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Hollysys Automation Technologies Reports Unaudited Financial Results for the Fiscal Year and the Fourth Quarter Ended June 30, 2017

2017-08-15 05:00
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BEIJING, Aug. 15, 2017 /PRNewswire/ --

Fiscal Year 2017 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $70.1 million, a decrease of 42.3% compared to the comparable prior year period.
  • Total revenues were $431.9 million, a decrease of 20.6% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 32.7%, compared to 37.9% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $1.16, a decrease of 42.6% compared to the comparable prior year period.
  • Net cash provided by operating activities was $69.8 million for the current year.
  • DSO of 201 days, compared to 162 days for the comparable prior year period.
  • Inventory turnover days of 51 days, compared to 38 days for the comparable prior year period.

Fourth Quarter of Fiscal Year 2017 Financial Highlights

  • Non-GAAP net income attributable to Hollysys was $22.6 million, a decrease of 34.0% compared to the comparable prior year period.
  • Total revenues were $138.0 million, a decrease of 6.6% compared to the comparable prior year period.
  • Non-GAAP gross margin was at 39.1%, compared to 39.9% for the comparable prior year period.
  • Non-GAAP diluted EPS were at $0.37, a decrease of 35.1% compared to the comparable prior year period.
  • Net cash provided by operating activities was $23.8 million for the current quarter.
  • DSO of 153 days, compared to 146 days for the comparable prior year period.
  • Inventory turnover days of 50 days, compared to 37 days for the comparable prior year period.

Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"), a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for the fiscal year 2017 and the fourth quarter ended on June 30, 2017 (see attached tables). The management of Hollysys, stated:

Industrial automation presented signal of stabilization starting from the second half of the fiscal year. Our third quarter revenue achieved year-on-year growth for the first time in the last two years, recorded at 0.1%, The growth went further up to 6.5% in the fourth quarter, driving fiscal year revenue decline down to single digit while new contracts was recovering. Performance in power remained prominent. We signed contracts to provide products for large power units, including Sichuan Jiangyou 2X1000MW power units, Xinjiang East Hope 4X660MW power units, Guohua Yongzhou 2X1000MW power units, and Datang Pingluo 2X660MW power units. In chemical, several major contracts we signed include DCS and SIS contract for the polysilicon of Xinjiang East Hope Company, DCS and Batch contract for ASIA CUANON in its Waterborne Coatings Project and DCS, AMS and SIS contract for Bosheng Clean Energy Company. In nuclear, we continued to provide products for Tianwan, Fangchenggang and Hongyanhe Nuclear Stations.

In Factory automation, under the transition from an equipment provider to be a total solution provider, we are developing demonstration projects whose practice and model can be transferrable for future application in related industries. We are currently running testing projects for some renowned domestic enterprises, including an automation-and-intelligence boosting project for Haier's Tianjin-based and Qingdao-based wash machine factories, and another project for Hai Di Lao, the famous hot pot chain, to improve efficiency in hot pot base material making.

In high-speed railway, a flat fourth quarter performance was not enough to offset the 48% decline accumulated in the first three quarters. Weakness persisted throughout the year. Limited completion of newly planned railway infrastructure in the early years of the 13th five-year-plan coupled with change in customer procurement timeline present unfavorable short-term outlook and rendered uncertainties and volatilities in the performance of ATP contracts. For ground-based control, we signed contracts to provide TCC to Jinan-Qingdao Line, Haerbin-Jiamusi Line and Jiujingqu Line. For subway, we adhered to the expansion strategy, winning new SCADA contracts in more cities, such as Wuhan Line 21 and Dalian intercity line (from Jinzhou to Pulandianwan).Even with short-term uncertainty, however, outlook for our rail business in the long run remains positive. National mid and long term plan for the high-speed railway describes a sizable market, while we are paying adequate attention to after sale and replacement demand and expanding our products range.

