Hollysys Automation Technologies Reports Unaudited Financial Results for Fiscal Year 2013 Second Quarter Ended December 31, 2012 PR Newswire BEIJING, Feb. 19, 2013 BEIJING, Feb. 19, 2013 /PRNewswire-FirstCall/ --Hollysys Automation Technologies, Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company"),a leading provider of automation and control technologies and applications in China, today announced its unaudited financial results for the fiscal year 2013 second quarter ended on December 31, 2012 (see attached tables). Q2 Financial Highlights oQuarterly revenues of $87.2 million, representing an increase of 8.6% compared to $80.3 million year over year, and a decrease of 1.0% compared to $88.1 million quarter over quarter. oGross margin at 32.1%, as compared to 38.5% year over year, and 34.4% quarter over quarter. oNon-GAAP net income attributable to Hollysys of $13.6 million, a 33.4% decrease compared to $20.4 million year over year, and a 13.7% decrease compared to $15.8 million quarter over quarter. Excluding $9.3 million VAT refunds recorded in the second quarter of the prior year, which was related to the VAT refund claims made for the sales from January to September 2011 that were approved in the second quarter of the prior year due to the delay in the government's issuance of the renewed VAT refund policy, Non-GAAP net income attributable to Hollysys increased by 21.9% compared to $11.2 million year over year. oNon-GAAP Diluted EPS at $0.24 reported for the quarter, as compared to $0.37 year over year, and $0.28 quarter over quarter. oBacklog of $359.6 million as of December 31, 2012, a 8.3% increase compared to $332.1 million year over year, and 2.5% decrease compared to $368.7 million quarter over quarter. oQuarterly DSO of 161 days, as compared to 150 days year over year, and 140 days quarter over quarter. oInventory turnover days of 42 days for the current quarter compared to 54 days year over year, and 43 days quarter over quarter. oThe total amount of cash and cash equivalents and time deposits with original maturities over three months were $133.5 million as of the current quarter end. Dr. Changli Wang, Chairman and CEO of Hollysys, stated: "We continue to report another quarter with solid financial and operational performance, but we are not satisfied with overall results achieved amid the unfavorable external environment. We have to say we underestimated the impact that the downturn of the macro economy brought to our businesses including both industrial automation and rail transportation: the restart of high-speed rail construction is slower than we expected; and more importantly we underestimated the impact it brought to low- and middle-end markets of industrial automation. So in January of this new year, we conducted a thorough introspection deeply across various levels of management and the execution team and we adjusted our strategies: firstly, we will continue to intensify marketing efforts in the industrial automation field, expand our sales and service network across China and enhance market position in the low- and middle-end of the industrial automation market; secondly, we will organize professional teams to penetrate and occupy the high-end market; thirdly, we will actively work on new business opportunities and boost these businesses' growth. All in all, we believe that we did not make our full efforts and achieve satisfactory results in the past half year; in this calendar year we will spare no efforts to achieve our originally set targets with all that we can do. What's more, the recovery of China's economy in 2013 will further support our growth, incorporating with our own efforts. "Here I would like to take this opportunity to discuss some key events that took place during this quarter: "Industrial automation continued its solid growth and performed as the largest growth driver for the whole group. During this quarter, we further segmented the process industries including chemical, petro-chemical, thermal power as well as metallurgy, new energies, etc.; we found more automation application opportunities and made several significant breakthroughs in penetrating to the high end of