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Hollysys Automation Technologies Reports Unaudited Financial Results for the Fiscal Year 2010 Second Quarter Ended December 31, 2009
Feb 10, 2010 (05:02 PM EST)


    BEIJING, Feb. 10 /PRNewswire-Asia-FirstCall/ --

    Q2 FY 2010 Highlights
    -- Unprecedented backlog reported at $219.7 million as of December 31,
       2009
    -- Revenues of $46.2 million, as compared to $38.2 million quarter over
       quarter, and $52.5 million year over year
    -- Non-GAAP net income attributable to Hollysys of $8.1 million, as
       compared to $6.6 million quarter over quarter, and $11.1 million year
       over year
    -- $13.7 million net cash generated from operations for the quarter ended
       on December 31, 2009;
    -- $138.9 million cash and cash equivalents as of December 31, 2009, and
       DSO at 137 days
    -- The first 300-350kph high-speed rail Zhengzhou-Xian line commissioned
       by Hollysys' signaling systems successfully put in commercial operation
    -- Delivered the first ever China-made DCS for ultra supercritical GW
       level thermal power station in China
    -- Hollysys buying out the minority interest in subsidiary Beijing
       Hollysys

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 its fiscal second quarter of fiscal year 2010 ended December 31, 2009 (see attached tables).

Dr. Changli Wang, Hollysys' Chief Executive Officer, stated, "We are pleased to report a strong fiscal 2010 second quarter with solid financial and operational results and significant strategic progress. The management is satisfied with our financial performance, from both operating and financial perspective, given the adverse impact of economic downturns and uncertainties we've experienced over the past 12 months. We accomplished the net income target set out at the beginning of the fiscal year, while steadfastly increasing investment in research and development activities to maintain Hollysys a leading player in its end-markets with advanced technologies and products."

"We are very excited that during the December quarter, we have successfully completed the testing, delivery, and installation of our high-speed railway signaling systems for the Zhengzhou-Xi'an high-speed railway line. After a successful trial run on January 28, 2010, the Zhengzhou-Xi'an line became officially operational on February 6, 2010, marking a maximum speed limit of 352 km/h. Having our state-of-the-art automation and control systems installed for one of the world's fastest running high-speed rail lines is a concrete testament of our advanced R&D, production, and project implementation capabilities in the high-speed railway sector. As China continues to stay on track in achieving its 13,000 km high-speed railway build-out target by 2012, the Zhengzhou-Xi'an high-speed railway line is one of the first railway lines launched in China with a designed traveling speed of 300kph or higher, together with the Wuhan-Guangzhou high-speed railway line.

"We are also very proud that during the December quarter, we commenced delivering our proprietary designed and manufactured large-scale industrial Distributed Control Systems (DCS) to China's largest 1000 MW (1GW) ultra-supercritical thermal power station, Guohua Taishan Power Plant. This signifies China's first-ever deployment of domestic made large-scale DCS in lieu of imported systems for the ultra-supercritical thermal power stations in China. As a follow-on contract subsequent to several successful DCS applications in the 600MW thermal power stations, this strategic reference project further validated Hollysys' dominant position in China's industrial automation and control field.

"Also in the December quarter, we have initiated the non-controlling interest buyout program in acquiring 24.11% of the non-controlling interest in Beijing Hollysys, one of the two operating subsidiaries of Hollysys Automation Technologies, Ltd., from the Rilin Group. The non-controlling interest buyout initiative is of important strategic significance to Hollysys, in that the non-controlling interest acquisition will bring Beijing Hollysys to a wholly-owned subsidiary of Hollysys, and will contribute the full earnings and revenue growth potential to the listing entity, particularly in the areas of high-speed railway, subway, and nuclear automation."

Dr. Wang continued, "On top of the minority buy-out, we also managed to form a strategic partnership with Rilin Group to supply our industry-leading automation and control solutions and products to some of the exciting business lines of the Rilin group, such as wind power and shipbuilding industries. Such strategic partnership will provide Hollysys a high entry platform to further scale its core proprietary automation and control technologies to some of the most attractive end markets in China today."

