Hollysys Automation Technologies Reports Unaudited Financial Results for the Fiscal Year and the Quarter Ended June 30, 2015

Aug 13, 2015, 18:00 ET from Hollysys Automation Technologies, Ltd

BEIJING, Aug. 13, 2015 /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 2015 and the quarter ended on June 30, 2015 (see attached tables). The management of Hollysys, stated:

Fiscal Year 2015 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $103.3 million, an increase of 18.9% compared to the prior year.
  • Total revenues were $531.4 million, an increase of 1.9% compared to the prior year.
  • Non-GAAP gross margin was at 41.2%, compared to 34.7% from the prior year.
  • Non-GAAP diluted EPS were at $1.72, an increase of 15.4% compared to the prior year.
  • Integrated Contracts Backlog was $568.5 million, an increase of 2.3% compared to the comparable prior year period.
  • Net cash provided by operating activities of $79.5 million for fiscal year 2015.
  • DSO of 176 days, compared to 150 days from the prior year.
  • Inventory turnover days of 41 days, compared to 36 days from the prior year.

Fourth Quarter of Fiscal Year 2015 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $23.0 million, a decrease of 9.8% compared to the comparable prior year period.
  • Total revenues were $142.2 million, a decrease of 10.5% compared to the comparable prior year.
  • Non-GAAP gross margin was at 41.4%, compared to 34.9% from the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.38, a decrease of 11.6% compared to the comparable prior year period.
  • Net cash provided by operating activities was $76.6 million for the current quarter.
  • Quarterly DSO of 176 days, compared to 148 days from the comparable prior year period.
  • Inventory turnover days of 43 days, compared to 31 days from the comparable prior year period.

In fiscal year 2015, we made solid achievements and delivered robust growth in several areas in terms of financial performance and business operation, and achieved higher than our expected net income guidance. When we enjoy the exciting moment, we also calmly evaluate the future opportunities and challenges and carefully plan for the future growth. Here we would like to discuss the achievements in the past fiscal year and strategies in the future in the respective segments:

In the industrial automation sector, during the past fiscal year, China was continuously adjusting its industry structure and reducing the capacity in some industries such as metallurgy, building material, paper mill and coal fire power, but we gained more market share from rising industries to make up the loss from decreasing industries and through winning more high-end projects such as Guangdong Yuedian Bohe Thermal Power Plant, Guohua Shouguang Coal Fire Power Plant, Datang Sanmenxia Coal Fire Generating Units and etc., to remain in good shape for our total industrial automation sector. In order to better cope with weak general environment, firstly, we have been continuously improving our industry solution capability and competition capability to strengthen industry marketing and influence on the base of regional network construction few years ago, and focus more on larger projects with more total solution supply. Secondly, we increased the higher gross margin products providing including Distributed Control System ("DCS"), Safety Instrumentation System ("SIS") and advanced control software, to improve operation quality and profitability. Thirdly, we continued to provide quality service and maintenance to our customers, to set up long term working relationship with old customers and provide more value adding technologies to improve their operation. Fourthly, capture the new growth opportunities of energy conservation and emission reduction, and pursue the new business opportunities driven by intelligent and automated production and working.

The factory automation which is categorized in the industrial automation is relatively a new business but with strong potential, in this area we provide proprietary Programmable Logic Controller ("PLC") and develop our proprietary solution and equipment, to the industries such as coal mining, waste water treatment, and the Traditional Chinese Medicine ("TCM") which performed well in the past fiscal year and we expect solid growth in the coming year. We have built up the advanced technology platform, mature products and successful application track record in the above areas, and we'd like to seek more opportunities to replace labor and improve production efficiency for our customers.

Besides, we are expecting another strong growth driver of industrial automation from overseas market, we have established subsidiary companies and offices in India, Malaysia, and Singapore few years ago to provide our industrial automation products. We are currently enhancing the localization such as recruiting local talents and establishing local partnership, we believe that we will have the same strong advantages as in China like the quality products, better service and better value for money which will enable us to win more customers and enlarge overseas business scale.

