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Section 1: 8-K (FORM 8-K)

cui20180505_8k.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):

May 7, 2018

 

Commission File Number: 0-29923

 

CUI Global, Inc.

(Exact Name of registrant as specified in Its Charter)

 

Colorado84-1463284 

84-1463284

(State or jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

20050 SW 112th Avenue, Tualatin, Oregon97062

97062

(Address of Principal Executive Offices)(zip code)

(Zip Code)

 

(503) 612-2300

(Registrant’s telephone number)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a- 12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.1 4d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On May 7, 2018, CUI Global, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the quarter ended March 31, 2018. The press release is being furnished with this report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference. This report (including the exhibit) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference in any filing made by the Registrant pursuant to the Securities Act of 1933, as amended, other than to the extent that such filing incorporates by reference any or all of such information by express reference thereto.

 

The press release is available at the Company’s website, www.CUIGlobal.com.

  

Section 9 – Financial Statement and Exhibits

 

Item 9.01 Financial Statement and Exhibits.

 

 

(d)

Exhibits

 

 

Exhibit No.

Description of Exhibit

 

99.1

Press Release dated May 7, 2018

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Signed and submitted this 7th day of May 2018.

 

 

  CUI Global, Inc.    

 By:

/s/ William J. Clough

   

 

        William J. Clough

 

 

 

        President/CEO

 

 

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

ex_112914.htm

Exhibit 99.1

 

 

 

CUI GLOBAL, INC. REPORTS UNAUDITED FIRST QUARTER 2018 FINANCIAL RESULTS

 

Increases Backlog $11.0 Million to Record $43.8 Million –

 

TUALATIN, Ore., May 7, 2018 -- CUI Global, Inc. (NASDAQ: CUI), (the “Company”) today reported its unaudited financial results for the three months ended March 31, 2018.

 

Note: Effective January 1, 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), utilizing the modified retrospective method. The Company also provides its results for the three months ended March 31, 2018 under old revenue rules, ASC Topic 605, following the ‘Recent Business and Operational Highlights’ section below as required under the modified retrospective transition method to allow easier comparison with prior results.

 

First Quarter 2018 Financial Performance Summary: (comparisons to prior year period)

 

 

Total revenues were $22.0 million compared to $17.8 million;

 

Gross profit was $6.6 million compared to $5.7 million;

 

Gross margin was 29.9% compared to 31.9%;

 

Consolidated net loss was $(3.3) million compared to $(3.9) million;

 

Loss per basic share was $(0.11) compared to $(0.18) per basic share;

 

Adjusted EBITDA was $(2.7) million compared to $(3.2) million;

 

Cash and cash equivalents were $9.6 million and restricted cash was $0.5 million at March 31, 2018;

 

Power and Electromechanical (P&EM) segment unaudited backlog was $26.1 million at March 31, 2018, up from $20.2 million at December 31, 2017; and,

 

Energy segment unaudited backlog was $17.7 million at March 31, 2018, up from $12.6 million at December 31, 2017.

 

“Strong revenue and record backlog in the first quarter reflect continued execution on our strategy to leverage our industry-disrupting technologies to build demand with new customers and across new geographies,” said William Clough, president and CEO of CUI Global. “Our P&EM segment continues to benefit from new and expanded distributor relationships supplemented this quarter by initial ICE Technology sales. In our Energy segment, with a new, larger facility in Houston we are winning higher-dollar integration projects from leading energy providers in North America, and are advancing Energy products opportunities internationally that offer significant revenue optionality even as we await the restart of our largest Energy product contract in Italy.

 

“Looking ahead, we are well positioned to drive volume and sales growth and improve the profitability of our sales mix,” continued Mr. Clough. “In our P&EM segment, UL certification for our ICE Switch and ICE Block products enables us to more vigorously promote this full solution to the data center market that has already demonstrated its interest with significant orders received in Q4 2017 for the ICE Switch and Q1 2018 for the ICE Block.

 

 

 

 

“In our Energy segment, we continue to cultivate demand for our Energy products across Europe and North America. In particular, the recent certification of our GasPT solution by Ofgem should serve to catalyze interest in the U.K. at a time when energy providers there are moving to utilize a government subsidy program to build biomethane terminals. We are progressing GasPT opportunities in North America for process control and fiscal monitoring applications, and concurrently building demand for our VE Technology as demonstrated by the receipt of recent orders with several Fortune 100 energy providers. We are also increasingly leveraging integration projects across both geographies to drive Energy product sales. These joint solutions create significant incremental value and generate higher gross margins for us. As business development activities in prior quarters convert to opportunities and orders, we are building a stronger business and ensuring our long-term success,” concluded Mr. Clough.