Q2 Fiscal Year 2010 Unaudited Financial Results Summary

To facilitate a clear understanding of Hollysys operational result, a summary of unaudited non-GAAP financial results is included below.



    In USD thousands, except share numbers and EPS

                                                    Three Months ended
                                              Dec 31,     Dec 31,        %
                                                2009       2008       Change
    Revenues                                  $46,163     52,526      -12.1 %
      Integrated Contract Revenue             $43,970     50,225      -12.5 %
      Products Sales                          $ 2,193      2,301       -4.7 %
    Cost of Revenues                          $31,770     34,376       -7.6 %
    Gross Profit                              $14,393     18,151      -20.7 %
    Total Operating Expenses                  $ 5,365      3,976       34.9 %
      Selling                                 $ 3,573      2,651       34.8 %
      General and Administrative              $ 4,014      1,918      109.3 %
      Research and Development                $ 3,395      1,942       74.8 %
      VAT refunds and government
       subsidy                                $(5,618)    (2,536)     121.6 %
    Income from Operations                    $ 9,028     14,175      -36.3 %
    Others                                    $    17      1,013      -98.4 %
    Income Tax Expenses                       $   102      1,434      -92.9 %
    Non-GAAP Net income attributable to
     non-controlling interest                 $   864      2,608      -66.9 %
    Non-GAAP Net Income attributable to
    Hollysys Automation Technologies Ltd.     $ 8,079     11,146      -27.5 %
    Basic Non-GAAP EPS                        $  0.16       0.25      -36.2 %
    Diluted Non-GAAP EPS                      $  0.16       0.25      -36.7 %

    Stock-based Compensation Cost for         $
     Options                                      131         44      195.1 %
    Stock-based Compensation Cost for         $    --     17,000     -100.0 %
    Incentive Shares
    Net income attributable to Hollysys       $ 7,948     (5,899)    -234.7 %
    Automation Technologies Ltd.(GAAP)
    Basic GAAP EPS                            $  0.16      (0.13)    -218.6 %
    Diluted GAAP EPS                          $  0.16      (0.13)    -217.6 %

    Basic Weighted Average Common Shares   49,942,614 43,964,353       13.6 %
    Outstanding
    Diluted Weighted Average Common
     Shares                                50,653,381 43,964,353       15.2 %
    Outstanding


                                                      Six Months ended
                                              Dec 31,     Dec 31,        %
                                                2009       2008       Change
    Revenues                                  $84,357     89,831       -6.1 %
      Integrated Contract Revenue             $79,840     86,183       -7.4 %
      Products Sales                          $ 4,516      3,647       23.8 %
    Cost of Revenues                          $55,754     58,600       -4.9 %
    Gross Profit                              $28,603     31,230       -8.4 %
    Total Operating Expenses                  $11,229      8,601       30.6 %
      Selling                                 $ 6,299      5,416       16.3 %
      General and Administrative              $ 6,441      4,184       54.0 %
      Research and Development                $ 6,249      3,109      101.0 %
      VAT refunds and government
       subsidy                                $(7,760)    (4,108)      88.9 %
    Income from Operations                    $17,374     22,630      -23.2 %
    Others                                    $    49        662      -92.6 %
    Income Tax Expenses                       $   922       2217      -58.4 %
    Non-GAAP Net income attributable to
     non-controlling interest                 $ 1,794      3,785      -52.6 %
    Non-GAAP Net Income attributable to
    Hollysys Automation Technologies Ltd.     $14,707     17,290      -14.9 %

    Basic Non-GAAP EPS                        $  0.29       0.39      -25.1 %
    Diluted  Non-GAAP EPS                     $  0.29       0.39      -25.7 %

    Stock-based Compensation Cost for
     Options                                  $   262         89      195.1 %
    Stock-based Compensation Cost for         $    --     17,000     -100.0 %
    Incentive Shares
    Net income attributable to Hollysys       $14,445        202     7067.4 %
    Automation Technologies Ltd.(GAAP)
    Basic GAAP EPS                            $  0.29       0.00     6207.9 %
    Diluted GAAP EPS                          $  0.29       0.00     6160.5 %

