Cogo Reports Unaudited Earnings for Second Quarter 2013

           Cogo Reports Unaudited Earnings for Second Quarter 2013

- Cogo's unaudited revenue in the second quarter ended June 30, 2013, was
$184.9 million, down 4.1% from a year earlier, while net income for the same
period was $1.7 million, down 6.2% from $1.8 million reported in the same
period in 2012.

- Non-GAAP net income was $4.4 million down 14.4% from $5.2 million reported
for the same period in 2012.

- Diluted Earnings per share ("EPS") came to $0.05 and, on a non-GAAP basis,
$0.13 a share.

- Cogo's Audit Committee continues to review its Chairman and CEO's proposed
purchase of certain net assets

PR Newswire

SHENZHEN, China, Aug. 15, 2013

SHENZHEN, China, Aug. 15, 2013 /PRNewswire/ --Cogo Group, Inc. (NASDAQ: COGO)
("Cogo" or the "Company"), one of the leading gateways for global
semiconductor companies to access the industrial and technology markets in
China, today announced unaudited financial results for its second quarter
ended June 30, 2013.

Unaudited revenue in the second quarter was $184.9 million, down 4.1%
year-over-year from $192.9 million in the second quarter of 2012.

Jeffrey Kang, CEO and Chairman of Cogo, commented, "The Audit Committee,
comprising the three independent board members of Cogo, continues to make
progress in the due diligence process on my proposal to purchase certain of
Cogo's net assets."

Mr. Kang said: "If the transaction is approved, it is expected that Cogo would
dispose most of its components business while all services and technical
solutions businesses would become Cogo's core business. The bulk of Cogo's
accounts receivable, inventories, accounts payable and bank loans would be
sold to the buyer under the proposal. The disposal of the net assets in a cash
transaction is expected to increase Cogo's net cash position. The sale would
allow the company to focus on developing a higher margin service and technical
solution business, thus creating greater value for shareholders."

Mr. Kang added, "Management believes that retaining the Company's listing will
provide greater return for its shareholders than privatization. While the
proceeds could also fund the Company's buyback program for investors who wish
to sell their shares of the Company, it allows the Company to continue to
leverage its listed status to develop higher margin business and venture to
new business to generate greater value to shareholders."

Financial Results

Cogo's net income in the second quarter of 2013 was $1.7 million, down 6.2%
from $1.8 million in the same period in 2012, with non-GAAP net income at $4.4
million down 14.4% from $5.2 million a year earlier. Diluted EPS was $0.05,
unchanged from the second quarter of 2012, and non-GAAP diluted EPS was $0.13,
down 7.1% from the second quarter of 2012.

Key Financial Indicators
(all numbers in USD thousands, except share data)
                                    Q2 2013 ^(1) Q2 2012^(1)
                                                             Percentage Change
                                    (unaudited)  (unaudited)
Net Revenue                         $184,928     $192,861    -4.1%
Cost of Sales                       $172,762     $179,104    -3.5%
Gross Profit                        $12,166      $13,757     -11.6%
Operating Expenses                  $9,111       $9,923      -8.2%
Net Income attributable to Cogo     $1,684^(2)   $1,796      -6.2%
Group, Inc.
Diluted EPS attributable to Cogo    $0.05        $0.05       0.0%
Group, Inc.
Non-GAAP Diluted EPS attributable   $0.13        $0.14       7.1%
to Cogo Group, Inc.



    The US dollar ("USD") amounts are calculated based on the conversion rate
(1) of $1 to RMB6.1374 as of June 30, 2013 and $1 to RMB6.353 as of June 30,
    2012.
    Included in the Q2 2013 net income attributable to Cogo Group, Inc. was
    $1.9 million of share-based compensation expenses recognized in accordance
(2) with Accounting Standards Codification ("ASC") 718, Compensation-Stock
    Compensation and $0.9 million of amortization of intangible assets and
    related deferred taxation. Non-GAAP net income attributable to Cogo Group,
    Inc. was $4.4 million.