In high-speed rail sector, we were continuously making remarkable achievements in fiscal year 2015. In this year, we signed several sizable ground-based high-speed rail signaling system contracts to provide the Train Control Centers ("TCC") and other related products consecutively, including the Foshan-Zhaoqing intercity high-speed rail line which is the first TCC contract with Automatic Train Operation technology applied, Jinhua-Wenzhou high speed rail line, and Xi'an-Chengdu high-speed rail line Xi'an-Jiangyou section; and two batches of significant Automatic Train Protection ("ATP") equipment providing contracts value at RMB 580 Million and RMB 118.7 Million respectively. The strong backlog and booming order pipeline make certain for another strong year ahead. We believe with our key position in China's high-speed rail signaling system providing, superior products performance and well-reputed track record, we are well prepared to take more market share in the high-speed rail signaling in the near future. Besides that, our new product, track circuit is making significant progress, we expect to win first contract in fiscal year 2016 and becoming growth driver in the long run.

In subway sector, we signed the contract of Tianjin Subway Line 5, Shenzhen Subway Line 11 and Lanzhou Subway Line 1 to provide Supervisory Control and Data Acquisition System ("SCADA"). In the future, we will closely work with local subway authorities to explore the SCADA and subway signaling business opportunities both in China and aboard.

For overseas business, we were satisfied with Bond and Concord' capability of winning orders and execution, and we are expecting strong business growth from the overseas sector. In the next phrase, we will continuously accelerate the overseas business expansion, ensure the healthy development of their business, increase our proprietary products and systems providing leveraging their market resources, and improve our overseas business gross margin.

In addition, analysts and investors are invited to attend our Annual Investor Day around mid-October, which will be filled with showcasing our whole executive team, insightful presentations from various corporate executives and facility tour, to further enhance our transparency, corporate investor relations and communication. Our shareholders who would like to participate in this annual event shall contact their brokerage firms or contact us directly to arrange the reservation; we are looking forward to meeting with you in October at our premises.

Fiscal Year and the Quarter Ended June 30, 2015 Unaudited Financial Results Summary

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

(In USD thousands, except share numbers and per share data)


















Fiscal year ended


Three months ended



Jun 30, 2015

Jun 30, 2014

%
Change


Jun 30, 2015

Jun 30, 2014

%
Change










Revenues

$

531,379

521,332

1.9%

$

142,189

158,852

(10.5)%

    Integrated contract revenue

$

481,006

478,261

0.6%

$

127,141

137,216

(7.3)%

    Products sales

$

39,762

31,922

24.6%

$

10,769

13,381

(19.5)%

    Service rendered

$

10,611

11,149

(4.8)%

$

4,279

8,255

(48.2)%

Cost of revenues

$

312,523

340,296

(8.2)%

$

83,272

103,474

(19.5)%

Gross profit

$

218,856

181,036

20.9%

$

58,917

55,378

6.4%

Total operating expenses

$

81,801

74,229

10.2%

$

18,108

19,827

(8.7)%

    Selling

$

26,263

28,257

(7.1)%

$

6,577

6,232

5.5%

    General and administrative

$

48,292

36,730

31.5%

$

14,541

12,276

18.5%

    Impairment of goodwill

$

1,855

-

-

$

1,855

-

-

    Research and development

$

35,779

36,486

(1.9)%

$

7,517

8,443

(11.0)%

    VAT refunds and government subsidies

$

(30,388)

(27,244)

11.5%

$

(12,382)

(7,124)

73.8%

Income from operations

$

137,054

106,807

28.3%

$

40,808

35,551

14.8%

Other income, net

$

2,233

1,537

45.3%

$

350

730

(52.1)%

Foreign exchange (losses) gains

$

(6,765)

794

(952.0)%

$

(6,757)

(280)

2313.2%

Gains on disposal of investment in an equity
  investee

$

80

-

-

$

-

-

-

Share of net gain (losses) of equity investees

$

(2,910)

(2,692)

8.1%

$

1,242

(915)

(235.7)%

Dividend income from a cost investee

$

249

-

-

$

-

-

-

Interest income

$

3,686

3,253

13.3%

$

1,239

906

36.8%

Interest expenses

$

(1,585)

(1,067)

48.5%

$

(591)