In the mechanical and electrical installation services, although facing uncertain macroeconomic condition in Singapore and South East Asia as well as political tensions in Middle East, M&E recorded high single-digit growth at 9%. Concord, for example, signed a contract to provide electrical installation services for Macau LRT Phase 1 Project. Ongoing economic and political situation in these areas raised concern on performance and should be closely followed. Moreover, management and risk control can be addressed to improve operation efficiency as counter measure. The strategic value of Concord and Bond as customer resources and international sales channels remains significant and we expect a moderate growth in the future.

The Fourth Quarter and Fiscal Year 2017 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


Fiscal year ended



Jun 30, 2017

 Jun 30, 2016

%
Change


Jun 30, 2017

 Jun 30, 2016

%
Change










Revenues

$

137,961

147,669

(6.6)%

$

431,943

544,325

(20.6)%

 Integrated contract revenue

$

124,733

132,861

(6.1)%

$

385,500

477,790

(19.3)%

 Products sales

$

8,549

11,554

(26.0)%

$

32,665

54,546

(40.1)%

 Service rendered

$

4,679

3,254

43.8%

$

13,778

11,989

14.9%

Cost of revenues

$

84,065

88,780

(5.3)%

$

290,891

337,781

(13.9)%

Gross profit

$

53,896

58,889

(8.5)%

$

141,052

206,544

(31.7)%

Total operating expenses

$

33,894

25,991

30.4%

$

79,737

81,283

(1.9)%

 Selling

$

6,593

6,680

(1.3)%

$

24,412

25,637

(4.8)%

 General and administrative

$

14,586

13,535

7.8%

$

43,833

41,972

4.4%

Goodwill impairment charge

$

11,211

-

-


11,211

-

-

 Research and development

$

8,026

8,595

(6.6)%

$

30,109

36,564

(17.7)%

 VAT refunds and government subsidies

$

(6,522)

(2,819)

131.4%

$

(29,828)

(22,890)

30.3%

Income from operations

$

20,002

32,898

(39.2)%

$

61,315

125,261

(51.1)%

Other income (expenses), net

$

(109)

933

111.7%

$

1,722

2,316

(25.6)%

Foreign exchange losses

$

(267)

(1,027)

(74.0)%

$

(135)

(299)

(54.8)%

Gains on disposal of a subsidiary

$

628

-

-

$

628

-

-

Share of net (loss) income of equity investees

$

(1,063)

1,347

(178.9)%

$

3,607

7,834

(54.0)%

Gains on dilution and divestment of the Company's interests in HollyCon

$

8,085

-

-

$

14,514

-

-

Dividend income from cost investees


(450)

1,109

(140.6)%


-

1,109

(100.0)%

Interest income

$

1,256

1,807

(30.5)%

$

3,687

5,858

(37.1)%

Interest expenses

$

(55)

(397)

(86.1)%

$

(849)

(1,311)

(35.2)%

Income tax expenses

$

5,383

1,100

389.4%

$

14,386

14,238

1.0%

Net income attributable to noncontrolling interests

$

42

1,305

(96.8)%

$

25

5,033

(99.5)%

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

$

22,602

34,265

(34.0)%

$

70,078

121,497

(42.3)%

Non-GAAP basic EPS

$

0.37

0.58

(36.2)%

$

1.16

2.05

(43.4)%

Non-GAAP diluted EPS

$

0.37

0.57

(35.1)%

$

1.16

2.02

(42.6)%










Share-based compensation expenses

$

534

594

(10.1)%

$

464

3,860

(88.0)%

Amortization of acquired intangible assets

$

318

165

92.7%

$

581

818

(29.0)%

Acquisition-related incentive share contingent consideration

$

-

-

-

$

-

(1,745)

(100.0)%

Convertible bond related fair value adjustments

$

89

93

(4.3)%


89

93

(4.3)%

GAAP Net income attributable to Hollysys Automation Technologies Ltd.