Revenue Review

Revenue for the second quarter was $184.9 million, a decrease of 4.1% from
$192.9 million in the same period in 2012. The revenue breakdown includes:
$69.1 million, or 37.4% of total sales for digital media (including the mobile
handset business), down 5.2% year-over-year; $79.8 million or 43.2% of total
sales for telecommunications equipment, representing a 5.7% decrease
year-over-year; and $35.2 million or 19.0% of total sales relating to
industrial business, down 0.6% year-over-year. The Company recorded $0.8
million or 0.4% of total sales from the service business in the second quarter
of 2013, increased 100% from $0.4 million recorded in the first quarter of
2013.

Cost of sales, which includes the aggregate purchase of components from
suppliers and the direct cost of services, was $172.8 million, down 3.5% from
$179.1 million in the second quarter of 2012. Gross profit for the second
quarter was $12.2 million, down 11.6% from $13.8 million in the second quarter
of last year. The gross margin for the second quarter of 2013 was 6.6%, down
from 7.1% a year earlier.

Operating expenses, including selling, general and administrative, and
research and development expenses, totaled $9.1 million, down 8.2% from $9.9
million in the second quarter of 2012.

Income from operations was $3.1 million, down 20.3% from $3.8 million in the
same period of 2012. The operating margin was 1.7%, down from 2.0% in the
second quarter of 2012. Excluding the effects of share-based compensation
expenses and amortization of intangible assets and related deferred taxation,
operating margin would have been 3.2% for the second quarter of 2013, compared
to 3.8% in the second quarter of 2012. The effective tax rate for the second
quarter of 2013 was 12.0%, up from 10.8% a year earlier.

Cogo's net income for the second quarter of 2013 was $1.7 million, with
diluted EPS of $0.05 on a GAAP basis, compared to net income of $1.8 million
and diluted EPS $0.05, in the second quarter of 2012. Included in the second
quarter of 2013 were $1.9 million for share-based compensation expenses and
$0.9 million for amortization of intangible assets and related deferred
taxation. Excluding share-based compensation expenses and amortization of
intangible assets and related deferred taxation, the non-GAAP net income would
have been $4.4 million, or Non-GAAP Diluted EPS of $0.13. The weighted average
number of shares used in the calculation of diluted EPS was 33.1 million
compared to 36.4 million in the second quarter of 2012.

For the six-month period ended June 30, 2013, the Company reported revenue of
$369.5 million, up 2.4% from $360.7 million in the first-half year of 2012.
Gross profit was $24.3 million, down 3.2% from $25.1 million in the first-half
year of 2012. The gross margin was 6.6%, compared to 7.0% in the same period
last year. Net operating expenses were $18.1 million, down 4.7% from $19.0
million in the first half of 2012. Income from operations was $6.2 million,
down 1.6% from the $6.1 million reported a year earlier. The non-GAAP
operating margin, excluding share-based compensation expenses and amortization
of intangible assets, was 3.3%, compared to 3.6% in the same period last year,
as a result of a lower gross margin. The Company had an effective tax rate of
11.4% compared to 11.9% during the same period last year. Non-controlling
interests' share of income was $1.9 million, up from $1.7 million in the
first-half of 2012. Cogo's net income for the half-year period was up 3.3% at
$3.1 million from the same period last year.

Balance Sheets and Cash Flows
Total cash, including pledged bank deposits, was $140.8 million at the end of
the second quarter, down from $141.5 million as of December 31, 2012. Bank
borrowings decreased to $90.1 million as of June 30, 2013, from $98.6 million
at the end of 2012. The Company has a current ratio of 2.6 to 1 and has
operating cash outflow of $6.8 million during the second quarter of 2013.

Inventories decreased from $82.9 million as of December 31, 2012, to $67.2
million as of June 30, 2013. Inventory turnover days numbered 35 days in the
second quarter of 2013 down from 41 days in the fourth quarter of 2012.
Accounts receivable increased from $113.2 million as of December 31, 2012, to
$170.6 million as of June 30, 2013, and the Days Sales Outstanding increased
from 52 days in the fourth quarter of 2012 to 84 days. Accounts payable
increased from $16.5 million at the end of 2012 to $23.2 million as of June
30, 2013, and Days Payable Outstanding increased from 8 days to 12 days.
Cogo's cash conversion cycle increased from 85 days in the fourth quarter of
2012 to 107 days in the second quarter of 2013.

