Cogo Group, Inc. Reports 2009 Third Quarter Results

- Q3 Net Revenue: $82.0 million Generally Accepted Accounting Principles
("GAAP") (a year-on-year increase of 9.7%)

SHENZHEN, China, Nov. 4 /PRNewswire-FirstCall/ -- Cogo Group, Inc. (Nasdaq:
COGO), a leading provider of customized design solutions for the technology
manufacturing sector in China, today announced unaudited financial results for
its third quarter of 2009. The Company posted quarterly revenue of $82.0
million, up 9.7% year-over-year, compared to $74.8 million reported in the
third quarter of 2008.

Net income attributable to Cogo Group, Inc. for the third quarter of 2009 was
$3.4 million, up 144.2% from $1.4 million in the same period last year, with
Non-GAAP net income attributable to Cogo Group, Inc. of $6.7 million, up 24.5%
over the same period last year. Earnings per share ("EPS") Diluted
attributable to Cogo Group, Inc. on a U.S. GAAP basis was $0.09. Non-GAAP EPS
Diluted attributable to Cogo Group, Inc. (which excludes share-based
compensation expense and acquisition related costs, net including
amortization, impairment and extraordinary gain of intangible assets, related
deferred taxation and impairment loss of goodwill) was $0.18, up 28.6% from
the third quarter of 2008.

Key Financial Indicators
(all numbers in USD thousands, except Earnings per share data)

Q3 2009(1) Q3 2008(1) Percent Change
Net Revenue $82,042 $74,794 9.7%
Cost of Sales $70,201 $64,453 8.9%
Gross Profit $11,841 $10,341 14.5%
Net Operating Expenses $9,206 $10,200 (9.7%)
Income from Operations $2,635 $141 1768.8%
Net Income Attributable to Cogo
Group, Inc.(2) $3,363 $1,377 144.2%
EPS Diluted Attributable to Cogo
Group, Inc. $0.09 $0.04 125.0%
Non-GAAP EPS Diluted attributable
to Cogo Group, Inc.(2) $0.18 $0.14 28.6%

(1) The US dollar amounts are calculated based on the conversion rate of
US $1 to RMB 6.8262 as of September 30, 2009, US $1 to RMB 6.7899 as
of September 30, 2008.

(2) Included in the Q3 2009 net income attributable to Cogo Group, Inc.
was an amount of $2.2 million in respect of share-based compensation
expense in accordance with Accounting Standards Codification ("ASC")
718, Compensation - Stock Compensation and $1.1 million, net
acquisition related costs including amortization, impairment and
extraordinary gain of intangible assets and related deferred taxation.
Non-GAAP net income attributable to Cogo Group, Inc., excluding the
effects of share-based compensation expense and acquisition related
costs, was $6.7 million or $0.18 Non-GAAP EPS Diluted attributable to
Cogo Group, Inc. Included in the Q3 2008 net income was an amount of
$1.5 million for share-based compensation expense and $2.5 million
acquisition related costs (including amortization, impairment and
extraordinary gain of intangible assets and related deferred
taxation).

Recent Developments

In September, the Company announced a series of design wins within multiple
Smartphone and Smartbook products on both Windows Mobile and Android
platforms. The Company continued to experience sequential growth in the
telecommunications equipment and combined digital media and handset businesses
while aggressively pursuing new opportunities within the Industrial
Applications business.

"Since Cogo's Industrial business was first introduced in the first quarter of
2008, it has grown to 13.5% of sales, and we expect that it will continue to
grow much faster than the overall company through 2010 and beyond," said
Jeffrey Kang, CEO and Chairman of Cogo. "Growth in our Industrial
Applications business is being driven by the aggressive build-out of China's
Smart Power Grid, high speed railways and roll-out of Smart Meters. We expect
that the inclusion of new opportunities, like auto electronics, will only
further accelerate our growth in this end-market."

Financial Results

Net revenue for the third quarter was $82.0 million, an increase of 9.7%
compared to $74.8 million reported for the third quarter of last year. The net
revenue breakdown is as follows: $11.1 million, or 13.5% of total revenue
representing a 259.6% year-over-year increase, from component sales relating
to industrial applications business, which includes industrial solutions
targeted at the electrical grid and other sectors; $49.4 million, or 60.2% of
total revenue for digital media end-market (including handset business), up
1.5% from the same period in 2008 and $20.3 million, or 24.7% of total revenue
for telecommunications equipment, representing a 9.4% decrease
year-over-year.. The Company's service business contributed $1.3 million in
net revenues for the third quarter and accounted for approximately 1.6% of
total net revenue.