    Basic Weighted Average Common Shares
     Outstanding                           49,942,614 43,953,484       13.6 %
    Diluted Weighted Average Common
     Shares Outstanding                    50,465,837 43,953,484       14.8 %

For the three months ended December 31, 2009, total revenues amounted to $46.2 million, compared to $38.2 million quarter over quarter, and $52.5 million year over year. Of the total revenues, revenue from integrated contracts amounted to $44.0 million, and that of each segment was as follows:

    -- $29.6 million, or 67.2%, related to Industrial Automation & Control;
    -- Rail and subway was $10.7 million, or 24.2%, of which $8.4 million, or
       19.0%, was from Rail Signaling and Control projects, and $2.3 million,
       or 5.2%, was from Subway System Integration projects; and
    -- $3.7 million, or 8.6%, related to Nuclear Plant Control projects and
       miscellaneous.

As a percentage of total revenues, overall gross margin was 31.2% for the three months ended December 31, 2009, as compared to 34.6% for the prior year period, mainly due to gross margin for products sold decreased from 74.2% to 35.7% year over year. The gross margin for integrated contracts was 31.0% for the three months ended December 31, 2009, compared to 32.7% for the same period of the prior year.

For the three months ended December 31, 2009, selling expenses were $3.6 million, compared to $2.7 million year over year. The increase in selling expenses was mainly due to the Company's increased marketing activities. As a percentage to total revenues, selling expenses were 7.7% and 7.1% for the three months ended December 31, 2009 and September 30, 2009, respectively.

General and administrative expenses, excluding non-cash share compensation expenses, were $4.1 million for the quarter ended December 31, 2009, or 8.8% of total revenues, compared to $1.9 million, or 3.7%, for the same period of the prior year. The increase was mainly due to an increase of $0.8 million in allowance for doubtful accounts, an increase of $0.5 million in staff salaries and bonus, and an increase of $0.4 million in professional fee.

Research and development expenses were $3.4 million for the three months ended December 31, 2009, a 74.8% increase as compared to $1.9 million for the same period of the prior year. As a percentage to total revenue, R&D expenses were 7.4% and 3.7% for three months ended December 31, 2009 and 2008, respectively. The increase was mainly due to increased R&D activities.

For the three months ended December 31, 2009, non-GAAP net income attributable to Hollysys excluding non-cash share compensation expense was $8.1 million, or $0.16 per diluted share based on approximately 50.6 million shares outstanding, as compared to $11.1 million, or $0.25 per share based on approximately 44 million shares outstanding, reported in the prior year period. On a GAAP basis, net income attributable to Hollysys was $7.9 million, or $0.16 per diluted share based on approximately 50.6 million shares outstanding, compared to net loss of $5.9 million, or $(0.13) per diluted share based on 44 million shares outstanding, for the same period of the prior year.

Backlog Highlights

Hollysys' backlog as of December 31, 2009 was $219.7 million, compared to $187.5 million at September 30, 2009. The detailed breakdown for the backlog by segment is as followings:

   -- $107.6 million related to subway business, or 49.0% of the total
      backlog;
   -- $53.0 million related to industrial automation, or 24.1% of the total
      backlog;
   -- $53.9 million related to high-speed rail, or 24.5% of the total backlog;
   -- $5.2 million related to Nuclear and other miscellaneous contracts, or
      2.4% of the total backlog.

Cash Flow Highlights

Hollysys generated operating cash flow of $13.7 million for the three months ended December 31, 2009. Including investing and financing activities, the total net cash inflow for the three months ended December 31, 2009 was $8.3 million.

Balance Sheet Highlights

As of December 31, 2009, Hollysys' cash and cash equivalents were $138.9 million, compared to $130.6 million at September 30, 2009. Days Sales Outstanding ("DSO") for Q2 FY 2010 is 137 days, as compared to 157 days quarter over quarter. Inventory turnover is 58 days for quarter ended December 31, 2009, compared to 75 days quarter over quarters.