several industries. Also, we released several advanced technologies such as our 5^th generation Distributed Control System, Safety Instrumentation System, which we believe will further complete our total solution offerings and bring us significant revenue contribution; moreover, we believe that the intention to reduce labor cost and energy consumption, protect the environment, improve safety, and increase output with higher quality will be a major trend and bring us tremendous business opportunities. With our solid research and development capability, profound industry knowledge, renowned brand name recognition and successful track record, we are more than confident that we will continue to drive our industrial automation growth to a higher level and create value for our customers. "In the rail sector, even though the restarted pace of high-speed rail construction is not yet as fast as expected, the momentum is on the upward trend. As one of the major high-speed rail signaling system providers in China, Hollysys is well prepared for more meaningful and significant contract awards and systems providing. In this quarter, we signed a contract to provide Line-side Electronic Unit (LEU) and Balise to the Chongqing-Lichuan high-speed rail line in October. In addition, we are encouraged by the contract win of approximately RMB 67.60 million, or US $10.75 million, to supply our ground-based signaling system to the Xiamen-Shenzhen high-speed rail line, Guangdong Section in December. Given that the Ministry of Railways of China ("MOR") plans to beef up investment in railway infrastructure construction as compared to last year, we are confident that with our strong research and development capability and well-reputed track records, Hollysys will capture its fair share in China's vast high-speed rail build out. We are also well on track in completing the development of our proprietary subway signaling system, and have currently reached the last phase of certification. We expect that we will soon attain the Safety Integrity Level 4 certification of subway signaling system according to international standards, which will build us to an unparalleled place to further explore China and international subway signaling business opportunities. "In this quarter, we are also delighted with the outstanding achievements by our wholly owned subsidiary, Concord Corporation Pte. Ltd. ("Concord"). In November last year, Concord signed a contract with SMRT Trains Ltd in Singapore to provide design, electrification and installation for station renovations on the North-South and East-West lines, valued at approximately $5.59 million. Shortly after this contract, in December the same year, Concord signed a significant contract with Thales Solutions Asia Pte Ltd to provide design, installation, testing & commission for replacing the existing signaling systems for the North-South and East-West lines and install new signaling systems for the Tuas West Extension line (TWEL) in Singapore, valued at approximately $19.14 million. The two successful records in this quarter further validate the rich experience and knowledge, capability and strong track record of Concord. We believe that it is a good synergy between Hollysys and Concord, which will greatly enhance Hollysys' international presence, and enable us to continuously create value for our shareholders." The Second Quarter Ended December 31 Unaudited Financial Results Summary To facilitate a clear understanding of Hollysys' operational results, a summary of unaudited non-GAAP financial results is shown as below: In USD thousands, except share numbers and EPS Three months ended Six months ended December31, December31, % December31, December31, % 2012 2011 Change 2012 2011 Change Revenues $ 87,206 80,288 8.6% 175,272 167,452 4.7% Integrated contract $ 81,182 75,902 7.0% 164,034 159,384 2.9% revenue Products $ 6,024 4,386 37.3% 11,239 8,069 39.3% sales Cost of $ 59,195 49,412 19.8% 116,995 103,629 12.9% revenues Gross profit $ 28,010 30,877 (9.3)% 58,277 63,824 (8.7)% Total operating $ 13,269 8,870 49.6% 28,786 26,385 9.1% expenses Selling $ 8,086 8,060 0.3% 14,679 15,042 (2.4)% General and $ 4,143 7,385 (43.9)% 9,975 12,243 (18.5)% administrative Research $ 8,334 6,881 21.1% 16,009 12,950 23.6% and development VAT refunds and government $ (7,295) (13,456) (45.8)% (11,878) (13,851) (14.2)% subsidies Income from $ 14,742 22,007 (33.0)% 29,491 37,439 (21.2)% operations Other income, $ 902 71 1,162.0% 2,938 259 1032.9% net Share of net (loss) income $ (451) 207 (317.9)% 288 152 90.0% of equity investees Dividend income from cost $ 829 - - 829 - - investees Interest income $ 751 424 77.0% 1,732 629 175.4% Interest $ (521) (865) (39.7)% (1,237) (1,791) (30.9)% expenses Income tax $ 2,635 1,334 97.5% 4,601 3,201 43.8% expenses Non-GAAP net income attributable to $ 18 82 (78.2)% 93 223 (58.4)% non-controlling interest Non-GAAP net income attributable to Hollysys $ 13,597 20,428 (33.4)% 29,348 33,265 (11.8)% Automation Technologies Ltd. Basic Non-GAAP $ 0.24 0.37 (35.1)% 0.52 0.60 (13.3)% EPS Diluted $ 0.24 0.37 (35.1)% 0.52 0.60 (13.3)% Non-GAAP EPS Stock-based compensation $ 527 157 234.8% 1,054 315 234.8% expenses Net income attributable to Hollysys $ 13,071 20,271 (35.5)% 28,294 32,950 (14.1)% Automation Technologies Ltd.(GAAP) Basic GAAP EPS $ 0.23 0.36 (36.1)% 0.51 0.60 (15.0)% Diluted GAAP $ 0.23 0.36 (36.1)% 0.50 0.59 (15.3)% EPS Basic weighted average common 56,001,526 55,703,338 0.5% 56,000,221 55,356,413 1.2% shares outstanding Diluted weighted average common 56,070,948 55,852,982 0.4% 56,066,950 55,592,152 0.9% shares outstanding Operational Results Analysis for the Second quarter ended December 31, 2012 For the three months ended December 31, 2012, total revenues increased by 8.6% to $87.2 million, from $80.3 million for the same period in the prior year. Of the total revenues, revenue from integrated contracts increased by 7.0% to $81.2 million, as compared to $75.9 million for the same period of the prior year; revenue from products sales increased by 37.3% to $6.0 million, as compared to $4.4 million for the same period of the prior year. The Company's total revenue by segment was as followings: Three months ended Dec 31, Six months ended Dec 31, 2012 2011 2012 2011 % to % to % to % to $ Total $ Total $ Total $ Total Revenue Revenue Revenue Revenue Industrial 53.9 61.8% 48.1 59.9% 114.0 65.1% 102.9 61.5% Automation Rail Transportation 21.5 24.6% 24.8 30.9% 36.4 20.8% 50.4 30.1% Miscellaneous 11.8 13.6% 7.4 9.2% 24.9 14.1% 14.1 8.4% Total 87.2 100.0% 80.3 100.0% 175.3 100.0% 167.4 100.0% As a percentage of total revenues, overall gross margin was 32.1% for the three months ended December 31, 2012, as compared to 38.5% for the same period of the prior year. The gross margin for integrated contracts and product sales were 29.8% and 63.8% for the three months ended December 31, 2012, as compared to 36.4% and 73.4% for the same period of the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. For the three months ended December 31, 2012, selling expenses were $8.1 million, compared to $8.1 million for the same quarter of the prior year, representing a slight increase of 0.3% year over year. As a percentage of total revenues, selling expenses were 9.3% and 10.0% for the three months ended December 31, 2012, and 2011, respectively. General and administrative expenses, excluding non-cash stock-based compensation expense, were $4.1 million for the quarter ended December 31, 2012, representing an decrease of $3.3 million, or 43.9%, as compared to $7.4 million for the same period of the prior year, mainly due to a decrease of 1.7 million of bad debt allowance. As a percentage of total revenues, G&A expenses were 4.8% and 9.2% for the three months ended December 31, 2012 and 2011, respectively. Including the non-cash stock-based compensation cost recorded on a GAAP basis, G&A expenses were $4.7 million and $7.5 million for the three months ended December 31, 2012 and 2011, respectively. Research and development expenses were $8.3 million for the three months ended December 31, 2012, compared to $6.9 million for the same quarter of the prior year, representing a year over year increase of $1.4 million, or 21.1%. The increase was mainly due to the Company's increased R&D activities. As a percentage of total revenues, R&D