(311)

90.2%

Income tax expenses

$

26,040

19,861

31.1%

$

12,305

9,581

28.4%

Net income attributable to non-controlling interest

$

2,659

1,831

45.2%

$

955

575

66.1%

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

$

103,343

86,940

18.9%

$

23,031

25,526

(9.8)%

Non-GAAP basic EPS

$

1.76

1.50

17.3%

$

0.39

0.44

(11.4)%

Non-GAAP diluted EPS

$

1.72

1.49

15.4%

$

0.38

0.43

(11.6)%










Share based compensation expenses

$

2,492

2,986

(16.5)%

$

854

870

(1.8)%

Amortization of acquired intangibles

$

4,454

5,413

(17.7)%

$

368

1,410

(73.9)%

Acquisition-related incentive share contingent
   consideration fair value adjustments

$

(368)

7,989

(104.6)%

$

2,611

1,782

46.5%

Acquisition-related cash contingent consideration
   fair value adjustments

$

201

931

(78.4)%

$

-

198

(100.0)%

Convertible bond related fair value adjustments

$

35

-

-


521

-

-

GAAP Net income attributable to Hollysys
    Automation Technologies Ltd.

$

96,529

69,621

38.6%

$

18,678

21,265

(12.2)%

GAAP basic EPS

$

1.65

1.20

37.5%

$

0.32

0.36

(11.1)%

GAAP diluted EPS

$

1.61

1.19

35.3%

$

0.31

0.36

(13.9)%










Basic weighted average common shares
   outstanding


58,612,596

57,926,333

1.2%


58,986,296

58,261,824

1.2%

Diluted weighted average common shares
   outstanding


60,134,203

58,426,642

2.9%


60,636,960

59,045,703

2.7%

 

Operational Results Analysis for the Fiscal Year Ended June 30, 2015

Comparing to the prior fiscal year, the total revenues for fiscal year 2015 increased from $521.3 million to $531.4 million, representing an increase of 1.9%. Broken down by the revenue types, integrated contracts revenue increased by 0.6% to $481.0 million, products sales revenue increased by 24.6% to $39.8 million, and services revenue decreased by 4.8% to $10.6 million.

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

(In USD thousands)









Fiscal year ended Jun 30,



2015


2014



$

% to Total Revenue


$

% to Total Revenue

Industrial Automation


213,253

40.1%


224,366

43.0%

Rail Transportation Automation


193,274

36.4%


178,134

34.2%

Mechanical and Electrical Solution

110,030

20.7%


108,846

20.9%

Miscellaneous


14,822

2.8%


9,986

1.9%

Total


531,379

100.0%


521,332

100.0%

 

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 41.2% for fiscal year 2015, as compared to 34.7% for the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 38.5%, 68.4% and 61.4% for fiscal year 2015, as compared to 32.1%, 63.7%, and 63.3% for 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 40.3% for fiscal year 2015, as compared to 33.7% for the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 37.6%, 68.4% and 61.4% for fiscal year 2015, as compared to 31.0%, 63.7%, and 63.3% for the prior year respectively.

Selling expenses were $26.3 million for fiscal year 2015, representing a decrease of $2.0 million or 7.1% compared to $28.3 million for the prior year mainly due to the Company's efforts in efficiency improvement. Presented as a percentage of total revenues, selling expenses were 4.9% and 5.4% for fiscal year 2015 and 2014, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $48.3 million for fiscal year 2015, representing an increase of $11.6 million, or 31.5%, as compared to $36.7 million for the prior year. The increase was mainly due to an increase of $6.9 million in bad debt provision made by the Company at fiscal year end from a conservative consideration. In additional other factors contribute to the increase of the G&A including employee compensation expenses of $2.7 million, and amortization and depreciation expenses of $0.8 million. Presented as a percentage of total revenues, non-GAAP G&A expenses were 9.1% and 7.0% for fiscal year 2015 and 2014 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $50.8 million and $39.7 million for fiscal year 2015 and 2014, respectively.

Impairment of goodwill was $1.9 million for fiscal year 2015. As the result of new projects delaying, the Concord group's performance was slightly deviate from previous expectation, which led the company to make an estimation of impairment of goodwill related to Concord acquisition.