Outlook for FY 2010

Dr. Wang concluded, "Given our strong backlog level and sales pipeline, we are reiterating our revenue and non-GAAP net income guidance in the range of $185.9M to $192.2M and $30.3M and $31.4M respectively."

Conference Call

Management will discuss the current status of the Company's operations during a conference call at 9:00 AM ET/10:00 PM Beijing time on Thursday, February 11, 2010. Interested parties may participate in the call by dialing the following numbers approximately 10 minutes before the call is scheduled to begin and asking to be connected to the Hollysys Automation Technologies conference call. The conference call identification number is 52373507.

    1-866-519-4004 (USA)
    800-819-0121 (China Landline)
    400-620-8038 (China Mobile)
    + 65-67357955 (International)

In addition, a recording of the conference call will be accessible within 24 hours via Hollysys' website at: http://www.hollysys.com.sg/home/pubdown/110210.zip

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 2,100 employees with 9 sales centers and 13 service centers in 21 cities in China and serves over 1700 customers in the industrial, railway, subway & nuclear industries. Its proprietary technologies are applied in product lines including Distributed Control System (DCS) and Programmable Logic Controller (PLC), high-speed railway Train Control Center (TCC) and Automatic Train Protection (ATP), subway supervisory and control platform (SCADA), and nuclear conventional island automation and control products. Hollysys is the largest SCADA systems supplier to China's subway automation market, and is the only certified domestic automation control systems provider to the nuclear industry in China. Hollysys is also one of only five automation control systems and products providers approved by China's Ministry of Railways in the 200km to 250km high-speed rail segment, and is one of only two automation control systems and products providers approved in the 300km to 350km high-speed rail segment.

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.
     Web:   http://www.hollysys.com
     Jennifer Zhang
     Investor Relations
     Phone: +86-10-5898-1386
     Email: investors@hollysys.com

    Or

     Serena Wu
     Investor Relations
     Phone: +1-646-593-8125
     Email: serena.wu@hollysys.com



                      HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                 (In US Dollars)

                         Three months ended            Six months ended
                            December 31,                 December 31,
                         2009           2008          2009           2008
                     (Unaudited)    (Unaudited)   (Unaudited)    (Unaudited)
    Revenues
    Integrated
     contract
     revenue         $43,969,826    $50,224,953   $79,840,377    $86,183,341
    Products sales     2,193,281      2,301,260     4,516,338      3,647,422
    Total revenues    46,163,107     52,526,213    84,356,715     89,830,763

    Cost of
     integrated
     contracts        30,360,789     33,781,932    53,944,533     57,184,167
    Cost of
     products sold     1,409,204        593,712     1,808,782      1,416,208
    Gross profit      14,393,114     18,150,569    28,603,400     31,230,388

    Operating
     expenses
    Selling            3,573,479      2,650,876     6,299,120      5,416,241
    General and
     administrative    4,145,028     18,962,598     6,703,341     21,272,337
    Research and
     development       3,395,326      1,942,224     6,248,605      3,108,688
    VAT refunds and
     government       (5,617,990)    (2,535,529)   (7,759,870)    (4,107,917)
     subsidy
    Total operating
     expenses          5,495,843     21,020,169    11,491,196     25,689,349

    Income from
     operations        8,897,271     (2,869,600)   17,112,204      5,541,039

    Other income
     (expense), net     (104,264)       664,819        44,801        872,574
    Share of net
     gains of equity
     investees           363,689        611,218       599,974        385,455
    Interest
     expense, net       (242,729)      (262,976)     (595,532)      (595,659)
    Income before
     income taxes      8,913,967     (1,856,539)   17,161,447      6,203,409

    Income taxes
     expenses            101,808      1,433,715       921,806      2,216,987
    Net income         8,812,159     (3,290,254)   16,239,641      3,986,422

    Less: Net
     income attri-
     butable to
     non-controlling
     interest            864,370      2,608,463     1,794,294      3,784,879
    Net income
     attributable
     to Hollysys
     Automation
     Technologies
     Ltd.             $7,947,789    $(5,898,717)  $14,445,347       $201,543

    Weighted
     average number
     of common
     shares           49,942,614     43,964,353    49,942,614     43,953,484