Total equity was $261.3 million as of June 30, 2013, an increase of 2.4% from
$255.3 million as of December 31, 2012. During the second quarter of 2013, the
Company repurchased approximately 2.2 million ordinary shares at an average
price of $1.98 per share and a total cost of more than $4.3 million pursuant
to the current stock repurchase program. Cogo has repurchased almost 6.4
million shares since September 24, 2012. Under the current repurchase program,
and there are approximately 3.6 million shares left out of the 10 million
shares authorized for the program. Cogo continues to view share buybacks as a
strategic use of cash.

Cogo 2013 Q2 Earnings Results Conference Call

Date/ Time:
August 15, 2013 (Thursday) @ 8:00 PM (ET)

Conference Call:
Toll-Free 1-877-941-4774
Toll/International +1-480-629-9760

Webcast/ Audio Recording:
http://public.viavid.com/index.php?id=105721

Replay (from 8/15/2013 at 11:00 pm to 8/17/2013 at 11:59 pm ET):
US/ Canada Toll-Free: 1-877-870-5176 (Passcode: 4635093)
International: +1-858-384-5517 (Passcode: 4635093)

About Cogo Group, Inc.:
Cogo Group, Inc. (Nasdaq: COGO) is the leading gateway for global
semiconductor companies to access the rapidly growing Industrial and
Technology sectors in China. Through its unique business-to-business services
platform, Cogo designs customized embedded solutions using technology from
suppliers including Broadcom, Xilinx, Atmel and others for a customer base of
over 2,100 Chinese OEMs/ODMs. Cogo's customer list includes approximately 100
blue-chip companies, including ZTE, BYD and NARI, as well as nearly 2,000
Small and Medium Enterprises (SMEs). The Company serves a broad list of
rapidly growing end-markets in China, including 3G Smartphones, Tablets,
Automotives, High-Speed Railway, Smart Meter/Smart Grid, Healthcare and High
Definition Television "HDTV."

For further information:
Investor Relations
www.cogo.com.cn/investorinfo.html
communications@cogo.com.cn
H.K.:  +852 2730 1518
U.S.:  +1 (646) 291 8998
Fax:+86 755 2674 3522

Safe Harbor Statement:
This press release includes certain statements that are not descriptions of
historical facts, but are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
and Exchange Act of 1934. These forward-looking statements may include
statements about our proposed discussions related to our business or growth
strategy such as growth in digital media, telecommunications and industrial
applications businesses, as well as our potential acquisitions which are
subject to change. Such information is based upon expectations of our
management that were reasonable when made, but may prove to be incorrect. All
such assumptions are inherently subject to uncertainties and contingencies
beyond our control and upon assumptions with respect to future business
decisions, which are subject to change. For further descriptions of other
risks and uncertainties, see our most recent Annual Report filed with the
Securities and Exchange Commission (SEC) on Form 20-F, and our subsequent SEC
filings. Copies of filings made with the SEC are available through the SEC's
electronic data gathering analysis retrieval system (EDGAR) at www.sec.gov.

About Non-GAAP Financial Measures:
To supplement Cogo's unaudited consolidated financial results presented in
accordance with GAAP, Cogo uses the following measures defined as Non-GAAP
financial measures by the SEC: 1) Non-GAAP net income attributable to Cogo
Group, Inc. which is net income attributable to Cogo Group, Inc. excluding
share-based compensation expenses and amortization of intangible assets and
related deferred taxation, and 2) Non-GAAP diluted EPS attributable to Cogo
Group, Inc., which is diluted EPS excluding share-based compensation expenses
and amortization of intangible assets and related deferred taxation. The
presentation of these Non-GAAP financial measures is not intended to be
considered in isolation or as a substitute for the financial information
prepared and presented in accordance with GAAP. For more information on these
Non-GAAP financial measures, please see the table captioned "Unaudited
Reconciliation of Non-GAAP measures to the most comparable GAAP measures" set
forth at the end of this release.