$

21,661

33,413

(35.2)%

$

68,944

118,471

(41.8)%

GAAP basic EPS

$

0.36

0.56

(35.7)%

$

1.15

2.00

(42.5)%

GAAP diluted EPS

$

0.36

0.55

(34.5)%

$

1.14

1.97

(42.1)%










Basic weighted average common shares outstanding


60,420,004

59,511,267

1.5%


60,190,780

59,170,050

1.7%

Diluted weighted average common shares outstanding


61,268,999

60,675,636

1.0%


61,013,386

60,611,456

0.7%

Operational Results Analysis for the Fiscal Year Ended June 30, 2017

Comparing to the prior fiscal year, the total revenues for fiscal year 2017 decreased from $544.3 million to $431.9 million, representing a decrease of 20.6%. Broken down by the revenue types, services revenue increased by 14.9% to $13.8 million, integrated contracts revenue decreased by 19.3% to $385.5 million, and products sales revenue decreased by 40.1% to $32.7 million. In July 2016, the company's interests in Hollycon were diluted from 51.0% to 30.0% and the Company lost the control of Hollycon. As a result, Hollycon's financials would not be included in the Company's consolidated financials from July 2016 on. If Hollycon's revenue was excluded from the comparable figure for the prior fiscal year, the products sales revenue for fiscal year 2017 should be increased by 13.8%, and the total revenues for fiscal year 2017 should be decreased by 16.7%.

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,



2017


2016



$

% to Total Revenue


$

% to Total Revenue

Industrial Automation


172,667

39.9%


182,902

33.6%

Rail Transportation Automation


155,732

36.1%


240,310

44.2%

Mechanical and Electrical Solution

103,544

24.0%


95,277

17.5%

Miscellaneous


-

0.0%


25,836

4.7%

Total


431,943

100.0%


544,325

100.0%

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 32.7% for fiscal year 2017, as compared to 37.9% for the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 28.2%, 69.5% and 70.8% for fiscal year 2017, as compared to 35.2%, 56.0%, and 66.4% 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 32.5% for fiscal year 2017, as compared to 37.8% for the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 28.0%, 69.5% and 70.8% for fiscal year 2017, as compared to 35.0%, 56.0%, and 66.4% for the prior year respectively.

Selling expenses were $24.4 million for fiscal year 2017, representing a decrease of $1.2 million or 4.8% compared to $25.6 million for the prior year. Presented as a percentage of total revenues, selling expenses were 5.7% and 4.7% for fiscal year 2017 and 2016, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $43.8 million for fiscal year 2017, representing an increase of $1.8 million, or 4.4%, as compared to $42.0 million for the prior year. Presented as a percentage of total revenues, non-GAAP G&A expenses were 10.1% and 7.7% for fiscal year 2017 and 2016 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $44.3 million and $45.8 million for fiscal year 2017 and 2016, respectively.

Goodwill impairment charge was $11.2 million for fiscal year 2017. Concord's operating results deviated from previous expectation, and the management estimation was made in forecast of Concord's performances, which led the company to make an estimation of impairment of goodwill related to Concord acquisition.

Research and development expenses were $30.1 million for fiscal year 2017, a decrease of $6.5 million or 17.7% compared to $36.6 million for the prior year. Presented as a percentage of total revenues, R&D expenses were 7.0% and 6.7% for fiscal year 2017 and 2016, respectively. If Hollycon's R&D expenses were excluded from the comparable figure for the prior fiscal year, the R&D expenses for fiscal year 2017 should be decreased by 12.6%.

The VAT refunds and government subsidies were $29.9 million for fiscal year 2017, as compared to $22.9 million for the prior year, representing a $7.0 million or 30.3% increase which was primarily due to increase of the government subsidies for $10.0 million.

The income tax expenses and the effective tax rate were $14.4 million and 17.2% for fiscal year 2017, as compared to $14.2 million and 10.3% for the prior year. During the fourth quarter of fiscal year 2017, the company recorded a deferred tax expense of $5.4 million related to the dilution of the Company's interest in Hollycon. Excluding the impact of the abovementioned tax expenses, the effective tax rate for fiscal year 2017 should be 10.8%.