Cost of sales, which includes the aggregate purchase cost of components from
suppliers and the direct cost of services, was $70.2 million, compared to
$64.5 million in the same period last year, representing an increase of 8.9%
year-over-year. Gross profit for the third quarter was $11.8 million, up 14.5%
compared to the $10.3 million during the third quarter of last year. Gross
margin for the third quarter increased to 14.4%, compared to 13.8% reported
during the third quarter of 2008. The increase in both gross profit and gross
profit margin was primarily attributable to the increased revenue in
industrial business end-market, which generally had a higher gross margin than
that of the digital media and telecommunications equipment end-markets.

Selling, general and administrative expenses totaled $6.9 million, remained
stable as compared to $6.9 million reported for the third quarter of last
year. Research and development ("R&D") expenses increased by 7.7% to $2.3
million compared to $2.1 million in the third quarter of 2008. The increase
was primarily attributable to an increase in share-based compensation costs of
$0.7 million as a result of new stock awards granted to research staff in
2009.

Income from operations was $2.6 million as compared to $0.1 million for the
third quarter of 2008. Operating margin for the third quarter was 3.2% versus
0.2% for the third quarter of 2008. Excluding the effects of share-based
compensation and acquisition-related costs including amortization of
intangible assets, operating margin would have been 8.7% for the third quarter
of 2009, compared to 6.1% for the same period in 2008. Noncontrolling
interests' share of income was $0.3 million, an increase of 200.9% as compared
to $0.1 during the same period in 2008.

Net income attributable to Cogo Group, Inc. for the third quarter was $3.4
million or EPS Diluted attributable to Cogo Group, Inc. of $0.09 on a U.S.
GAAP basis, compared to net income attributable to Cogo Group, Inc. of $1.4
million, or EPS Diluted attributable to Cogo Group, Inc. of $0.04 in the third
quarter of 2008. Included in the third quarter 2009 net income attributable to
Cogo Group, Inc. was $2.2 million for share-based compensation expenses, $1.1
million, net for acquisition-related costs (including amortization, impairment
and extraordinary gain of intangible assets and related deferred taxation).
Excluding the share-based compensation expenses and acquisition-related costs
(including amortization, impairment and extraordinary gain of intangible
assets and related deferred taxation), the Company would have reported net
income attributable to Cogo Group, Inc. of $6.7 million, or $0.18 Non-GAAP EPS
Diluted attributable to Cogo Group, Inc. for the third quarter, as compared to
$0.14 for the third quarter of 2008. The weighted average number of shares
used in the calculation of diluted EPS attributable to Cogo Group, Inc. was
37.7 million compared to 39.2 million in the third quarter of 2008.

For the nine-month period ended September 30, 2009, the Company reported
revenue of $219.0 million, an increase of 6.4% compared to $205.9 million
reported during the same period of 2008. Gross profit was $31.3 million, a
decrease of 10.1% compared to $34.9 million reported during the nine-month
period ended September 30, 2008. Gross margin was 14.3% of sales, compared to
a gross margin of 16.9% for the same period last year. Net operating expenses
were $25.0 million, an increase of 4.2% as compared to $24.0 million for the
same period last year. Income from operations was $6.4 million, a decrease of
41.6% from the $10.9 million reported during the prior year period. Non-GAAP
operating margins, excluding share-based compensation expenses and
acquisition-related costs (including amortization, impairment and
extraordinary gain of intangible assets and related deferred taxation), were
7.9%, down 1.9% as compared to the same period last year, as a result of the
lower gross margin.

Balance Sheet

As of September 30, 2009, cash was $101.5 million, up $0.5 million from $101.0
million at June 30, 2009. Pledged bank deposits were $17.0 million as of
September 30, 2009 and June 30, 2009. The Company continues to be in a strong
financial position with a current ratio of 4.6 to 1. Inventory turnover was
shortened slightly to 27 days from 31 days as of September 30, 2009. Accounts
receivable were collected in an average of 95 days. Net cash used in operating
activities for the nine months ended September 30, 2009 was $3.6 million. The
Company had bank borrowings of $14.0 million as of September 30, 2009 as
compared to $4.4 million as of June 30, 2009. Total equity was $223.1 million
as of September 30, 2009, an increase of 3.3% from $215.9 million as of June
30, 2009.

Business Outlook

Based on current visibility and new business in the pipeline, management is
providing 2009 Q4 guidance of $86-88 million in revenue and Non-GAAP EPS
Diluted attributable to Cogo Group, Inc. of $0.18-0.19.