Research and development expenses were $35.8 million for fiscal year 2015, a decrease of $0.7 million or 1.9% compared to $36.5 million for the prior year. Presented as a percentage of total revenues, R&D expenses were 6.7% and 7.0% for fiscal year 2015 and 2014, respectively.

The VAT refunds and government subsidies were $30.4 million for fiscal year 2015, as compared to $27.2 million for the prior year, representing a $3.1 million or 11.5% increase which primarily due to the increase of the VAT refunds for $3.4 million.

The income tax expenses and the effective tax rate were $26.0 million and 20.8% for fiscal year 2015, as compared to $19.9 million and 21.8% for the prior year. When excluding the impact of non-GAAP adjustments on the income before income taxes, the effective tax rate would have been 19.7% for fiscal year 2015 and 18.3% for the prior year. In additional, total of $3.3 million and $1.4 million withholding tax expenses were accrued for the potential profits distribution from PRC to overseas in fiscal year 2015 and 2014 respectively. Eliminating the impact of the withholding tax, the effective tax rate would have been 17.2% and 17.0% respectively.

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 $103.3 million or $1.72 per diluted share based on 60.1 million shares outstanding for fiscal year 2015. This represents a 15.4% increase over the $86.9 million or $1.49 per share based on 58.4 million shares outstanding reported in prior year. On a GAAP basis, net income attributable to Hollysys was $96.5 million or $1.61 per diluted share representing an increase 35.3% over the $69.6 million or $1.19 per diluted share reported in prior year.  

Operational Results Analysis for the Quarter Ended June 30, 2015

Comparing to the fourth quarter of the prior fiscal year, the total revenues for the three months ended June 30, 2015 decreased from $158.9 million to $142.2 million, representing a decrease of 10.5%. Broken down by the revenue types, integrated contracts revenue decreased by 7.3% to $127.1 million, products sales revenue decreased by 19.5% to $10.8 million, and services revenue decreased by 48.2% to $4.3 million.

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

(In USD thousands)









Three months ended Jun 30,



2015


2014



$

% to Total Revenue


$

% to Total Revenue

Industrial Automation


57,661

40.6%


61,464

38.6%

Rail Transportation Automation


62,728

44.0%


60,434

38.0%

Mechanical and Electrical Solution

17,091

12.0%


34,409

21.8%

Miscellaneous


4,709

3.4%


2,545

1.6%

Total


142,189

100.0%


158,852

100.0%

 

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 41.4% for the three months ended June 30, 2015, as compared to 34.9% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 39.2%, 61.1% and 59.4% for the three months ended June 30, 2015, as compared to 29.8%, 62.6% and 73.9% for the same period of the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 41.2% for the three months ended June 30, 2015, as compared to 34.0% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 38.9%, 61.1% and 59.4% for the three months ended June 30, 2015, as compared to 28.8%, 62.6% and 73.9% for the same period of the prior year respectively.

Selling expenses were $6.6 million for the three months ended June 30, 2015, representing an increase of $0.3 million or 5.5% compared to $6.2 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 4.6% and 3.9% for the three months ended June 30, 2015, and 2014, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $14.5 million for the quarter ended June 30, 2015, representing an increase of $2.3 million, or 18.5%, as compared to $12.3 million for the same period of the prior year. The increase was mainly due to an increase of $5.0 million in bad debt provision made by the Company at fiscal year end from a conservative consideration. Presented as a percentage of total revenues, non-GAAP G&A expenses were 10.2% and 7.7% for quarters ended June, 2015 and 2014 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $15.4 million and $13.1 million for the three months ended June 30, 2015 and 2014, respectively.

Research and development expenses were $7.5 million for the three months ended June 30, 2015, a decrease of $0.9 million or 11.0% compared to $8.4 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 5.3% and 5.3% for the quarter ended June 30, 2015 and 2014, respectively.

The VAT refunds and government subsidies were $12.4 million for three months ended June 30, 2015, as compared to $7.1 million for the same period in the prior year, representing a $5.3 million or 73.8% increase which primarily due to the increase of the VAT refunds for $4.9 million.