The non-GAAP net income attributable to Hollysys, which excludes non-cash share-based compensation expenses, amortization of acquired intangibles, acquisition-related consideration fair value adjustments and convertible bond related fair value adjustments was $70.1 million or $1.16 per diluted share based on 61.0 million shares outstanding for fiscal year 2017. This represents a 42.3% decrease over the $121.5 million or $2.02 per share based on 60.6 million shares outstanding reported in prior year. On a GAAP basis, net income attributable to Hollysys was $68.9 million or $1.14 per diluted share representing a decrease 41.8% over the $118.5 million or $1.97 per diluted share reported in prior year.

Operational Results Analysis for the quarter Ended June 30, 2017

Comparing to the fourth quarter of the prior fiscal year, the total revenues for the three months ended June 30, 2017 decreased from $147.7 million to $138.0 million, representing a decrease of 6.6%. Broken down by the revenue types, services revenue increased by 43.8% to $4.7 million, integrated contracts revenue decreased by 6.1% to $124.7 million, and products sales revenue decreased by 26.0% to $8.5 million. If Hollycon's revenue was excluded from the comparable figure for the fourth quarter of the prior fiscal year, the products sales revenue for the three months ended June 30, 2017 should be increased by 101.5%, and the total revenues for the three months ended June 30, 2017 should be decrease by 1.7%.

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,



2017


2016



$

% to Total Revenue


$

% to Total Revenue

Industrial Automation


43,783

31.7%


41,134

27.8%

Rail Transportation Automation


64,647

46.9%


65,944

44.7%

Mechanical and Electrical Solution

29,531

21.4%


32,921

22.3%

Miscellaneous


-

0.0%


7,670

5.2%

Total


137,961

100.0%


147,669

100.0%

Overall gross margin excluding non-cash amortization of acquired intangibles (non-GAAP gross margin) was 39.1% for the three months ended June 30, 2017, as compared to 39.9% for the same period of the prior year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 35.7%, 71.5% and 69.9% for the three months ended June 30, 2017, as compared to 37.4%, 58.0% and 74.7% for the same period of the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. The GAAP overall gross margin which includes non-cash amortization of acquired intangibles was 38.8% for the three months ended June 30, 2017, as compared to 39.8% for the same period of the prior year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 35.4%, 71.5% and 69.9% for the three months ended June 30, 2017, as compared to 37.3%, 58.0% and 74.7% for the same period of the prior year respectively.

Selling expenses were $6.6 million for the three months ended June 30, 2017, representing a decrease of $0.1 million or 1.3% compared to $6.7 million for the same quarter of the prior year. Presented as a percentage of total revenues, selling expenses were 4.8% and 4.5% for the three months ended June 30, 2017, and 2016, respectively.

General and administrative expenses, excluding non-cash share-based compensation expenses (non-GAAP G&A expenses), were $14.6 million for the three months ended June 30, 2017, representing an increase of $1.1 million or 7.8% compared to $13.5 million for the same quarter of the prior year.. Presented as a percentage of total revenues, non-GAAP G&A expenses were 10.6% and 9.2% for quarters ended June 30, 2017 and 2016 respectively. The GAAP G&A expenses which include the non-cash share-based compensation expenses were $15.1 million and $14.1 million for the three months ended June 30, 2017 and 2016, respectively.

Research and development expenses were $8.0 million for the three months ended June 30, 2017, representing a decrease of $0.6 million or 6.6% compared to $8.6 million for the same quarter of the prior year. Presented as a percentage of total revenues, R&D expenses were 5.8% and 5.8% for the quarter ended June 30, 2017 and 2016, respectively.

The VAT refunds and government subsidies were $6.5 million for three months ended June 30, 2017, as compared to $2.8 million for the same period in the prior year, representing a $3.7 million or 131.4% increase which was primarily due to the increase of the government subsidies for $4.5 million.

