|
|
Q1 2011(1) |
Q1 2010(1) |
Percentage Change |
|
|
Net Revenue |
$104,418 |
$80,987 |
28.9% |
|
|
Cost of Sales |
$89,584 |
$69,548 |
28.8% |
|
|
Gross Profit |
$14,834 |
$11,439 |
29.7% |
|
|
Operating Expenses |
$9,787 |
$7,848 |
24.7% |
|
|
Net Income attributable to Cogo Group, Inc. |
$4,132(2) |
$3,481 |
18.7% |
|
|
EPS Diluted attributable to Cogo Group, Inc. |
$0.11 |
$0.09 |
18.7% |
|
|
Non-GAAP EPS Diluted attributable to Cogo Group, Inc. |
$0.20(2) |
$0.17 |
20.3% |
|
Revenue Review
Revenue for the first quarter was $104.4 million, an increase of 28.9%
compared to $81.0 million reported for the same period in 2010. The
revenue breakdown includes: $57.2 million, or 54.8% of total sales for
digital media (including mobile handsets business), representing a
21.6% increase year-over-year; $23.3 million, or 22.3% of total sales
for telecommunications equipment, representing a 19.2% increase
year-over-year; and $23.9 million, or 22.9% of total sales relating to
industrial business, representing a 76.8% increase year-over-year. The
Company did not record any revenue from the service business in the
first quarter compared to $0.9 million reported for the same period
last year. The Company is currently participating in what management
believes to be some of the fastest growing end-markets in China,
including the smart grid, wind power, smart meter, automotive,
high-speed railway and medical equipment sectors. Over time, Cogo
expects to expand into other verticals in the industrial space, such as
security.
Customers and ARPU Update
In the first quarter of 2011, blue-chip customers accounted for
approximately 66% of total Cogo revenue, down from approximately 68%
for the same period in 2010. SME customers accounted for the remaining
approximately 34% of total revenue in the quarter. Management expects
that over time, 50% of Cogo's revenue will be derived from SME
customers.
Cost of sales, which includes the aggregate purchase of components from
suppliers and the direct cost of services, was $89.6 million compared
to $69.5 million in the first quarter of 2010, representing an increase
of 28.8% year-over-year. Gross profit for the first quarter was $14.8
million, up 29.7%, compared to $11.4 million during the first quarter
of last year. Gross margin for first quarter was 14.2%, compared to
14.1% reported for the first quarter of 2010.
Operating expenses, including selling, general and administrative, and
research and development expenses, totaled $9.8 million, up 24.7%,
compared to $7.8 million reported for the first quarter of last year.
Income from operations was $5.0 million, an increase of 40.5% from $3.6
million reported in the same period of 2010. Operating margin for the
first quarter of 2011 was 4.8% compared to 4.4% for the first quarter
of 2010. Excluding the effects of share-based compensation expenses and
acquisition-related costs, such as amortization of intangible assets
and related deferred taxation, operating margin would have been 8.5%
for the first quarter of 2011, compared to 8.3% for the same period in
2010. The effective tax rate for the first quarter of 2011 was 10.8%,
compared to 10.0% for the same period in 2010. Included in the income
tax expense for the quarter ended March 31, 2011 was a deferred income
tax benefit of $0.2 million as a result of the amortization of
intangible assets of $1.0 million. Noncontrolling interests' share of
income was $0.4 for the first quarter of 2011 and $0.04 million for the
first quarter of 2010.
Net income attributable to Cogo Group, Inc. for the first quarter of
2011 was $4.1 million or EPS Diluted attributable to Cogo Group, Inc.
of $0.11 on a U.S. GAAP basis, compared to net income of $3.5 million,
or EPS Diluted attributable to Cogo Group, Inc. of $0.09, in the first
quarter of 2010. Included in the first quarter of 2011 was $2.9 million
attributable to share-based compensation expense and $0.8 million
attributable to acquisition related costs, such as amortization of
intangible assets and related deferred taxation. Excluding share-based
compensation expenses and acquisition related costs, such as
amortization of intangible assets and related deferred taxation, the
Non-GAAP net income would have been $7.8 million, or $0.20 Non-GAAP EPS
Diluted attributable to Cogo Group, Inc. for the first quarter of 2011.
The weighted average number of shares used in the calculation of
diluted EPS was 39.2 million compared to 38.2 million in the first
quarter of 2010.
Balance Sheets and Cash Flows
The Company
continues to be in a strong financial position with a current ratio of
2.8 to 1 and a net cash position of $85.0 million, or approximately
$2.2 per share as of March 31, 2011. The Company had operating
cash flows of $10.4 million at the end of the first quarter and
utilized approximately $5.5 million for acquisitions in the quarter.