 

Recent Business and Operational Highlights:

 

 

CUI Global announced that its Orbital Gas Systems North America (Orbital N.A.) subsidiary deployed its proprietary VE Technology across leading North American energy companies. Orders for VE probes and thermowells were received from several Fortune 100 energy companies.

 

 

CUI Global’s Orbital Gas Systems Ltd. (Orbital-UK) subsidiary received new, broader certification of its proprietary GasPT analyzer and software from the U.K. regulator, the Office of Gas and Electricity Markets. Certification further opens the U.K. gas market to GasPT, and was necessary for continued implementation of the Future Billing Methodology, biomethane applications and other projects on which the solution is applicable.

 

 

The Company’s CUI Inc. subsidiary entered into a global distribution agreement with Master Electronics, one of the largest global distributors of electronic components to distribute and market CUI's extensive product portfolio of power, interconnect, motion, audio and thermal management technologies to the design, OEM and contract manufacturer communities.

 

 

CUI Global announced that its Orbital-UK subsidiary secured contracts totaling $4.58 million to enhance fuel gas metering and compressor efficiency on the U.K.’s gas transmission network. The award is the Company’s first non-biomethane project to include GasPT and VE products;

 

 

The Company received UL 9540 certification for its ICE Block data center hardware. With the receipt of UL certification, ICE Block is now fully certified and saleable in the market;

 

 

CUI Global announced that its Orbital N.A. subsidiary was awarded a $2.1 million integration project from a large U.S.-based energy, procurement, and construction firm for which Orbital N.A. is the sole-source integrator. The award follows the recent opening of Orbital N.A.’s new, larger production facility in Houston to service bigger opportunities with the region’s largest gas operators;

 

 

The Company’s CUI Inc. subsidiary received an initial purchase order for 400 of its ICE Block devices and additional ICE Switches valued at approximately $2.9 million for expected delivery in the late 2018;

 

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CUI Global’s Orbital N.A. subsidiary was awarded a fourth purchase order in as many months for its GasPTi device from a leading U.S.-based power and energy producer. The devices are being utilized in a process control application to optimize the efficiency and minimize maintenance on certain of the customer's gas-fired compressor turbines in the northeastern United States.

 

 

First Quarter 2018 Financial Performance Summary: (ASC Topic 605 basis)

 

 

Total revenues would have been $21.7 million compared to $17.8 million;

 

Gross profit would have been $6.0 million compared to $5.7 million;

 

Gross margin would have been 27.5% compared to 31.9%;

 

Consolidated net loss would have been $(3.8) million compared to $(3.9) million;

 

Loss per basic share would have been $(0.13) compared to $(0.18) per basic share.

 

 

Conference Call

 

Management will host a conference call today, May 7, 2018 at 8:30 a.m. ET to discuss these results as well as recent corporate developments. After management’s opening remarks, there will be a question and answer period. To access the call, please dial (888) 462-6700 and provide conference ID 6592666. For international callers, please dial (720) 545-0016. The live webcast of the conference call and accompanying slide presentation can be accessed through the ‘Events & Presentations’ page of the CUI Global Investor Relations website (www.cuiglobal.com).

 

For those unable to attend the live call, a telephonic replay will be available until May 22, 2018. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 6592666. An archived copy of the webcast and slide presentation will also be available on the ‘Events & Presentations’ page of the CUI Global Investor Relations website.

 

About CUI Global, Inc.

 

Delivering Innovative Technologies for an Interconnected World . . . . .

 

CUI Global, Inc. is a publicly traded company dedicated to maximizing shareholder value through the acquisition and development of innovative companies, products and technologies. From Orbital Gas Systems' advanced GasPT2 platform targeting the energy sector, to CUI Inc.’s digital power platform serving the networking and telecom space, CUI Global and its subsidiaries have built a diversified portfolio of industry leading technologies that touch many markets. As a publicly traded company, shareholders are able to participate in the opportunities, revenues, and profits generated by the products, technologies, and market channels of CUI Global and its subsidiaries. But most importantly, a commitment to conduct business with a high level of integrity, respect, and philanthropic dedication allows the organization to make a difference in the lives of their customers, employees, investors and global community.

 

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For more information please visit www.cuiglobal.com.

 

Important Cautions Regarding Forward Looking Statements

 

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in the forward-looking statements. The Company may experience significant fluctuations in future operating results due to a number of economic, competitive, and other factors, including, among other things, our reliance on third-party manufacturers and suppliers, government agency budgetary and political constraints, new or increased competition, changes in market demand, and the performance or reliability of our products. These factors and others could cause operating results to vary significantly from those in prior periods, and those projected in forward-looking statements. Additional information with respect to these and other factors, which could materially affect the Company and its operations, are included in certain forms the Company has filed with the Securities and Exchange Commission.