The income tax expenses and the effective tax rate were $5.4 million and 19.9% for the three months ended June 30, 2017, as compared to $1.1 million and 3.1% for comparable prior year period. During the fourth quarter of fiscal year 2017, the company recorded a deferred tax expense of $5.4 million related to the dilution of the Company's interest in Hollycon. In addition, in the process of Settlement and Payment of Enterprise Income Tax for calendar year 2016 in May 2017, Beijing Hollysys and Hangzhou Hollysys satisfied to a preferential income tax rate of 10% for calendar year 2016 due to its "Key Software Enterprise" status, instead of the 15% used by the Company in calendar year 2016. As a result, the Company recorded a tax benefit of $4.4 million during the fourth quarter of fiscal 2017. Excluding the impact of the abovementioned tax expenses and tax benefit, the effective tax rate for the three months ended June 30, 2017 should be 16.2%.

The non-GAAP net income attributable to Hollysys, which excludes non-cash share-based compensation expenses, amortization of acquired intangibles, acquisition-related consideration fair value adjustments and convertible bond related fair value adjustments was $22.6 million or $0.37 per diluted share based on 61.3 million shares outstanding for the three months ended June 30, 2017. This represents a 34.0% decrease over the $34.3 million or $0.57 per share based on 60.7 million shares outstanding reported in the comparable prior year period. On a GAAP basis, net income attributable to Hollysys was $21.7 million or $0.36 per diluted share representing a decrease of 35.2% over the $33.4 million or $0.55 per diluted share reported in the comparable prior year period.

Contracts and Backlog Highlights

Hollysys achieved $169.9 million new contracts for the three months ended June 30, 2017. And the backlog as of June 30, 2017 was $524.0 million. The detailed breakdown of the new contracts and backlog by segments is shown below:

(In USD thousands)


New contracts achieved


Backlog



for the three months

 ended Jun 30, 2017


as of Jun 30, 2017



$

% to Total Contract


$

% to Total Backlog

Industrial Automation


84,081

49.5%


158,749

30.2%

Rail Transportation


69,863

41.1%


235,578

45.0%

Mechanical and Electrical Solutions


15,927

9.4%


129,713

24.8%

Total


169,871

100.0%


524,040

100.0%

Cash Flow Highlights

For the fiscal year ended June 30, 2017, the total net cash outflow was $31.5 million. The net cash provided by operating activities was $69.8 million. The net cash used in investing activities was $89.6 million, mainly consisted of $154.8 million time deposit with original maturities over three months placed with banks, and $16.7million cash reduced upon deconsolidation of subsidiary, which was partially offset by the $89.3 million generated from matured time deposits with original maturities over three months. The net cash used in financing activities was $7.4 million, mainly consisted of $12.0 million used for payment of dividends, $7.4 million used for repayments of long-term loans, $4.9 million used for repayments of short-term loans, which was partially offset by $10.1 million proceeds from short-term bank loans, and $6.3 million proceeds from exercise of options.

For the three months ended June 30, 2017, the total net cash inflow was $15.2 million. The net cash provided by operating activities was $23.8 million. The net cash used in investing activities was $13.1 million, mainly consisted of $57.3 million time deposits placed with banks, which was partially offset by $48.8 million maturity of time deposits. The net cash provided by financing activities was $2.0 million.

Balance Sheet Highlights

The total amount of cash and cash equivalents and time deposits with original maturities over three months were $293.9 million, $268.8 million, and $271.5 million as of June 30, 2017, March 30, 2017 and June 30, 2016, respectively. As of June 30, 2017, the company held $197.6 million in cash and cash equivalents and $96.3 million in time deposits with original maturities over three months.

For fiscal year ended June 30, 2017, Days Sales Outstanding ("DSO") was 201 days, as compared to 162 days from the prior year; and inventory turnover was 51 days, as compared to 38 days from the prior year.

For the three months ended June 30, 2017, DSO was 153 days, as compared to 146 days for the comparable prior year period and 219 days for the last quarter; and inventory turnover was 50 days, as compared to 37 days for the comparable prior year period and 61 days for the last quarter.

Outlook for FY 2018

The management concluded, "Based on our backlog currently on-hand and sales pipeline envisioned so far, we set our guidance for fiscal year 2018 with revenue in the range of $500 million to $530 million and non-GAAP net income in the range of $100 million to $110 million."