expenses were 9.6% and 8.6% for the quarter ended December 31, 2012 and 2011, respectively. The VAT refunds and government subsidies amounted to $7.3 million for three months ended December 31, 2012, as compared to $13.5 million for the same period in the prior year, representing a decrease of $6.2 million. Of the total amount of $13.5 million for the month ended December 31, 2011, $9.3 million VAT refunds was related to the VAT refund claims made for the sales from January to September 2011 that were approved in the second quarter of the prior year due to the delay in the government's issuance of the renewed VAT refund policy. Excluding this effect, the VAT refunds and government subsidies amounted to $7.3 million and $4.2 million for the quarter ended December 31, 2012, December 31, 2011 respectively. The income tax expenses and the effective tax rate were $2.6 million and 16.8% for the three months ended December 31, 2012, as compared to $1.3 million and 6.2% for the same period of the prior year. The lower rate for the quarter ended December 31, 2011 was mainly due to the large sum of VAT refunds recognized, which was a non-taxable income. For the three months ended December 31, 2012, the non-GAAP net income attributable to Hollysys excluding non-cash stock compensation expenses was $13.6 million or $0.24 per diluted share based on 56 million shares outstanding. This represents a decrease of $6.8 million, or 33.4%, over the $20.4 million, or $0.37 per share based on 56 million shares outstanding, reported in the prior year period. On a GAAP basis, net income attributable to Hollysys was $13.1 million, or $0.23 per diluted share representing a decrease of $7.2 million or 35.5%, over the $20.3 million, or $0.36 per diluted share reported in the prior year period. The decrease of net income is mainly due to lower VAT refunds and government subsidies. Backlog Highlights Hollysys' backlog as of December 31, 2012 was $359.6 million, representing a decrease of 2.5% compared to $368.7 million as at September 30, 2012, and an increase of 8.3% compared to $332.1 million as at December 31, 2011.The detailed breakdown of the backlog by segment was as followings: Quarter-over-Quarter Year-over-Year Analysis Analysis 2012-12-31 2012-9-30 2011-12-31 % to % to % % to % $ Total $ Total Change $ Total Change Backlog Backlog Backlog Industrial 125.4 34.9% 145.2 39.4% (13.6%) 124.4 37.5% 0.8% Automation Rail 206.7 57.4% 185.3 50.2% 11.5% 170.4 51.3% 21.3% Transportation Miscellaneous 27.5 7.7% 38.2 10.4% (28.1%) 37.3 11.2% (26.3%) Total 359.6 100.0% 368.7 100.0% (2.5%) 332.1 100.0% 8.3% Cash Flow Highlights The net cash used in operating activities was $2.9 million for the three months ended December 31, 2012; including investing and financing activities, the total net cash inflows for this quarter was $4.1 million. Of the total net cash inflows, there was a cash inflow of matured time deposits with original maturities over three months amounting to $10.0 million included in investing activities during this quarter. Balance Sheet Highlights The total amount of cash and cash equivalents and time deposits with original maturities over three months were $133.5 million, $139.2 million, and $130.0 million as of December 31, 2012, September 30, 2012, and December 31, 2011, respectively. Of the total $133.5 million as of December 31, 2012, cash and cash equivalents were $125.3 million, and time deposits with original maturities over three months were $8.2 million. For the three months ended December 31, 2012, Days Sales Outstanding ("DSO") was 161 days, as compared to 150 days year over year and 140 days quarter over quarter; and inventory turnover was 42 days, as compared to 54 days year over year and 43 days quarter over quarter. Outlook for FY 2013 Dr. Wang concluded, "Given our strong backlog currently on-hand and sales pipeline envisioned so far, we reiterate our guidance of fiscal year 2013 with revenue in the range of $385 million to $410 million and non-GAAP net income in the range of $63 million to $67 million unchanged." Conference Call Management will discuss the current status of the Company's operations during a conference call 9:00 a.m. Beijing Time on February 20, 2013 / 8:00 p.m. U.S. Eastern Time on February 19, 2013. Interested parties may participate in the call by dialing the following numbers approximately 10 minutes before the call is scheduled to begin and ask to be connected to the Hollysys Automation Technologies conference call. The conference call identification number is 92254065. 