 

 

Media Contact:                               

External IR Counsel:

CUI Global, Inc.                               

LHA Investor Relations

Jeff Schnabel                                    

Sanjay M. Hurry

Main: 503-612-2300                        

212-838-3777

press@cuiglobal.com                          

cuiglobal@lhai.com

 

 

- Financial Tables to Follow -

 

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CUI Global, Inc.

Condensed Consolidated Balance Sheets

 

 

   

March 31,

   

December 31,

 

(in thousands, except share and per share data)

 

2018

   

2017

 
   

(unaudited)

         

Assets:

               

Current Assets:

               

Cash and cash equivalents

  $ 9,637     $ 12,646  

Trade accounts receivable, net of allowance of $140 and $135, respectively

    11,993       10,833  

Inventories, net of allowance of $996 and $946, respectively

    11,906       13,892  

Contract assets

    1,196       2,299  

Prepaid expenses and other

    1,691       1,606  

Total current assets

    36,423       41,276  
                 

Property and equipment, less accumulated depreciation of $4,430 and $4,155, respectively

    11,318       11,242  

Goodwill

    17,820       17,641  

Other intangible assets, less accumulated amortization of $12,681 and $11,900, respectively

    15,608       15,568  

Note receivable, less current portion

    305       317  

Restricted cash

    523        

Deposits and other assets

    1,928       1,865  
                 

Total assets

  $ 83,925     $ 87,909  
                 

Liabilities and Stockholders' Equity:

               

Current Liabilities:

               

Accounts payable

  $ 4,494     $ 5,110  

Short-term overdraft facility

    837        

Mortgage note payable, current portion

    95       94  

Accrued expenses

    3,609       4,186  

Contract liabilities

    5,168       8,829  

Refund liabilities

    1,951       695  

Total current liabilities

    16,154       18,914  
                 

Long term mortgage note payable, less current portion

    3,231       3,256  

Long term note payable, related party

    5,304       5,304  

Derivative liability

    272       356  

Deferred tax liabilities

    1,999       2,414  

Other long-term liabilities

    190       179  

Total liabilities

    27,150       30,423  
                 

Commitments and contingencies

               
                 

Stockholders' Equity:

               

Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at March 31, 2018 or December 31, 2017

           

Common stock, par value $0.001; 325,000,000 shares authorized; 28,485,898 shares issued and outstanding at March 31, 2018 and 28,406,856 shares issued and outstanding at December 31, 2017

    28       28  

Additional paid-in capital

    169,747       169,527  

Accumulated deficit

    (109,929

)

    (108,559

)

Accumulated other comprehensive loss

    (3,071

)

    (3,510

)

Total stockholders' equity

    56,775       57,486  

Total liabilities and stockholders' equity

  $ 83,925     $ 87,909  

 

 

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CUI Global, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

(in thousands, except per share amounts)

 

For the Three Months Ended March 31,

 
   

2018

   

2017

 
                 

Total revenues

  $ 21,966     $ 17,844  
                 

Cost of revenues

    15,389       12,160  
                 

Gross profit

    6,577       5,684  
                 

Operating expenses:

               
                 

Selling, general and administrative

    9,201       8,554  

Depreciation and amortization

    529       552  

Research and development

    620       610  

Provision (credit) for bad debt

    6       (27

)

Other operating expenses

          5  
                 

Total operating expenses

    10,356       9,694  
                 

Loss from operations

    (3,779

)

    (4,010

)

                 

Other income

    330       46  

Interest expense

    (114

)

    (116

)

                 

Loss before taxes

    (3,563

)

    (4,080

)

                 

Income tax benefit

    (302

)

    (226

)

                 

Net loss

  $ (3,261

)

  $ (3,854

)

                 

Basic and diluted weighted average common shares outstanding

    28,488,032       20,949,251  
                 

Basic and diluted loss per common share

  $ (0.11

)

  $ (0.18

)

 

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CUI Global, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

(in thousands)

 

For the Three Months Ended March 31,

 
   

2018

   

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (3,261

)

  $ (3,854

)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Depreciation

    264       236  

Amortization of intangibles

    466       464  
                 

Stock issued and stock to be issued for compensation, royalties and services

    66       91  

Unrealized gain on derivative liability

    (84

)

    (33

)

Provision for (credit to) bad debt expense and returns allowances

    6       (28

)

Deferred income taxes

    (250

)