Conference Call

The Company will host a conference call at 9:00 pm August 14, 2017 U.S. Eastern Time / 9:00 am August 15, 2017 Beijing Time, to discuss the financial results for the fourth quarter and the fiscal year 2017 ended June 30, 2017 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 8301952.

1 800 573 793

(Australia)

+61 (0)2 9193 3706

(Australia, Sydney)

4001-209-101

(China)

0805 101 219

(France)

0800 589 4609

(Germany)

800 961 105

(Hong Kong)

+852 3008 1527

(Hong Kong)

0120 001 836

(Japan)

007 9814 2032 546

(Korea, Republic of)

1800 806 802

(Malaysia)

0800 868 298

(Taiwan)

+65 6320 9025

(Singapore, Singapore)

0800 200 831

(Switzerland)

0800 358 6377

(United Kingdom)

+44 (0)330 336 9105

(United Kingdom, Local)

866-548-4713

(United States/Canada)

+1 719-457-1036

(United States, Colorado Springs)

+1 323-794-2093

(United States, Los Angeles)

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 (Supervisory 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
+8610-58981386
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
Jun 30,


Fiscal year ended
Jun 30,



2017


2016


2017


2016



(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Net revenues









Integrated contract revenue

$

124,733

$

132,861

$

385,500

$

477,790

Products sales


8,549


11,554


32,665


54,546

Revenue from services


4,679


3,254


13,778


11,989

Total net revenues


137,961


147,669


431,943


544,325










Cost of integrated contracts


80,540


83,275


277,476


310,545

Cost of products sold


2,434


4,847


9,971


24,023

Costs of services rendered


1,409


823


4,025


4,031

Gross profit


53,578


58,724


140,471


205,726










Operating expenses









Selling


6,593


6,680


24,412


25,637

General and administrative


15,120


14,129


44,297


45,832

Goodwill impairment charge


11,211


-


11,211


-

Research and development


8,026


8,595


30,109


36,564

VAT refunds and government subsidies


(6,522)


(2,819)


(29,828)


(22,890)

Total operating expenses


34,428


26,585


80,201


85,143










Income from operations


19,150


32,139


60,270


120,583










Other income (expenses), net


(109)


933


1,722


4,061

Foreign exchange losses


(267)


(1,027)


(135)


(299)

Share of net income of equity investees


(1,063)


1,347


3,607


7,834

Gains on dilution and divestment of the Company's interests in HollyCon

8,085


-


14,514



Gains on disposal of a subsidiary


628


-


628


-

Dividend income from cost investees


(450)


1,109


-


1,109

Interest income


1,256


1,807


3,687


5,858

Interest expenses


(144)


(490)


(938)


(1,404)

Income before income taxes


27,086


35,818


83,355


137,742










Income taxes expenses


5,383


1,100


14,386


14,238

Net income


21,703


34,718


68,969


123,504










Net income attributable to noncontrolling interests

42


1,305


25


5,033

Net income attributable to Hollysys Automation Technologies Ltd.

$

21,661

$

33,413

$

68,944

$

118,471










Other comprehensive income (loss), net of tax of nil








Translation adjustments


11,659


(17,973)


(22,925)


(48,840)

Comprehensive income


33,362


16,745


46,044


74,664










Less: comprehensive income (loss) attributable to noncontrolling interests

44


(1,260)


(8,508)


2,245

Comprehensive income attributable to Hollysys Automation Technologies Ltd.