1-866-519-4004 (USA) 800-930-346 (HK) +852-24750994 (HK) 800-819-0121 (China Landline) 400-620-8038 (China Mobile) +65-67239381 (International) In addition, a recorded replay of the conference call will be accessible within 24 hours via Hollysys' website at: http://www.hollysys.com.sg/home/index.php/investor-relations/events-a-webcast About Hollysys Automation Technologies, Ltd. Hollysys Automation Technologies is a leading provider of automation and control technologies and applications in China that enables its diversified industry and utility customers to improve operating safety, reliability, and efficiency. Founded in 1993, Hollysys has approximately 3,500 employees with nationwide presence in over 60 cities in China, with subsidiaries and offices in Singapore, Malaysia, Dubai, India, and serves over 4,000 customers more than 15,000 projects in the industrial, railway, subway & nuclear industries in China, South-East Asia, and the Middle East. Its proprietary technologies are applied in its industrial automation solution suite including DCS (Distributed Control System), PLC (Programmable Logic Controller), RMIS (Real-time Management Information System), HAMS (HolliAS Asset Management System), OTS (Operator Training System), HolliAS BATCH (Batch Application Package), HolliAS APC Suite (Advanced Process Control Package), SIS (Safety Instrumentation System), high-speed railway signaling system of TCC (Train Control Center), ATP (Automatic Train Protection), Subway Supervisory and Control platform, SCADA (Surveillance Control and Data Acquisition), nuclear conventional island automation and control system and other products. SAFE HARBOUR: This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are "forward-looking statements," including statements regarding: the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Such forward-looking statements, based upon the current beliefs and expectations of Hollysys' management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements. Contact Information: Hollysys Automation Technologies, Ltd. www.hollysys.com Investor Relations +8610-58981386 email@example.com HOLLYSYS AUTOMATION TECHNOLOGIES LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In US Dollars except for per-share data) Three months ended Six months ended December 31, December 31, 2012 2011 2012 2011 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues Integrated contract $ 81,181,627 $ 75,901,956 $ 164,033,662 $ 159,383,839 revenue Products sales 6,023,980 4,386,448 11,238,563 8,068,638 Total revenues 87,205,607 80,288,404 175,272,225 167,452,477 Cost of integrated 57,013,225 48,243,403 113,040,984 101,149,057 contracts Cost of products 2,182,121 1,168,308 3,954,308 2,479,579 sold Gross profit 28,010,261 30,876,693 58,276,933 63,823,841 Operating expenses Selling 8,086,257 8,059,951 14,679,142 15,041,782 General and 4,670,168 7,542,441 11,029,027 12,557,924 administrative Research and 8,334,000 6,880,941 16,008,707 12,950,410 development VAT refunds and government (7,294,961) (13,456,043) (11,877,547) (13,850,534) subsidies Total operating 13,795,464 9,027,290 29,839,329 26,699,582 expenses Income from 14,214,797 21,849,403 28,437,604 37,124,259 operations Other income , net 901,645 71,443 2,938,308 259,369 Share of net (loss) income of equity (450,755) 206,872 288,263 151,697 investees Dividend income 828,567 - 828,567 - from cost investees Interest income 750,727 424,137 1,732,438 629,115 Interest expenses (521,475) (864,897) (1,237,306) (1,791,014) Income before 15,723,506 21,686,958 32,987,874 36,373,426 income taxes Income taxes 2,635,096 1,334,468 4,601,152 3,200,648 expenses Net income 13,088,410 20,352,490 28,386,722 33,172,778 Net income attributable to 17,870 81,938 92,694 222,868 non-controlling interests Net income attributable