Mr. Kang remarked, "I believe that Cogo's unique business position within the
Chinese market, together with the breadth of its business relationships across
a growing range of end markets and our large net cash position will support
the company's accelerating revenue growth in 2010. Simply, given the business
momentum we are seeing, particularly in the Industrial sector and with our
Small and Medium Enterprise customers, we expect to move back into a
high-growth phase in 2010. We continue to believe that the worst of the
Chinese economic situation is behind us and see the opportunity to continue to
expand our operating margin towards our target of 10%."

Cogo 2009 Q3 Earnings Results Conference Call

Date/ Time:
November 4, 2009 (Wednesday) @ 4:30 PM (ET)

Conference Call:
US/ Canada Toll-Free: 1-877-941-4775
International: +1 (480) 629 9761

Webcast/ Audio Recording:
http://viavid.net/dce.aspx?sid=00006AD5 .

Replay (from 11/04/2009 at 7:30 pm to 11/11/2009 at 11:59 pm ET):
US/ Canada Toll-Free: 1-800-406-7325 (Passcode: 4167390)
International: +1 (303) 590 3030 (Passcode: 4167390)

About CogoGroup, Inc.:
Cogo Group, Inc. (NASDAQ: COGO) Cogo Group, Inc. (NASDAQ: Cogo) is a leading
provider of customized module and subsystem design solutions in China. The
Company believes it acts as a proxy to China's technology industry as it works
with virtually all the major ODMs and OEMs in China. Cogo leverages these
relationships and combines their IP to create designs that Cogo then sells to
electronic manufacturers. These designs allow manufacturers to reduce their
time to market for new products and ultimately increase sales. Cogo focuses on
the telecommunications equipment, digital media and industrial applications
end-markets for their customized design modules while also offering business
and engineering services to their large telecommunications equipment vendor
customers. Over the last twelve years, Cogo has grown its customer list to
include nearly 1,300 manufacturers across the telecommunications equipment,
digital media and industrial applications markets, covering both multinational
Chinese subsidiaries and Chinese domestic companies.

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, mobile handset and
telecommunications 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 10-K, and our subsequent SEC
filings, including our most recent Forms S-1 and/or S-3. 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 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 acquisition related costs, net such as amortization,
impairment and extraordinary gain of intangible assets, related deferred
taxation and impairment of goodwill, 2) Non-GAAP basic and diluted earnings
per share attributable to Cogo Group, Inc., which is basic and diluted
earnings per share attributable to Cogo Group, Inc. excluding share-based
compensation expenses and acquisition related costs, net such as amortization,
impairment and extraordinary gain of intangible assets, related deferred
taxation and impairment of goodwill, 3) Non-GAAP operating margin, which is
operating margin excluding share-based compensation expenses and acquisition
related costs such as amortization and impairment of intangible assets, and
impairment of goodwill, and 4) Non-GAAP income from operation, which is income
from operation excluding share-based compensation expenses and acquisition
related costs such as amortization and impairment of intangible assets, and
impairment of goodwill. 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 acquisition related costs, net such as
amortization, impairment and extraordinary gain of intangible assets, related
deferred taxation and impairment of goodwill 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 basic and 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
acquisition related costs, net such as amortization, impairment and
extraordinary gain of intangible assets, related deferred taxation and
impairment of goodwill 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

COGO GROUP, INC. and SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months ended September 30,
--------------------------------
2009 2009 2008
USD'000 RMB'000 RMB'000

Net Revenue
Product sales 80,728 551,063 503,128
Services revenue 1,314 8,970 4,717
------ ------- -------
82,042 560,033 507,845
Cost of sales
Cost of goods sold (69,147) (472,010) (433,954)
Cost of services (1,054) (7,194) (3,674)
------ ------- -------
(70,201) (479,204) (437,628)
Gross profit 11,841 80,829 70,217
Selling, general and
administrative expenses (6,949) (47,437) (47,065)
Research and development
expenses (2,308) (15,756) (14,550)
Impairment loss on goodwill
and intangible assets - - (7,653)
Other operating income, net 51 349 8
------ ------- -------
Income from operations 2,635 17,985 957
Interest expense (84) (572) (191)
Interest income 544 3,716 7,366
------ ------- -------
Earnings before income taxes 3,095 21,129 8,132
Income tax benefit 248 1,691 1,936
------ ------- -------
Net income 3,343 22,820 10,068
Less net income attributable
to noncontrolling interest (319) (2,175) (717)
------ ------- -------
Net income before
extraordinary item 3,024 20,645 9,351
Extraordinary item (less
applicable income taxes
benefit of RMB 4,423
thousand) 339 2,315 -
------ ------- -------
Net income attributable to
Cogo Group, Inc. 3,363 22,960 9,351
====== ======= =======