Cogo believes that these Non-GAAP financial measures provide meaningful
supplemental information regarding its performance and liquidity by excluding
share-based compensation expenses and amortization of intangible assets and
related deferred taxation that may not be indicative of its operating
performance from a cash perspective. Cogo believes that both management and
investors benefit from referring to these Non-GAAP financial measures in
assessing its performance and when planning and forecasting future periods.
These Non-GAAP financial measures also facilitate management's internal
comparisons to Cogo's historical performance and liquidity. Cogo computes its
Non-GAAP financial measures using the same consistent method from quarter to
quarter.

Cogo believes these Non-GAAP financial measures are useful to investors in
allowing for greater transparency with respect to supplemental information
used by management in its financial and operational decision making. A
limitation of using Non-GAAP net income attributable to Cogo Group, Inc.,
Non-GAAP diluted Earnings Per Share attributable to Cogo Group, Inc., Non-GAAP
income from operations and Non-GAAP operating margin is that these Non-GAAP
measures exclude share-based compensation expenses and amortization of
intangible assets and related deferred taxation that have been and will
continue to be for the foreseeable future a recurring expense in our business.
Management compensates for these limitations by providing specific information
regarding the GAAP amounts excluded from each Non-GAAP measure. The
accompanying tables have more details on the reconciliations between GAAP
financial measures that are most directly comparable to Non-GAAP financial
measures.

Tables Attached



FINANCIAL INFORMATION
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
COGO GROUP, INC. and SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2013
and December 31, 2012
                                                                 December 31,
                                          June 30, 2013
                                                                 2012
                                          USD'000     RMB'000    RMB'000
Assets
Current assets:
Cash                                       30,169     185,159    324,839
Pledged bank deposits                      110,648    679,091    556,941
Accounts receivable, net                   170,592    1,046,993  704,968
Bills receivable                           4,064      24,943     27,945
Amount due from related party              —          —          35,743
Inventories                                67,230     412,616    516,372
Income taxes receivable                    581        3,566      2,098
Prepaid expenses and other receivables     7,883      48,384     56,266
Total current assets                       391,167    2,400,752  2,225,172
Property and equipment, net                4,504      27,645     17,515
Intangible assets, net                     18,927     116,162    128,810
Other assets                               6          35         261
Total Assets                               414,604    2,544,594  2,371,758
Liabilities and equity
Current liabilities:
Accounts payable                           23,249     142,690    102,878
Bank borrowings                            90,074     552,823    614,045
Income taxes payable                       1,105      6,781      7,155
Amount due to related party                27,966     171,638    —
Accrued expenses and other liabilities     7,799      47,865     35,734
Total current liabilities                  150,193    921,797    759,812
Deferred tax liabilities                   3,123      19,167     21,254
Total liabilities                          153,316    940,964    781,066
Equity
Common stock:
Par value: USD0.01

Authorized: 200,000,000 Shares

Issued: 44,579,871 shares in 2013,         567        3,481      3,409
43,423,556 shares in 2012

Outstanding:29,518,358 shares in 2013,
31,110,922 shares in 2012
Additional paid in capital                 240,163    1,473,976  1,448,396
Retained earnings                          98,331     603,498    584,364
Accumulated other comprehensive loss       (21,441)   (131,594)  (122,513)
                                           317,620    1,949,361  1,913,656
Less cost of common stock in treasury,
15,061,513 shares in 2013 and 12,312,634   (65,755)   (403,566)  (369,217)
shares in 2012
Total Cogo Group, Inc. equity              251,865    1,545,795  1,544,439
Noncontrolling interests                   9,423      57,835     46,253
Total equity                               261,288    1,603,630  1,590,692
Total liabilities and equity               414,604    2,544,594  2,371,758