to Hollysys Automation $ 13,070,540 $ 20,270,552 $ 28,294,028 $ 32,949,910 Technologies Ltd. stockholders Other comprehensive income, net of tax Foreign currency translation 1,804,697 1,714,300 (112,757) 5,653,872 adjustments, net of nil tax Comprehensive 14,893,107 22,066,790 28,273,965 38,826,650 income Comprehensive income attributable 31,476 90,814 99,437 248,865 to non-controlling interests Comprehensive income attributable to Hollysys $ 14,861,631 $ 21,975,976 28,174,528 38,577,785 Automation Technologies Ltd. stockholders Net income per ordinary share: Basic 0.23 0.36 0.51 0.60 Diluted 0.23 0.36 0.50 0.59 Weighted average ordinary shares used in income per share computation: Basic 56,001,526 55,703,338 56,000,221 55,356,413 Diluted 56,070,948 55,852,982 56,066,950 55,592,152 HOLLYSYS AUTOMATION TECHNOLOGIES LTD. CONSOLIDATED BALANCE SHEETS (In US Dollars) December 31, September 30, 2012 2012 (Unaudited) (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 125,262,261 $ 121,157,212 Time deposits with original maturities over 8,187,751 18,015,398 three months Restricted cash 3,175,576 3,829,739 Accounts receivable, net of allowance for doubtful accounts of $15,443,730 and 168,168,878 136,752,983 $15,777,271 as of December 31,2012 and September 30, 2012, respectively Costs and estimated earnings in excess of billings, net of allowance for doubtful accounts of $1,489,477 and $1,768,528 as of 118,625,168 126,344,148 December 31, 2012 and September 30, 2012, respectively Other receivables, net of allowance for doubtful accounts of $272,361 and $354,214 as 6,967,259 5,948,416 of December 31, 2012 and September 30, 2012, respectively Advances to suppliers 6,981,527 8,542,288 Amount due from related parties 14,739,788 14,750,841 Inventories, net 25,756,160 28,553,597 Prepaid expenses 858,274 288,241 Income tax recoverable 102,655 319,298 Deferred tax assets 1,994,575 652,979 Total current assets 480,819,872 465,155,140 Restricted cash 1,195,548 675,651 Prepaid expenses 29,205 - Property, plant and equipment, net 70,510,908 69,137,613 Prepaid land leases 6,829,996 6,813,632 Acquired intangible assets, net 371,836 503,328 Investments in equity investees 14,055,037 14,256,245 Investments in cost investees 3,650,290 2,989,025 Goodwill 27,686,774 27,643,846 Deferred tax assets 466,170 1,376,462 Total assets 605,615,636 588,550,942 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term loans 7,959,768 7,895,145 Accounts payable 85,760,172 83,314,254 Construction cost payable 4,213,860 3,309,360 Deferred revenue 72,606,208 70,235,032 Accrued payroll and related expense 9,989,855 7,239,996 Income tax payable 3,068,458 3,148,875 Warranty liabilities 3,827,355 1,602,545 Other tax payables 18,183,202 18,504,017 Accrued liabilities 8,464,522 14,077,091 Amounts due to related parties 1,594,749 1,835,253 Deferred tax liabilities 200,452 1,351,906 Total current liabilities 215,868,601 212,513,474 Long-term bank loans 20,804,534 22,610,747 Deferred tax liabilities 223,368 234,111 Total liabilities 236,896,503 235,358,332 Commitments and contingencies Equity Ordinary shares 56,029 55,999 Additional paid-in capital 152,595,661 151,831,919 Statutory reserves 23,128,214 23,091,072 Retained earnings 159,060,872 146,157,830 Accumulated other comprehensive income 32,595,056 30,803,965 Total Hollysys Automation Technologies Ltd. 367,435,832 351,940,785 stockholder's equity Non-controlling interests 1,283,301 1,251,825 Total equity 368,719,133 353,192,610 Total liabilities and equity $ 605,615,636 $ 588,550,942 HOLLYSYS AUTOMATION TECHNOLOGIES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (In US Dollars) Three months ended Six months ended December 31, 2012 December 31, 2012 (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 13,088,410 $ 28,386,722 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation of property, plant 1,549,652 3,016,951 and equipment Amortization of prepaid land 39,229 78,279 leases Amortization of intangible 130,724 174,035 assets Allowance for doubtful accounts (424,089) 1,141,757 Loss on disposal of property, 1,051 25,166 plant and equipment Share of net loss (income) from 450,755 (288,263) equity