    Weighted
     average number
     of diluted
     common shares    50,653,381     43,964,353    50,465,837     43,953,484

    Basic earnings
     per share
     attributable to
     Hollysys
     Automation
     Technologies Ltd.      0.16          (0.13)         0.29           0.00

    Diluted earnings
     per share
     attributable to
     Hollysys
     Automation
     Technologies Ltd.      0.16          (0.13)         0.29           0.00

    Other
     comprehensive
     income
    Net income         8,812,159     (3,290,254)   16,239,641      3,986,422
    Translation
     adjustments          (3,563)      (777,455)      117,899        851,302
    Comprehensive
     income            8,808,596     (4,067,709)   16,357,540      4,837,724

    Less:
     Comprehensive
     income
     attributable
     to non-
     controlling
     interest            864,967      2,517,936     1,813,243      3,880,183
    Comprehensive
     income
     attributable
     to Hollysys
     Automation
     Technologies
     Ltd.              $7,943,629   $(6,585,645)  $14,544,297       $957,541



                      HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
                           CONSOLIDATED BALANCE SHEETS
                                 (In US Dollars)

                                                December 31,    September 30,
                                                     2009            2009
                                                 (Unaudited)     (Unaudited)
    ASSETS
     Current Assets
       Cash and cash equivalents                $138,934,585    $130,598,078
       Contract commitment deposit in banks        3,623,312       4,407,069
       Accounts receivable, net of allowance
        for doubtful accounts of
        $7,470,817 and  $6,742,484                62,471,834      63,571,474
       Cost and estimated earnings in excess
        of billings, net of allowance
        for doubtful accounts of $910,459 and
        $759,356                                  42,257,120      43,842,207
       Other receivables, net of allowance
        for doubtful accounts of
        $154,829 and $183,175                      4,173,793       4,255,909
       Advances to suppliers                       5,435,659       4,832,369
       Amount due from related parties             9,918,280       9,919,384
       Inventories, net of provision of
        $1,187,717 and $972,778                   19,704,487      19,286,897
       Prepaid expenses                              994,471       1,043,141
       Deferred tax assets                         1,282,775         820,007
     Total current assets                        288,796,316     282,576,535

     Property, plant and equipment, net           48,640,944      48,262,000
     Long term investments                        13,751,983      13,352,627
     Goodwill                                        284,936              --
     Long term deferred expenses                          --          76,515
     Deferred tax assets                             767,822         766,389

     Total assets                                352,242,001     345,034,066

    LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities
       Short-term bank loans                       1,464,493       1,464,343
       Bonds payable                              11,715,947              --
       Accounts payable                           34,789,135      37,161,317
       Deferred revenue                           26,507,895      25,961,044
       Accrued payroll and related expense         5,195,086       4,159,199
       Income tax payable                            822,727       2,047,086
       Warranty liabilities                        2,000,454       1,865,333
       Other tax payables                          7,283,233       8,793,827
       Accrued liabilities                         7,482,159       2,565,291
       Amounts due to related parties              2,901,648       2,263,833
       Deferred tax liabilities                      231,686         219,425
       Construction cost payable                   5,221,674       9,145,412
     Total current liabilities                   105,616,137      95,646,110

       Long-term bank loans                       36,612,334      36,608,581
       Long-term bonds payable                            --      11,714,746

     Total liabilities                           142,228,471     143,969,437

     Commitments and contingencies                        --              --



                      HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
                           CONSOLIDATED BALANCE SHEETS
                                 (In US Dollars)

                                                 December 31,   September 30,
                                                     2009            2009
                                                 (Unaudited)     (Unaudited)
     Stockholder's equity
       Common stock, par value $0.001 per
        share, 100,000,000 shares authorized,
        49,942,614 and 49,942,614 shares
        issued and outstanding                        49,943          49,943
       Additional paid-in capital                130,393,281     130,262,262
       Appropriated earnings                      15,135,442      15,135,442
       Retained earnings                          27,677,601      19,729,812
       Accumulated comprehensive income -
        translation adjustments                   14,000,995      14,005,155
     Total Hollysys Automation Technologies
      Ltd. stockholder's equity                  187,257,262     179,182,614