Inventories increased from $38.0 million on December 31, 2010 to $49.6
million as of March 31, 2011 as the Company continued to target new
revenue growth opportunities. Some inventories were accumulated in
order to meet the needs of our customers in a potentially tightened
supply chain following the Japan earthquake. Consequently, Inventory
turnover days was 50 days in the first quarter of 2011 compared to 36
days in the prior quarter. It is expected that inventory turns will
return to 40 to 50-day level in the second quarter. Accounts receivable
decreased from $103.3 million on December 31, 2010 to $100.7 million as
of March 31, 2011 as the Days Sales Outstanding increased from 84 to 88
days. Accounts payable increased from $9.6 million at the end of 2010
to $20.8 million as of March 31, 2011 and Days Payable Outstanding
increased from 9 to 21 days sequentially. Cogo's cash conversion cycle
increased from 111 days in the fourth quarter of 2010 to 117 days in
the first quarter of 2011. Cogo's cash conversion cycle in the
first quarter of 2011 is similar to the cash conversion cycle posted in
the fourth quarter of 2010.
Total cash, including pledged bank deposits, increased slightly to
$156.7 million reported at the end of the first quarter, from $156.3
million as at December 31, 2010. Bank borrowings decreased from $76.7
million as of December 31, 2010 to $71.6 million reported as of March
31, 2011, reduction is primarily due to repayment of bank
borrowings as a result of increased operating cash flows generated in
the first quarter.
Cogo Group, Inc. equity was $265.3 million as of March 31, 2011, an
increase of 3.5% from $256.4 million as of December 31, 2010. During
the first quarter of 2011, the Company did not repurchase any shares
due to restriction of the insider trading and blackout policy.
Cogo continues to view share buybacks as a strategic use of cash.
About Cogo Group, Inc.:
Cogo Group, Inc. (Nasdaq: COGO) is one of the leading gateways 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 Intel,
Broadcom, Xilinx, SanDisk, Freescale, Atmel and others for a customer
base of over 1,600 Chinese OEMs/ODMs. Cogo's customer list includes
approximately 100 blue-chip companies, including ZTE, BYD and
NARI, as
well as over 1,500 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").
Cogo's fastest growing end-market is Industrial business, which
constituted close to 18% of total company sales at the end of 2010.
Cogo has approximately 600 employees, with about 300 focused on
engineering and 200 in direct sales.
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 10-K, 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 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, such as amortization of intangible assets
and related deferred taxation, and 2) Non-GAAP basic and diluted EPS
attributable to Cogo, which is basic and diluted EPS excluding
share-based compensation expenses and acquisition related costs such as
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 acquisition related
costs such as amortization of intangible assets 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, Non-GAAP
basic and diluted earnings per share, Non-GAAP income from operation
and Non-GAAP operating margin is that these Non-GAAP measures exclude
share-based compensation expenses and acquisition related costs,
such as 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.
COGO GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
March 31, 2011 |
December 31, 2010 |
|
|
|
USD’000 |
RMB’000 |
RMB’000 |
|
Assets |
|
|
|
|
Current assets: Cash............................................................................................... |
101,113 |
662,121 |
699,650 |
|
Pledged bank deposits........................................................................ |
55,551 |
363,758 |
332,050 |
|
Accounts receivable, net.................................................................... |
100,680 |
659,285 |
681,911 |
|
Bills receivable.................................................................................. |
5,464 |
35,778 |
31,001 |
|
Inventories....................................................................................... |
49,619 |
324,921 |
250,573 |
|
Income taxes receivable..................................................................... |
173 |
1,135 |
2,478 |
|
Prepaid expenses and other receivables............................................... |
6,734 |
44,095 |
49,338 |
|
Total current assets................................................................................. |
319,334 |
2,091,093 |
2,047,001 |
|
Property and equipment, net....................................................................... |
2,381 |
15,591 |
14,613 |
|
Goodwill and intangible assets, less accumulated amortization, RMB128,908 thousand (USD19,686 thousand) in 2011 and RMB122,637 thousand in 2010. |
63,490 |
415,750 |
258,935 |
|
Other assets............................................................................................. |
353 |
2,314 |
1,468 |
|
Total Assets |
385,558 |
2,524,784 |
2,322,017 |
|
Liabilities and equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable.............................................................................. |
20,815 |
136,306 |
63,283 |
|
Bank borrowings................................................................................ |
71,643 |
469,137 |
505,888 |
|
Income taxes payable........................................................................ |
2,784 |
18,231 |
16,153 |
|
Accrued expenses and other liabilities................................................... |
17,552 |
114,936 |
15,581 |
|
Total current liabilities............................................................................. |
112,794 |
738,610 |
600,905 |
|
Deferred tax liabilities................................................................................. |
4,804 |