$

33,318

$

18,005

$

54,552

$

72,419










Net income per ordinary share:









Basic


0.36


0.56


1.15


2.00

Diluted


0.36


0.55


1.14


1.97

Shares used in income per share computation:









Weighted average number of ordinary shares

60,420,004


59,511,267


60,190,780


59,170,050

Weighted average number of diluted ordinary shares

61,268,999


60,675,636


61,013,386


60,611,456


 


HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In USD thousands except for number of shares and per share data)












Jun 30,


Mar 31,





2017


2017





(Unaudited)


(Unaudited)

ASSETS






Current assets







Cash and cash equivalents

$

197,640

$

182,478



Time deposits with original maturities over three months


96,214


86,352



Restricted cash


39,534


44,940



Accounts receivable, net of allowance for doubtful accounts of $48,089 and $45,509 as of June 30,2017 and March 31, 2017, respectively


246,552


223,494



Costs and estimated earnings in excess of billings, net of allowance for doubtful accounts of $8,659 and $5,515 as of June 30, 2017 and March 31, 2017, respectively


162,096


147,737



Other receivables, net of allowance for doubtful accounts of $1,448 and $1,534 as of June 30, 2017 and March 31, 2017, respectively


20,000


15,026



Advances to suppliers


11,537


9,463



Amounts due from related parties


34,178


44,868



Inventories


45,660


45,802



Prepaid expenses


619


562



Income tax recoverable


5,169


6,531



Deferred tax assets


8,828


7,586


Total current assets


868,027


814,839








Non-current assets







Restricted cash


522


2,318



Prepaid expenses


-


13



Property, plant and equipment, net


81,607


79,871



Prepaid land leases


10,206


10,145



Acquired intangible assets, net


850


407



Investments in equity investees


47,242


23,924



Investments in cost investees


4,024


3,961



Goodwill


47,326


57,758



Deferred tax assets


23


1,758


Total non-current assets


191,800


180,155








Total assets


1,059,827


994,994








LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities







Short-term bank loans


8,121


2,979



Current portion of long-term loans


420


5,260



Accounts payable


124,670


101,598



Deferred revenue


107,407


105,145



Accrued payroll and related expenses


13,600


9,455



Income tax payable


3,371


6,362



Warranty liabilities


5,386


6,137



Other tax payables


10,488


4,833



Accrued liabilities


24,437


30,768



Amounts due to related parties


2,301


2,244



Deferred tax liabilities


4,350


5,842


Total current liabilities


304,551


280,623








Non-current liabilities







Accrued liabilities


2,220


-



Long-term loans


20,581


20,682



Deferred tax liabilities


6,689


816



Warranty liabilities


2,246


3,227


Total non-current liabilities


31,736


24,725








Total liabilities


336,287


305,348









Commitments and contingencies


-


-









Stockholders' equity:







Ordinary shares, par value $0.001 per share, 100,000,000 shares authorized; 60,342,099 and 60,319,599 shares issued and outstanding as of June 30, 2017 and March 31, 2017, respectively


60


60



Additional paid-in capital


222,189


221,656



Statutory reserves


41,526


41,500



Retained earnings


482,603


460,969



Accumulated other comprehensive income


(22,859)


(34,517)


Total Hollysys Automation Technologies Ltd. stockholder's equity


723,519


689,668










Noncontrolling interests


21


(22)


Total equity


723,540


689,646









Total liabilities and equity

$

1,059,827

$

994,994

 


 

HOLLYSYS AUTOMATION TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In USD thousands)





Three months ended


Fiscal year ended

Jun 30, 2017


Jun 30, 2017




(Unaudited)


(Unaudited)

Cash flows from operating activities:






Net income

$

21,703

$

68,969

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






Depreciation of property, plant and equipment


1,631


6,049


Amortization of prepaid land leases


48


189


Amortization of intangible assets


159


580


Allowance for doubtful accounts


4,796


9,760


Loss on disposal of property, plant and equipment


570


596


Impairment loss on goodwill


11,211


11,211


Impairment loss on property, plant and equipment


361


361


Share of net income from equity investees


1,063


(3,607)


Gains on dilution and divestment of the Company's interests in HollyCon


(8,085)


(14,514)


Gain on disposal of a subsidiary


(628)


(628)


Share based compensation expenses


533


464


Deferred income tax expenses


4,950


2,015


Accretion of convertible bond discount


270


661


Fair value adjustments of a bifurcated derivative


89


89

Changes in operating assets and liabilities:






Accounts receivable


(20,314)


(23,441)


Costs and estimated earnings in excess of billings


(14,710)


