General and administrative


12,079


15,932


21,889


25,711

Research and development


11,890


10,109


19,600


18,893

VAT refunds and government subsidies


(10,671)


(5,016)


(15,767)


(11,371)

Total operating expenses


20,394


28,228


39,442


47,208










Income from operations


40,185


20,083


70,060


54,897










Other (expenses) income, net


(975)


(1,676)


3,522


1,386

Foreign exchange (losses) gains


(850)


30


(814)


(668)

Share of net (losses) income of equity investees


(217)


24


77


(2,487)

Dividend income from cost investees


-


248


-


248

Interest income


1,102


857


2,839


1,712

Interest expenses


(384)


(417)


(753)


(948)

Income before income taxes


38,861


19,149


74,931


54,140










Income taxes expenses (credit)


5,128


(282)


9,783


7,133

Net income


33,733


19,431


65,148


47,007










Net income attributable to noncontrolling interests


785


325


1,940


800

Net income attributable to Hollysys Automation
   Technologies Ltd.

$

32,948

$

19,106

$

63,208

$

46,207










Other comprehensive income, net of tax of nil









Translation adjustments


(9,250)


(55)


(38,705)


(1,986)

Comprehensive income


24,483


19,376


26,443


45,021










Comprehensive income (losses) attributable to noncontrolling
   interests


818


(119)


1,706


357

Comprehensive income attributable to Hollysys
   Automation Technologies Ltd.

$

23,665

$

19,495

$

24,737

$

44,664










Net income per ordinary share:









Basic


0.56


0.33


1.07


0.79

Diluted


0.55


0.32


1.05


0.78

Weighted average ordinary shares used in income per
   share computation:









Basic


59,071,520


58,271,021


59,069,316


58,267,994

Diluted


60,619,909


59,157,335


60,632,435


59,129,245

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In USD thousands except for number of shares and per share data)












Dec 31,


Sep 30,





2015


2015





(Unaudited)


(Unaudited)

ASSETS






Current assets







Cash and cash equivalents

$

188,683

$

190,475



Time deposits with maturities over three months


86,950


44,394



Restricted cash


27,113


24,418



Accounts receivable, net of allowance for doubtful accounts of $39,244 and $34,259 as of
   December 31,2015 and September 30, 2015, respectively


234,251


234,873



Costs and estimated earnings in excess of billings, net of allowance for doubtful accounts of
   $5,774 and $9,052 as of December 31, 2015 and September 30, 2015, respectively


167,626


185,603



Other receivables, net of allowance for doubtful accounts of $739 and $696 as of December
   31, 2015 and September 30, 2015, respectively


15,882


13,481



Advances to suppliers


10,302


19,386



Amounts due from related parties


32,213


37,377



Inventories


35,505


34,815



Prepaid expenses


676


460



Income tax recoverable


257


784



Deferred tax assets


3,871


3,470


Total current assets


803,329


789,536










Restricted cash


3,713


3,735



Prepaid expenses


12


12



Property, plant and equipment, net


78,357


77,126



Prepaid land leases


10,820


10,948



Acquired intangible assets, net


1,131


1,350



Investments in equity investees


11,360


12,386



Investments in cost investees


4,204


4,290



Goodwill


57,100


56,643



Deferred tax assets


2,791


2,249









Total assets


972,817


958,275








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Short-term bank loans


2,872


2,462



Current portion of long-term loans


11,880


11,695



Accounts payable


109,392


104,021



Construction costs payable


1,112


1,082



Deferred revenue


108,627


130,738



Accrued payroll and related expenses


15,160


12,677



Income tax payable


3,638


4,800



Warranty liabilities


7,448


7,313



Other tax payables


21,527


23,763



Accrued liabilities


30,581


27,398



Amounts due to related parties


1,405


1,687



Deferred tax liabilities


8,561


8,330



Current portion of acquisition-related consideration


-


10,970


Total current liabilities


322,203


346,936










Long-term loans


20,402


20,524



Deferred tax liabilities


64


68



Long-term warranty liabilities


2,846


2,507









Total liabilities


345,515


370,035









Commitments and contingencies


-


-









Equity







Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized; 58,998,599 and
   58,358,521 shares issued and outstanding as of December 31, 2015 and September 30,
   2015, respectively


59


58



Additional paid-in capital


208,241


193,663



Statutory reserves


30,299


30,248



Retained earnings


381,598


348,700



Accumulated other comprehensive income


-886


8,398


Total Hollysys Automation Technologies Ltd. stockholder's equity


619,311


581,067










Noncontrolling interests


7,991


7,173


Total equity


627,302


588,240









Total liabilities and equity

$

972,817

$

958,275

 

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands)