    (294

)

Inventory reserve

    58       179  

Non-cash unrealized foreign currency gains

    (295

)

    (176

)

Loss on disposal of assets

          5  
                 

(Increase) decrease in operating assets:

               

Trade accounts receivable

    (1,040

)

    (643

)

Inventories

    910       (296

)

Contract assets

    625       475  

Prepaid expenses and other current assets

    (137 )     (371

)

Deposits and other assets

          (3

)

Increase (decrease) in operating liabilities:

               

Accounts payable

    (694

)

    1,410  

Accrued expenses

    (308

)

    (210

)

Refund liabilities

    386       40  

Contract liabilities

    385       1,526  
                 

NET CASH USED IN OPERATING ACTIVITIES

    (2,903

)

    (1,482

)

                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Purchase of property and equipment

    (154

)

    (198

)

Proceeds from sale of property and equipment

          1  

Investments in other intangible assets

    (239

)

    (71

)

Proceeds from notes receivable

          19  

NET CASH USED IN INVESTING ACTIVITIES

    (393

)

    (249

)

                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from overdraft facility

    4,982        

Payments on overdraft facility

    (4,155

)

     

Proceeds from line of credit

    1,166        

Payments on line of credit

    (1,166

)

     

Payments on capital lease obligations

    (1

)

    (3

)

Payments on mortgage note payable

    (24

)

    (22

)

Payments on contingent consideration

    (45

)

    (61

)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

    757       (86

)

                 

Effect of exchange rate changes on cash

    53       162  

Net decrease in cash, cash equivalents and restricted cash

    (2,486

)

    (1,655

)

Cash, cash equivalents and restricted cash at beginning of period

    12,646       4,617  
                 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD PERIOD

  $ 10,160     $ 2,962  

 

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Reconciliation of Non-GAAP Financial Measures

 

EBITDA, Adjusted EBITDA and Adjusted Net loss are non-GAAP financial measures and are reconciled in the table below. These non-GAAP financial measures do not represent funds available for management's discretionary use and is not intended to represent cash flow from operations. EBITDA, Adjusted EBITDA and Adjusted Net loss should not be construed as a substitute for net loss or as a better measure of liquidity than cash flow from operating activities, which is determined in accordance with United States generally accepted accounting principles ("GAAP"). EBITDA, Adjusted EBITDA and Adjusted Net loss exclude components that are significant in understanding and assessing the company's results of operations and cash flows. In addition, EBITDA, Adjusted EBITDA and Adjusted Net loss are not terms defined by GAAP and as a result our measure of EBITDA, Adjusted EBITDA and Adjusted Net loss might not be comparable to similarly titled measures used by other companies. However, EBITDA, Adjusted EBITDA and Adjusted Net loss are used by management to evaluate, assess and benchmark the company's operational results and the company believes EBITDA, Adjusted EBITDA, and Adjusted Net loss are relevant and useful information which are often reported and widely used by analysts, investors and other interested parties in the Company's industry. Accordingly, the Company is disclosing this information to permit a more comprehensive analysis of its operating performance, to provide an additional measure of performance and liquidity and to provide additional information with respect to the Company's ability to meet future debt service, capital expenditure and working capital requirements. Adjusted Net loss eliminates the amortization expenses associated with intangible assets acquired with Orbital Gas Systems Limited and CUI-Canada, non-cash expenses associated with stock and stock options for compensation, royalties and services during the period, and impairment of goodwill and intangible assets.

 

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(in thousands)

               
   

For the Three Months Ended

 
   

March 31,

 
   

2018

   

2017

 

EBITDA:

               

Net loss

  $ (3,261

)

  $ (3,854

)

Plus: Interest expense

    114       116  

Plus: Income tax benefit

    (302

)

    (226

)

Plus: Depreciation and amortization

    730       700  

EBITDA

  $ (2,719

)

  $ (3,264

)

                 
                 

Adjusted EBITDA:

               

Plus: Provision (credit) for bad debt

  $ 6     $ (27

)

                 

Plus: Unrealized gain on derivative

    (84

)

    (33

)

Plus: Stock issued and stock to be issued for compensation, royalties and services

    66       91  

Adjusted EBITDA

  $ (2,731

)

  $ (3,233

)

                 

Adjusted net loss:

               

Net loss

  $ (3,261

)

  $ (3,854

)

Plus: Amortization expense of Orbital and CUI - Canada acquisition intangibles

    325       298  

Plus: Stock issued and stock to be issued for compensation, royalties and services

    66       91  

Adjusted net loss

  $ (2,870

)

  $ (3,465

)

 

 

 

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