31,456 |
13,777 |
|
Total liabilities......................................................................................... |
117,598 |
770,066 |
614,682 |
|
Equity |
|
|
|
|
Common stock: .. Par value: USD0.01........................................................................ Authorized: 200,000,000 Shares....................................................... Issued: 41,306,657 shares in 2011 and 41,181,529 shares in 2010....... Outstanding: 35,973,892 shares in 2011 and 35,848,764 shares in 2010............................................................................................... ................................................................................................... |
510 |
3,340 |
3,332 |
|
Additional paid in capital...................................................................... |
203,827 |
1,334,717 |
1,315,806 |
|
Retained earnings.............................................................................. |
113,601 |
743,895 |
716,839 |
|
Accumulated other comprehensive loss................................................ |
(18,097) |
(118,501) |
(117,479) |
|
|
299,841 |
1,963,451 |
1,918,498 |
|
Less cost of common stock in treasury, 5,332,765 shares in 2011 and 2010................................................................................................ |
(34,588) |
(226,495) |
(226,495) |
|
Total Cogo Group, Inc. equity...................................................................... |
265,253 |
1,736,956 |
1,692,003 |
|
Noncontrolling interest................................................................................ |
2,707 |
17,726 |
15,332 |
|
Total equity............................................................................................. |
267,960 |
1,754,682 |
1,707,335 |
|
Total liabilities and equity |
385,558 |
2,524,748 |
2,322,017 |
COGO GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
|
Three Months ended March 31, |
|||
|
|
2011 |
2011 |
2010 |
|
|
|
USD’000 |
RMB’000 |
RMB’000 |
|
|
Net Revenue |
|
|
|
|
|
Product sales............................................................... |
104,418 |
683,762 |
546,846 |
|
|
Services revenue......................................................... |
- |
- |
5,953 |
|
|
|
104,418 |
683,762 |
552,799 |
|
|
Cost of sales |
|
|
|
|
|
Cost of goods sold....................................................... |
(89,584) |
(586,624) |
(469,948) |
|
|
Cost of services.......................................................... |
- |
- |
(4,773) |
|
|
|
(89,584) |
(586,624) |
(474,721) |
|
|
Gross profit....................................................................... |
14,834 |
97,138 |
78,078 |
|
|
Selling, general and administrative expenses.................... |
(6,464) |
(42,331) |
(37,560) |
|
|
Research and development expenses............................... |
(3,321) |
(21,745) |
(16,031) |
|
|
Other operating income (expenses)................................... |
(2) |
(10) |
27 |
|
|
Income from operations...................................................... |
5,047 |
33,052 |
24,514 |
|
|
Interest expense................................................................ |
(474) |
(3,103) |
(1,115) |
|
|
Interest income.................................................................. |
478 |
3,130 |
3,294 |
|
|
Earnings before income taxes............................................ |
5,051 |
33,079 |
26,693 |
|
|
Income tax expense.......................................................... |
(546) |
(3,573) |
(2,659) |
|
|
Net income........................................................................ |
4,505 |
29,506 |
24,034 |
|
|
Less net income attributable to noncontrolling interest................................................................................ |
(373) |
(2,450) |
(273) |
|
|
|
|
|
|
|
|
Net income attributable to Cogo Group, Inc. |
4,132 |
27,056 |
23,761 |
|
|
|
|
|
|
|
|
|
USD |
RMB |
RMB |
|
|
Earnings per share attributable to Cogo Group, Inc. |
|
|
|
|
|
Basic.......................................................................... |
0.11 |
0.71 |
0.64 |
|
|
Diluted........................................................................ |
0.11 |
0.69 |
0.62 |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
|
Basic.......................................................................... |
|
37,994,774 |
37,144,442 |
|
|
Diluted........................................................................ |
|
39,174,483 |
38,168,035 |
|
COGO GROUP, INC. and SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES
|
|
|
|
Three Months ended March 31, |
|||
|
|
|
|
2011 |
|
2010 |
|
|
|
|
|
$’000 |
|
$’000 |
|
|
Net Income |
|
|
|
|
||
|
|
GAAP net income attributable to Cogo Group, Inc. |
|
4,132 |
|
3,481 |
|
|
|
Share-based compensation expenses |
|
2,889 |
|
2,352 |
|
|
|
Amortization of intangible assets and related deferred taxation |
|
800 |
|
667 |
|
|
|
Non-GAAP net income attributable to Cogo Group, Inc. |
|
7,821 |
|
6,500 |
|
|
|
|
|
|
|
||
|
Income from operation |
|
|
|
|
||
|
|
GAAP income from operations |
|
5,047 |
|
3,591 |
|
|
|
Share-based compensation expenses |
|
2,889 |
|
2,352 |
|
|
|
Amortization of intangible assets |
|
958 |
|
799 |
|
|
|
Non-GAAP income from operation |
|
8,894 |
|
6,742 |
|
|
|
|
|
|
|
|
|
|
Operating Margin |
|
|
|
|
||
|
|
GAAP operating margin |
|
4.8% |
|
4.4% |
|
|
|
Non-GAAP operating margin |
|
8.5% |
|
8.3% |
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
$ |
|
$ |
||
|
|
GAAP net income attributable to Cogo Group, Inc. per common share- Diluted |
|
0.11 |
|
0.09 |
|
|
|
Non-GAAP net income attributable to Cogo Group, Inc. per common share- Diluted |
|
0.20 |
|
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
||
|
|
Basic |
|
37,994,774 |
|
37,144,442 |
|
|
|
Diluted |
|
39,174,483 |
|
38,168,035 |
|
|
|
|
|
|
|
|
|
Disclaimer | Copyright © Cogo Group, Inc. All rights reserved.