Three months ended
Dec 31, 2015


Six months ended
Dec 31, 2015




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

33,733

$

65,148

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






Depreciation of property, plant and equipment


1,366


3,283


Amortization of prepaid land leases


83


132


Amortization of intangible assets


231


489


Allowance for doubtful accounts


2,897


4,874


Losses on disposal of property, plant and equipment


(95)


305


Share of net losses (income) from equity investees


217


(77)


Share-based compensation expenses


1,243


2,137


Deferred income tax expenses


(743)


1,604


Acquisition-related consideration adjustments


2,366


(1,745)


Accretion of convertible notes discount


57


115

Changes in operating assets and liabilities:






Accounts receivable


(7,499)


(3,276)


Costs and estimated earnings in excess of billings


19,179


(9,330)


Inventories 


(1,388)


(2,894)


Advances to suppliers


8,995


4,205


Other receivables


(2,667)


(4,353)


Deposits and other assets


(3,255)


(3,353)


Due from related parties


4,530


4,712


Accounts payable


5,766


10,135


Deferred revenue


(20,473)


(22,561)


Accruals and other payable


4,429


2,653


Due to related parties


156


198


Income tax payable


(558)


(1,500)


Other tax payables


(1,885)


2,660


Net cash provided by operating activities


46,685


53,561







Cash flows from investing activities:






Time deposits with original maturities over three months placed with banks


(47,210)


(60,860)


Purchases of property, plant and equipment


(1,335)


(3,271)


Proceeds from disposal of property, plant and equipment


-


1


Maturity of time deposits with original maturities over three months


3,055


20,254


Net cash used in investing activities


(45,490)


(43,876)







Cash flows from financing activities:






Proceeds from short-term bank loans


404


3,221


Repayments of short-term bank loans


-


(16,378)


Proceeds from long-term bank loans


1,929


2,296


Repayments of long-term bank loans


(1,975)


(4,194)


Net cash provided by (used in) financing activities


358


(15,055)








Effect of foreign exchange rate changes


(3,345)


(13,781)


Net decrease in cash and cash equivalents

$

(1,792)

$

(19,151)








Cash and cash equivalents, beginning of period

$

190,475

$

207,834


Cash and cash equivalents, end of period


188,683


188,683

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 intangible assets, fair value adjustments of acquisition-related consideration, and fair value adjustments of a bifurcated derivative. 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 the Company, 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:

(In USD thousands except for number of shares and per share data)




Three months ended


Six months ended




Dec 31,


Dec 31,




2015


2014


2015


2014




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)











Cost of integrated contracts

$

84,520

$

78,058

$

154,349

$

161,818

Less: Amortization of acquired intangible assets


230


1,535


487


3,431

Non-GAAP cost of integrated contracts

$

84,290

$

76,523

$

153,862

$

158,387











General and administrative expenses

$

12,079

$

15,932

$

21,889

$

25,711

Less: Share-based compensation expenses


1,243


466


2,137


931

Non-GAAP general and administrative expenses

$

10,836

$

15,466

$

19,752

$

24,780











Other (expenses) income, net

$

(975)

$

(1,676)

$

3,522

$

1,386

Add: Fair value adjustments of acquisition-related incentive
   share contingent consideration


2,366


2,389


(1,745)


(117)

Non-GAAP other income, net

$

1,391

$

713

$

1,777

$

1,269











Interest expenses

$

(384)

$

(417)

$

(753)

$

(948)

Add:










Fair value adjustments of acquisition-related cash
   contingent consideration


-


-


-


201


Fair value adjustments of a bifurcated derivative


-


81


-


81

Non-GAAP interest expenses

$

(384)

$

(336)

$

(753)

$

(666)











Net income attributable to Hollysys Automation
   Technologies Ltd.

$

32,948

$

19,106

$

63,208

$

46,207

Add:










Share-based compensation expenses


1,243


466


2,137


931


Amortization of acquired intangible assets


230


1,535


487


3,431


Fair value adjustments of acquisition-related
   consideration


2,366


2,389


(1,745)


84


Fair value adjustments of a bifurcated derivative


-


81


-


81

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

$

36,787

$

23,577

$

64,087

$

50,734












Weighted average number of basic ordinary shares


59,071,520


58,271,021


59,069,316


58,267,994


Weighted average number of diluted ordinary shares


60,619,909


59,157,335


60,632,435


59,129,245

Non-GAAP basic earnings per share

$

0.62

$

0.40

$

1.08

$

0.87

Non-GAAP diluted earnings per share

$

0.61

$

0.40

$

1.06

$

0.86

 

SOURCE Hollysys Automation Technologies, Ltd



RELATED LINKS

http://www.hollysys.com