The income tax expenses and the effective tax rate were $12.3 million and 38.5% for the three months ended June 30, 2015, as compared to $9.6 million and 30.5% 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 33.9% for the current quarter and 26.9% for the comparable prior year period. In addition, during the fourth quarter of fiscal year 2015 and 2014, $3.3 million and $1.4 million withholding tax expenses were accrued for the potential profits distribution from PRC to overseas respectively. Excluding the impact of the withholding tax, the effective tax rate would be 24.9% and 23.0% respectively.

The non-GAAP net income attributable to Hollysys, which excludes non-cash share-based compensation expenses, amortization of acquired intangibles and acquisition-related consideration fair value adjustments was $23.0 million or $0.38 per diluted share based on 60.6 million shares outstanding for the three months ended June 30, 2015. This represents a 11.6% decrease over the $25.5 million or $0.43 per share based on 59.0 million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $18.7 million or $0.31 per diluted share representing a decrease 13.9% over the $21.3 million or $0.36 per diluted share reported in the comparable prior year period.  

Integrated Contracts Backlog Highlights

Hollysys' backlog for integrated contracts as of June 30, 2015 was $568.5 million, representing an increase of 14.0% compared to $498.7 million as of March 31, 2015, and an increase of 2.3% compared to $556.0 million as of June 30, 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



2015-06-30


2015-03-31


2014-06-30



$

% to
Total
Backlog


$

% to
Total
Backlog


%
Change


$

% to
Total
Backlog


%
Change

Industrial Automation


134,100

23.6%


145,330

29.1%


(7.7%)


178,660

32.2%


(24.9%)

Rail Transportation Automation

299,010

52.6%


257,450

51.7%


16.1%


262,080

47.1%


14.1%

Mechanical and Electrical Solution

135,420

23.8%


95,910

19.2%


41.2%


115,210

20.7%


17.5%

Total


568,530

100.0%


498,690

100.0%


14.0%


555,950

100.0%


2.3%

 

Cash Flow Highlights

For the fiscal year ended June 30, 2015, the total net cash inflow was $45.7 million. The net cash provided by operating activities was $79.5 million. The net cash used in investing activities was $40.2 million, the outflow was mainly due to the $33.4 million time deposit with original maturities over three months placed with the bank and the $14.6 million used to settle the third cash consideration in connection to the acquisition of the Bond Group. The outflow was partially offset by the cash inflow generated from matured time deposits with original maturities over three months for the amount of $11.6 million. The net cash provided by financing activities was $1.1 million. During the current year, we received $20.0 million convertible loan from International Finance Corporation and $25.1 million short-terms loans from various banks. These cash inflow was partially offset by dividend payment of $23.5 million plus the repayment of short-term and long-term loan for $12.6 million and $8.8 million respectively.

For the three months ended June 30, 2015, the total net cash inflow was $56.8 million. The net cash provided by operating activities was $76.6 million. The net cash used in investing activities was $22.5 million, the majority of which was time deposits with original maturities over three months placed with banks for the amount of $22.7 million. The net cash used in financing activities was $3.3 million

Balance Sheet Highlights

The total amount of cash and cash equivalents and time deposits with original maturities over three months were $257.5 million, $179.7 million, and $190.5 million as of June 30, March 31, 2015 and June 30, 2014, respectively. As of June 30, 2015, the company held $207.8 million in cash and cash equivalents and $49.7 million in time deposits with original maturities over three months.

For fiscal year ended June 30, 2015, Days Sales Outstanding ("DSO") was 176 days, as compared to 150 days from the prior year; and inventory turnover was 41 days, as compared to 36 days from the prior year.

For the three months ended June 30, 2015, Days Sales Outstanding ("DSO") was 176 days, as compared to 148 days from the comparable prior year period and 228 days from last quarter; and inventory turnover was 43 days, as compared to 31 days from the comparable prior year period and 66 days from 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 9:00 p.m. U.S. Eastern Time on August 13, 2015 / 9:00 a.m. Beijing Time on August 14, 2015, to discuss the financial results for the fiscal year 2015 fourth quarter and fiscal year ended June 30, 2015 and business outlook.