investees Stock dividends from cost (828,567) (828,567) investees Gain on disposal of a subsidiary (136,795) (136,795) Share based compensation 526,772 1,053,545 expenses Deferred income tax expenses (1,632,632) (1,269,670) Changes in operating assets and liabilities: Accounts receivable (30,729,525) (32,225,082) Costs and estimated earnings in 8,950,142 (2,408,240) excess of billings Inventories 2,941,596 1,091,660 Advances to suppliers 1,638,898 3,373,135 Other receivables (892,749) 468,489 Deposits and other assets (435,481) 1,318,312 Due from related parties 201,591 1,274,795 Accounts payable 2,389,095 6,947,250 Deferred revenue 1,919,368 12,808,899 Accruals and other payable (1,037,005) 3,263,634 Due to related parties (256,515) (380,550) Income tax payable 114,343 (514,921) Other tax payables (473,090) (147,489) Net cash (used in) provided by (2,904,822) 26,223,052 operating activities Cash flows from investing activities: Time deposits placed with banks (72,292) (5,289,537) Purchases of property, plant and (1,254,877) (5,288,117) equipment Maturity of time deposits 10,003,337 18,769,802 Proceeds from disposal of a 111,998 111,998 subsidiary Net cash provided by investing 8,788,166 8,304,146 activities Cash flows from financing activities: Repayments of long-term bank (1,985,332) (3,961,330) loans Proceeds from exercise of share 237,000 237,000 options Net cash used in financing (1,748,332) (3,724,330) activities Effect of foreign exchange rate (29,963) (1,873,569) changes Net increase in cash and cash $ 4,105,049 $ 28,929,299 equivalents Cash and cash equivalents, $ 121,157,212 $ 96,332,962 beginning of period Cash and cash equivalents, end 125,262,261 125,262,261 of period Non-GAAP Measures In evaluating our results, the non-GAAP measures of "Non-GAAP general and administrative expenses", "Non-GAAP net income attributable to Hollysys Automation Technologies Ltd. stockholders", "Non-GAAP basic earnings per share", and "Non-GAAP diluted earnings per share"serve as additional indicators of our operating performance and not as a replacement for other measures in accordance with U.S. GAAP. We believe these non-GAAP measures are useful to investors, as they exclude the stock-based compensation expenses, which is calculated based on the number of shares or options granted and the fair value as of the grant date. It will not result in any cash inflows or outflows. We believe that using non-GAAP measures help our shareholders to have a better understanding of our operating results and growth prospects. In addition, given the business nature of Hollysys, it has been a common practice for investors and analysts to use such non-GAAP measures to evaluate the Company. The following table provides a reconciliation of U.S. GAAP measures to the non-GAAP measures for the periods indicated: Three months ended Six months ended December 31, December 31, 2012 2011 2012 2011 (Unaudited) (Unaudited) (Unaudited) (Unaudited) General and administrative $ 4,670,168 $ 7,542,441 $ 11,029,027 $ 12,557,924 expenses Minus: Stock-based 526,772 157,356 1,053,545 314,712 compensation cost Non-GAAP general and administrative $ 4,143,396 $ 7,385,085 $ 9,975,482 $ 12,243,212 expenses Net income attributable to Hollysys Automation $ 13,070,540 $ 20,270,552 $ 28,294,028 $ 32,949,910 Technologies Ltd. stockholders Add: Stock-based 526,772 157,356 1,053,545 314,712 compensation cost Non-GAAP net income attributable to Hollysys Automation $ 13,597,312 $ 20,427,908 $ 29,347,573 $ 33,264,622 Technologies Ltd. stockholders Weighted average number of ordinary 56,001,526 55,703,338 56,000,221 55,356,413 shares Weighted average number of diluted 56,070,948 55,852,982 56,066,950 55,592,152 ordinary shares Non-GAAP basic $ 0.24 $ 0.37 $ 0.52 $ 0.60 earnings per share Non-GAAP diluted $ 0.24 $ 0.37 $ 0.52 $ 0.60 earnings per share SOURCE Hollysys Automation Technologies, Ltd. Website: http://www.hollysys.com Website: http://www.hollysys.com.sg/home/index.php/investor-relations/events-a-webcast
Hollysys Automation Technologies Reports Unaudited Financial Results for Fiscal Year 2013 Second Quarter Ended December 31,
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