       Non-controlling interest                   22,756,268      21,882,015
     Total equity                                210,013,530     201,064,629

     Total liabilities and equity               $352,242,001    $345,034,066



                      HOLLYSYS AUTOMATION TECHNOLOGIES LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In US Dollars)

                                               Three months      Six months
                                                  ended             ended
                                               December 31,      December 31,
                                                   2009              2009
                                                (Unaudited)      (Unaudited)
    Cash flows from operating activities:
      Net income                                $8,812,159       $16,239,641
    Adjustments to reconcile net income
     to net cash provided by (used in)
     operating activities:
      Depreciation and amortization                971,288         1,587,024
      Allowance for doubtful accounts              889,674         1,411,469
      Provision for inventories                    214,939            73,577
      Loss on disposal of property, plant
       and equipment                               197,072           198,658
      Share of net gains from equity
       investees                                  (363,689)         (599,974)
      Amortization of expenses accrued for
       bond payable                                 15,300            30,603
      Stock-based compensation                     131,019           262,038
      Deferred tax assets (liabilities)           (451,940)       (1,069,568)
    Changes in operating assets and
     liabilities:
      Accounts receivable                          332,724        (7,192,151)
      Cost and estimated earnings in
       excess of billings                        1,433,983         8,671,194
      Inventories                                 (632,428)         (940,693)
      Advance to suppliers                        (603,290)        2,432,197
      Other receivables                            110,462            (1,859)
      Deposits and other assets                    893,645         2,316,728
      Amount due from related parties              263,492        (1,992,884)
      Accounts payable                          (2,758,472)       (3,829,489)
      Deferred revenue                             546,851         5,435,355
      Accrued liabilities                        5,795,085         5,956,543
      Amount due to related parties                637,815         1,436,965
      Tax payable                               (2,734,953)       (2,443,943)
      Net cash provided by operating
       activities                               13,700,736        27,981,431

    Cash flows from investing activities:
      Purchase of property, plant and
       equipment                                (5,082,049)       (7,817,666)
      Proceeds from disposing property,
       plant and equipment                           2,411             4,034
      Advance to related parties                   645,238           645,238
      Acquisition of long term investments      (1,000,337)       (1,000,337)
      Dividends from equity investees               58,568            58,568
      Acquisition of a subsidiary, net of
       cash acquired                                15,302            15,302
      Acquisition of equity interest from
       non controlling interest                         --          (438,275)
      Net cash used in investing
       activities                               (5,360,867)       (8,533,136)

    Cash flows from financing activities:
      Repayments of short-term loans                    --        (4,392,579)
      Repayments of long-term bank loans                --        (5,124,676)
      Net cash used in financing
       activities                                       --        (9,517,255)

     Effect of foreign exchange rate
      changes                                       (3,362)          120,879
     Net increase in cash and cash
      equivalents                               $8,336,507       $10,051,919

     Cash and cash equivalents, beginning
      of period                                130,598,078       128,882,666
     Cash and cash equivalents, end of
      period                                  $138,934,585      $138,934,585



    Reconcile GAAP Net Income (Loss) to Non-GAAP Net Income
    The following table provides more details on the reconciliations between
GAAP financial measures that are most directly comparable to non-GAAP
financial measures.

                               Three months ended        Six months ended
                                   December 31,            December 31,
                                2009         2008       2009         2008
                            (Unaudited) (Unaudited) (Unaudited)  (Unaudited)

    Net income (loss)
     attributable to
     Hollysys Automation
     Technologies Ltd.     $7,947,789  $(5,898,717) $14,445,347     $201,543
    Adjustments:
     Stock-based
      compensation cost
      for options             131,019       44,394      262,038       88,788
     Stock-based
      compensation cost
      for incentive shares         --   17,000,000           --   17,000,000
    Non-Gaap Net Income
     attributable to
     Hollysys Automation
     Technologies Ltd.     $8,078,808  $11,145,677  $14,707,385  $17,290,331

SOURCE Hollysys Automation Technologies, Ltd.