COGO GROUP, INC. and SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income and
Comprehensive Income for the three months ended June 30, 2013 and 2012
                                      Three months ended June 30,
                                      2013        2013          2012
                                      USD'000     RMB'000       RMB'000
Net Revenue                            184,928     1,134,978     1,225,247
Cost of sales                          (172,762)   (1,060,311)   (1,137,850)
Gross profit                           12,166      74,667        87,397
Selling, general and administrative    (6,765)     (41,521)      (39,023)
expenses
Research and development expenses      (3,100)     (19,023)      (24,009)
Other operating income (expense)       754         4,630         (12)
Income from operations                 3,055       18,753        24,353
Interest expense                       (753)       (4,621)       (6,741)
Interest income                        511         3,135         3,608
Earnings before income taxes           2,813       17,267        21,220
Income tax expense                     (337)       (2,067)       (2,286)
Net income                             2,476       15,200        18,934
Less net income attributable to        (792)       (4,858)       (7,528)
noncontrolling interests
Net income attributable to Cogo        1,684       10,342        11,406
Group, Inc.
Earnings per share attributable to
Cogo Group, Inc.
 Basic                                0.05        0.31          0.31
 Diluted                              0.05        0.31          0.31
Weighted average number of common
shares outstanding
 Basic                                            33,002,573    36,379,789
 Diluted                                          33,111,295    36,379,789
Comprehensive income:
Net income                             2,476       15,200        18,934
Other comprehensive income, net of
nil tax
Foreign currency translation           (1,227)     (7,528)       2,624
adjustments
Total comprehensive income             1,249       7,672         21,558
Less comprehensive income, net of
nil tax, attributable                  (742)       (4,556)       (6,783)
toNoncontrolling interests
Comprehensive income attributable to   507         3,116         14,775
Cogo Group, Inc.







COGO GROUP, INC. and SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income and
Comprehensive Income for the Six months ended June 30, 2013 and 2012
                                      Six months ended June 30,
                                      2013        2013          2012
                                      USD'000     RMB'000       RMB'000
Net Revenue                            369,507     2,267,815     2,291,688
Cost of sales                          (345,182)   (2,118,517)   (2,131,953)
Gross profit                           24,325      149,298       159,735
Selling, general and administrative    (12,914)    (79,254)      (74,823)
expenses
Research and development expenses      (6,530)     (40,078)      (47,898)
Other operating income                 1,303       7,998         1,729
Income from operations                 6,184       37,964        38,743
Interest expense                       (1,433)     (8,795)       (12,110)
Interest income                        946         5,803         7,627
Earnings before income taxes           5,697       34,972        34,260
Income tax expense                     (647)       (3,969)       (4,082)
Net income                             5,050       31,003        30,178
Less net income attributable to        (1,934)     (11,869)      (10,836)
noncontrolling interests
Net income attributable to Cogo        3,116       19,134        19,342
Group, Inc.
Earnings per share attributable to
Cogo Group, Inc.
 Basic                                0.09        0.57          0.53
 Diluted                              0.09        0.57          0.53
Weighted average number of common
shares outstanding
 Basic                                            33,557,265    36,201,755
 Diluted                                          33,762,091    36,201,755
Comprehensive income:
Net income                             5,050       31,003        30,178
Other comprehensive income, net of
nil tax
 Foreign currency translation         (1,526)     (9,368)       2,926
adjustments
Total comprehensive income             3,524       21,635        33,104
Less comprehensive income, net of
nil tax, attributable                  (1,887)     (11,582)      (10,835)
toNoncontrolling interests
Comprehensive income attributable to   1,637       10,053        22,269
Cogo Group, Inc.





COGO GROUP, INC. and SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP
MEASURES
                                                      Three Months ended June,
                                                      2013          2012
                                                      $'000         $'000
Net Income
        GAAP net income attributable to Cogo Group,   1,684         1,796
        Inc.
        Share-based compensation expenses             1,903         2,569
        Amortization of intangible assets and         860           831
        related deferred taxation
        Non-GAAP net income attributable to Cogo      4,447         5,196
        Group, Inc.
Income from operations
        GAAP income from operations                   3,055         3,834
        Share-based compensation expenses             1,903         2,569
        Amortization of intangible assets             1,030         995
        Non-GAAP income from operation                5,988         7,398
Operating Margin
        GAAP operating margin                         1.7%          2.0%
        Non-GAAP operating margin                     3.2%          3.8%
Earnings per share                                    $             $
   GAAP net income attributable to Cogo Group,  0.05          0.05
  Inc. per common share-Diluted
   Non-GAAP net income attributable to Cogo     0.13          0.14
  Group, Inc. per common share-Diluted
Weighted average number of common shares outstanding
   Basic                                       33,002,573    36,379,789
   Diluted                                 33,111,295    36,379,789



SOURCE Cogo Group, Inc.

Website: http://www.comtech.com.cn
 
Press spacebar to pause and continue. Press esc to stop.