To participate, please call the following dial-in numbers ten minutes before the scheduled start of the call. The conference call identification number is 8523537.

China

4001-200-539

United States

+1-855-298-3404

Hong Kong

800-905-927

Hong Kong

+852-5808-3202

United Kingdom

0800-015-9725

United Kingdom

+44(0)20 3078 7622

Singapore

800-616-3222

Singapore/International

+65 6823 2299 (Singapore/International)

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

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

Hollysys Automation Technologies is a leading provider of automation and control technologies and applications in China that enables its diversified industry and utility customers to improve operating safety, reliability, and efficiency. Founded in 1993, Hollysys has approximately 3,600 employees with nationwide presence in over 60 cities in China, with subsidiaries and offices in Singapore, Malaysia, Dubai, India, and serves over 5,000 customers more than 20,000 projects in the industrial, railway, subway & nuclear industries in China, South-East Asia, and the Middle East. Its proprietary technologies are applied in its industrial automation solution suite including DCS (Distributed Control System), PLC (Programmable Logic Controller), RMIS (Real-time Management Information System), HAMS (HolliAS Asset Management System), OTS (Operator Training System), HolliAS BATCH (Batch Application Package), HolliAS APC Suite (Advanced Process Control Package), SIS (Safety Instrumentation System), high-speed railway signaling system of TCC (Train Control Center), ATP (Automatic Train Protection), Subway Supervisory and Control platform, SCADA (Surveillance Control and Data Acquisition), nuclear power plant automation and control system and other products.

SAFE HARBOUR:

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

For further information, please contact:

Hollysys Automation Technologies, Ltd.

www.hollysys.com
+86-10-5898-1386
investors@hollysys.com

-tables to follow-

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In USD thousands, except share numbers and per share data)












Fiscal year ended
June 30,


Three months ended
June 30,



2015


2014


2015


2014



(Unaudited)


(Unaudited)


(Unaudited)


 (Audited)

Revenues









Integrated contract revenue

$

481,006

$

478,261

$

127,141

$

137,216

Products sales


39,762


31,922


10,769


13,381

Revenue from service


10,611


11,149


4,279


8,255

Total revenues


531,379


521,332


142,189


158,852










Costs of integrated contracts


300,332


330,039


77,712


97,723

Costs of products sold


12,547


11,580


4,191


5,006

Costs of services rendered


4,098


4,090


1,737


2,155

Gross profit


214,402


175,623


58,549


53,968










Operating expenses









Selling


26,263


28,257


6,577


6,232

General and administrative


50,784


39,716


15,395


13,146

Impairment of goodwill


1,855


-


1,855


-

Research and development


35,779


36,486


7,517


8,443

VAT refunds and government subsidies


(30,388)


(27,244)


(12,382)


(7,124)

Total operating expenses


84,293


77,215


18,962


20,697










Income from operations


130,109


98,408


39,587


33,271










Other incomes (expenses), net


2,600


(6,452)


(2,261)


(1,052)

Foreign exchange (losses) gains


(6,765)


794


(6,757)


(280)

Gains on disposal of investment in an equity investee


80


-


-


-

Share of net gains (losses) of equity investees


(2,910)


(2,692)


1,242


(915)

Dividend income from a cost investee


249


-


-


-

Interest income


3,686


3,253


1,239


906

Interest expenses


(1,821)


(1,998)


(1,112)


(509)

Income before income taxes


125,228


91,313


31,938


31,421










Income taxes expenses


26,040


19,861


12,305


9,581

Net income


99,188


71,452


19,633


21,840










Net income attributable to non-controlling interest


2,659


1,831


955


575

Net income attributable to Hollysys Automation
   Technologies Ltd. stockholders

$

96,529

$

69,621

$

18,678

$

21,265










Other comprehensive income, net of tax of nil









Translation adjustments


1,256


2,146


9,626


1,687

Comprehensive income


100,444


73,598


29,259


23,527










Comprehensive income attributable to non-controlling interest


1,869


1,837


982


574

Comprehensive income attributable to Hollysys
    Automation Technologies Ltd. stockholders

$

98,575

$

71,761

$

28,277

$

22,953










Net income per ordinary share:









Basic


1.65


1.20


0.32


0.36

Diluted


1.61


1.19


0.31


0.36

Weighted average ordinary shares used in income per
    share computation:









Basic


58,612,596


57,926,333


58,986,296


58,261,824

Diluted


60,134,203


58,426,642


60,636,960


59,045,703

 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In USD thousands, except share numbers and per share data)



June 30,


Mar 31,


2015


2015


(Unaudited)


(Unaudited)

ASSETS

   Current Assets





       Cash and cash equivalents

$

207,834

$

151,063

       Time deposits with maturities over three months


49,650


28,647

       Restricted cash


25,337


25,215

       Accounts receivable, net of allowance for doubtful accounts of $34,259 and $27,528 as
         of June 30, 2015 and March 31, 2015, respectively


252,538


292,683

       Costs and estimated earnings in excess of billings, net of allowance for doubtful
         accounts of $11,144 and $5,407 as of June 30, 2015 and March 31, 2015,
         respectively


156,801


176,117

       Other receivables, net of allowance for doubtful accounts of $638 and $350 as of June
        30, 2015 and March 31, 2015, respectively


12,471


11,937

       Advances to suppliers


15,286


18,735

       Amounts due from related parties


47,612


35,183

       Inventories


34,706


42,298

       Prepaid expenses


595


833

       Income tax recoverable


597


570

       Deferred tax assets


3,214


3,199

  Total current assets

806,640


786,480






       Restricted cash


3,994


4,100

       Prepaid expenses


13


115

       Property, plant and equipment, net


80,222


79,675

       Prepaid land leases


11,649


11,624

       Acquired intangible assets, net


1,693


2,033

       Investments in equity investees


12,512


10,669

       Investments in cost investees


4,464


4,444

       Goodwill


59,918


60,468

       Deferred tax assets


2,581


6,492






   Total assets


983,686


966,099






LIABILITIES AND STOCKHOLDERS' EQUITY

   Current liabilities





       Short-term bank loans


16,295


17,512

       Current portion of long-term bank loans


14,111


13,310

       Accounts payable


105,292


113,218

       Construction costs payable


1,159


1,154

       Deferred revenue


130,052


151,475

       Accrued payroll and related expenses


11,982


8,426

       Income tax payable


5,732


3,623

       Warranty liabilities


7,310


6,150

       Other tax payables


20,147


24,008

       Accrued liabilities


31,299


25,821

       Amounts due to related parties


10,248


1,915

       Deferred tax liabilities


5,888


5,489

       Current portion of acquisition-related consideration


15,081


12,470

   Total current liabilities


374,596


384,571






       Long-term bank loans


20,551


23,406

       Deferred tax liabilities


77


1,080

       Long-term warranty liabilities


3,077


2,744






   Total liabilities


398,301


411,801






   Commitments and contingencies


-


-






   Equity





       Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized;
         58,358,521 and 58,249,021 shares issued and outstanding as of June 30, 2015 and
         March 31, 2015, respectively


58


58

       Additional paid-in capital


192,768


190,941

       Statutory reserves


30,248


28,547

       Retained earnings


318,441


301,463

       Accumulated other comprehensive income


37,585


27,986

Total Hollysys Automation Technologies Ltd. stockholder's equity

579,100


548,995






       Non-controlling interest


6,285


5,303

  Total equity


585,385


554,298






  Total liabilities and equity

$

983,686

$

966,099


 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands)










Fiscal year ended
Jun 30, 2015


Three months ended
Jun 30, 2015




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

99,188

$

19,633

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






Depreciation of property, plant and equipment


8,508


1,623


Amortization of prepaid land leases


197


47


Amortization of intangible assets


4,454


368


Allowance for doubtful accounts


17,418


10,516


Losses on disposal of property, plant and equipment


598


105


Impairment of goodwill


1,855


1,855


Share of net losses (incomes) from equity investees


2,617


(1,534)


Share-based compensation expenses


2,492


854


Deferred income tax expenses


4,892


3,283


Acquisition-related consideration adjustments


(166)


2,611


Accretion of convertible bond discount


(158)


(158)