Earnings per share
attributable to Cogo Group,
Inc. USD RMB RMB

Income before extraordinary
item 0.08 0.56 0.24
Extraordinary item 0.01 0.06 -
------ ------- -------
- Basic 0.09 0.62 0.24

Income before extraordinary
item. 0.08 0.55 0.24
Extraordinary item 0.01 0.06 -
------ ------- -------
- Diluted 0.09 0.61 0.24
Weighted average number of
common shares outstanding
- Basic 36,809,304 38,869,625
- Diluted 37,745,926 39,233,125

COGO GROUP, INC. and SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, December 31,
------------- ------------
2009 2009 2008
---- ---- ----
USD'000 RMB'000 RMB'000
Assets
Current assets:
Cash 101,485 692,753 686,379
Pledged bank deposits 17,000 116,045 115,983
Accounts receivable, net 85,063 580,657 497,992
Bills receivable 1,561 10,658 13,555
Inventories 20,444 139,557 95,855
Prepaid expenses and other receivables 3,009 20,543 20,211
----- ------ ------
Total current assets 228,562 1,560,213 1,429,975
Property and equipment, net 2,238 15,274 17,993
Goodwill and intangible assets, less
accumulated amortization, RMB65,392
thousand (USD9,580 thousand) in 2009 and
RMB42,819 thousand in 2008 46,674 318,609 237,234
Other assets 61 416 1,608
--- --- -----
Total Assets 277,535 1,894,512 1,686,810
======= ========= =========
Liabilities and equity
Current liabilities:
Accounts payable 13,049 89,080 107,512
Bank borrowings 14,003 95,585 -
Income taxes payable 1,739 11,872 8,225
Accrued expenses and other liabilities 20,908 142,722 141,925
------ ------- -------
Total current liabilities 49,699 339,259 257,662
Deferred tax liabilities 2,936 20,044 19,693
Other non-current liabilities 1,757 11,992 -
----- ------ ---
Total liabilities 54,392 371,295 277,355

Equity
Common stock:
Par value: USD 0.01
Authorized 200,000,000 shares
Issued: 40,079,336 shares
Outstanding: 36,134,925 shares in 2009
35,231,661 shares in 2008 477 3,258 3,196
Additional paid in capital 176,758 1,206,585 1,146,840
Retained earnings 84,252 575,121 524,240
Accumulated other comprehensive loss (15,721) (107,318) (107,645)
-------- --------- ---------
245,766 1,677,646 1,566,631
Less cost of common stock in treasury,
3,944,411 shares in 2009 and 2008 (23,833) (162,687) (162,687)
-------- --------- ---------
Total Cogo Group, Inc. equity 221,933 1,514,959 1,403,944
Noncontrolling interest 1,210 8,258 5,511
----- ----- -----
Total equity 223,143 1,523,217 1,409,455
------- --------- ---------
Total liabilities and equity 277,535 1,894,512 1,686,810
======= ========= =========

COGO GROUP, INC. and SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP
MEASURES

Three Months ended
September 30,
------------------
2009 2008
---- ----
$'000 $'000
Net Income
GAAP net income attributable to Cogo
Group, Inc. 3,363 1,377
Share-based compensation expense 2,191 1,506
Acquisition related costs, extraordinary
item and related deferred taxation 1,129 2,487
----- -----
Non-GAAP net income attributable to Cogo
Group, Inc. 6,683 5,370

Income from operation
GAAP income from operations 2,635 141
Share-based compensation expense 2,191 1,506
Acquisition related costs 2,288 2,884
----- -----
Non-GAAP income from operation 7,114 4,531
===== =====

Operating Margin
GAAP operating margin 3.2% 0.2%
Non-GAAP operating margin 8.7% 6.1%

Earnings per share $ $
GAAP net income attributable to Cogo
Group, Inc. per common share- Basic 0.09 0.04
==== ====
GAAP net income attributable to Cogo
Group, Inc. per common share- Diluted 0.09 0.04
==== ====

Non-GAAP net income attributable to Cogo
Group, Inc. per common share- Basic 0.18 0.14
==== ====
Non-GAAP net income attributable to Cogo
Group, Inc. per common share- Diluted 0.18 0.14
==== ====
Weighted average number of common shares
outstanding
Basic 36,809,304 38,869,625
========== ==========
Diluted 37,745,926 39,233,125
========== ==========

SOURCE Cogo Group, Inc.

Cogo Group, Inc. Investor Relations, HK, +852 2730 1518, or US,
+1-646-291-8998