21,945


Inventories


875


(10,701)


Advances to suppliers


(730)


881


Other receivables


(4,166)


(6,767)


Deposits and other assets


7,916


(12,698)


Due from related parties


(1,447)


(6,819)


Accounts payable


16,087


23,563


Deferred revenue


615


28,168


Accruals and other payable


(2,997)


(18,509)


Due to related parties


21


801


Income tax payable


(1,580)


(1,779)


Other tax payables


5,567


(7,026)


Net cash provided by operating activities


23,808


69,813







Cash flows from investing activities:






Time deposits placed with banks


(57,253)


(154,810)


Purchases of property, plant and equipment


(335)


(3,711)


Proceeds from disposal of property, plant and equipment


30


64


Maturity of time deposits


48,787


89,262


Investment of an equity investee


(2,654)


(2,654)


Proceeds received from a cost method entity


-


88


Cash prepaid for acquisition of a subsidiary


(1,652)


(1,652)


Cash reduced upon deconsolidation of subsidiary


-


(16,681)


Disposal of a subsidiary, net of cash received


-


541


Net cash used in investing activities


(13,077)


(89,553)







Cash flows from financing activities:






Proceeds from short-term bank loans


3,121


10,058


Repayments of short-term bank loans


(844)


(4,932)


Proceeds from long-term bank loans


-


461


Repayments of long-term bank loans


(313)


(7,350)


Proceeds from exercise of options


-


6,323


Payment of Dividends


-


(11,973)


Net cash provided by (used in) financing activities


1,964


(7,413)








Effect of foreign exchange rate changes


2,467


(4,302)


Net increase (decrease) in cash and cash equivalents

$

15,162

$

(31,455)








Cash and cash equivalents, beginning of period

$

182,478

$

229,095


Cash and cash equivalents, end of period


197,640


197,640

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


Fiscal year ended




Jun 30,


Jun 30,




2017


2016


2017


2016




(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)











Cost of integrated contracts

$

80,540

$

83,275

$

277,476

$

310,545

Less: Amortization of acquired intangible assets


318


165


581


818

Non-GAAP cost of integrated contracts

$

80,222

$

83,110

$

276,895

$

309,727











General and administrative expenses

$

15,120

$

14,129

$

44,297

$

45,832

Less: Share-based compensation expenses


534


594


464


3,860

Non-GAAP general and administrative expenses

$

14,586

$

13,535

$

43,833

$

41,972











Other income, net

$

(109)

$

933

$

1,722

$

4,061

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


-


-


-


(1,745)

Non-GAAP other income, net

$

(109)

$

933

$

1,722

$

2,316











Interest expenses             

$

(144)

$

(490)

$

(938)

$

(1,404)

Add:









convertible bond related fair value adjustment


89


93


89


93

Non-GAAP interest expenses       

$

(55)

$

(397)

$

(849)

$

(1,311)










Net income attributable to Hollysys Automation Technologies Ltd.

$

21,661

$

33,413

$

68,944

$

118,471

Add:










Share-based compensation expenses


534


594


464


3,860


Amortization of acquired intangible assets


318


165


581


818


Acquisition-related consideration adjustment


-


-


-


(1,745)


Convertible bond related Fair value adjustments


89


93


89


93

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

$

22,602

$

34,265

$

70,078

$

121,497












Weighted average number of basic ordinary shares

60,420,004


59,511,267


60,190,780


59,170,050


Weighted average number of diluted ordinary shares

61,268,999


60,675,636


61,013,386


60,611,456

Non-GAAP basic earnings per share

$

0.37

$

0.58

$

1.16

$

2.05

Non-GAAP diluted earnings per share

$

0.37

$

0.57

$

1.16

$

2.02












 

View original content:http://www.prnewswire.com/news-releases/hollysys-automation-technologies-reports-unaudited-financial-results-for-the-fiscal-year-and-the-fourth-quarter-ended-june-30-2017-300503905.html

Source: Hollysys Automation Technologies, Ltd

Related stocks: NASDAQ-NMS:HOLI

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