Convertible bond related fair value adjustment


35


521

Changes in operating assets and liabilities:






Accounts receivable


(8,613)


35,287


Costs and estimated earnings in excess of billings


19,062


16,986


Inventories 


560


7,759


Advances to suppliers


(3,690)


3,466


Other receivables


(1,928)


(815)


Deposits and other assets


(13,375)


473


Due from related parties


(23,740)


(12,494)


Accounts payable


(28,994)


(8,984)


Deferred revenue


(980)


(22,130)


Accruals and other payable


6,781


10,987


Due to related parties


6,234


8,315


Income tax payable


(6,153)


1,999


Other tax payables


(7,622)


(4,006)


Net cash provided by operating activities


79,472


76,567







Cash flows from investing activities:






Time deposits with original maturities over three months placed with
   banks


(33,416)


(22,687)


Purchases of property, plant and equipment


(4,553)


(2,491)


Proceeds from disposal of property, plant and equipment


794


630


Maturity of time deposits with original maturities over three months


11,551


2,018


Acquisition of a subsidiary, net of cash acquired


(14,600)


-


Net cash used in investing activities


(40,224)


(22,530)







Cash flows from financing activities:






Proceeds from short-term bank loans


25,074


559


Repayments of short-term bank loans


(12,631)


(2,287)


Proceeds from convertible bond


20,000


-


Convertible bond issuance cost


(349)


-


Repayments of long-term bank loans


(8,813)


(2,542)


Proceeds from exercise of share options


1,280


973


Payment of dividends


(23,478)


-


Net cash provided by (used in) financing activities


1,083


(3,297)








Effect of foreign exchange rate changes


5,344


6,031


Net increase in cash and cash equivalents

$

45,675

$

56,771








Cash and cash equivalents, beginning of period

$

162,159

$

151,063


Cash and cash equivalents, end of period


207,834


207,834

 


Non-GAAP Measures

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

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

(In USD thousands, except share numbers and per share data)










Fiscal year ended


Three months ended




Jun 30,


Jun 30,




2015


2014


2015


2014




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)











Cost of integrated contracts

$

300,332

$

330,039

$

77,712

$

97,723

Less: amortization of acquired intangibles


4,454


5,413


368


1,410

Non-GAAP cost of integrated contracts

$

295,878

$

324,626

$

77,344

$

96,313











General and administrative expenses

$

50,784

$

39,716

$

15,395

$

13,146

Less: Share-based compensation expenses


2,492


2,986


854


870

Non-GAAP general and administrative expenses

$

48,292

$

36,730

$

14,541

$

12,276











Other income (expenses), net

$

2,600

$

(6,452)

$

(2,261)

$

(1,052)

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


(368)


7,989


2,611


1,782

Non-GAAP other income, net

$

2,233

$

1,537

$

350

$

730











Interest expenses

$

(1,821)

$

(1,998)

$

(1,112)

$

(509)

Add: acquisition-related cash consideration adjustments


201


931


-


198

Add: convertible bond related fair value adjustment


35


-


521


-

Non-GAAP Interest expenses

$

(1,585)

$

(1,067)

$

(591)

$

(311)











Net income attributable to Hollysys Automation
   Technologies Ltd. stockholders

$

96,529

$

69,621

$

18,678

$

21,265

Add:










Share based compensation expenses


2,492


2,986


854


870


Amortization of acquired intangible assets


4,454


5,413


368


1,410


Acquisition-related consideration adjustments


(166)


8,920


2,611


1,981


Convertible bond related fair value adjustment


35


-


521


-

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

$

103,343

$

86,940

$

23,031

$

25,526












Weighted average number of basic ordinary shares


58,612,596


57,926,333


58,986,296


58,261,824


Weighted average number of diluted ordinary shares


60,134,203


58,426,642


60,636,960


59,045,703

Non-GAAP basic earnings per share

$

1.76

$

1.50

$

0.39

$

0.44

Non-GAAP diluted earnings per share

$

1.72

$

1.49

$

0.38

$

0.43

 

 

 

SOURCE Hollysys Automation Technologies, Ltd



RELATED LINKS

http://www.hollysys.com