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

cui20190315_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):

March 18, 2019

 

Commission File Number: 0-29923

 

CUI Global, Inc.

(Exact Name of registrant as specified in Its Charter)

 

Colorado

84-1463284

(State or jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

20050 SW 112th Avenue, Tualatin, Oregon

97062

(Address of Principal Executive Offices)

(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 March 18, 2019, CUI Global, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the quarter and year ended December 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 March 18, 2019

 

 

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 18th day of March 2019.

 

 

 

 

        CUI Global, Inc.

   
       
By:         /s/ Daniel N. Ford    

 

        Daniel N. Ford

 

 

 

        Chief Financial Officer

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_137924.htm

Exhibit 99.1

  

 

 

CUI Global, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

 

Reports Record Full-Year Revenues –  

 

- Secures $10 Million Line of Credit with Bank of America -

 

Separately Company Agrees to Terms for an Approximate 20% Equity Interest
in Virtual Power Systems

 

TUALATIN, Ore., March 18, 2019 -- CUI Global, Inc. (NASDAQ: CUI) (“the Company”), today reported its unaudited financial results for the fourth quarter and full fiscal year ended December 31, 2018.

 

Note 1: 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. To allow for easier comparison with prior periods and as required under the modified retrospective transition method, results for the three months and full year ended December 31, 2018 under old revenue rules, ASC Topic 605, are provided following the '2018 Fourth Quarter Highlights' section below.

 

Full Year 2018 vs. Full Year 2017

 

 

Revenue was $96.8 million compared to $83.3 million;

 

Gross profit was $28.9 million compared to $27.9 million;

 

Gross margin was 29.9% compared to 33.5%;

 

Consolidated net loss was $(17.3) million compared to $(12.6) million;

 

Loss per diluted share was $(0.61) compared to $(0.56) per diluted share;

 

Adjusted EBITDA was $(8.0) million compared to $(7.4) million;

 

Cash and cash equivalents were $4.0 million and restricted cash was $0.5 million at December 31, 2018;

 

Power and Electromechanical (P&EM) segment unaudited backlog was $21.8 million at December 31, 2018 compared to $20.2 million at December 31, 2017;

 

Energy segment unaudited backlog was $15.7 million at December 31, 2018 compared to $12.6 million at December 31, 2017.

 

Fourth Quarter 2018 vs. Fourth Quarter 2017

 

 

Revenue was $27.0 million compared to $21.1 million;

 

Gross profit was $6.4 million compared to $6.5 million;

 

Gross margin was 23.9% compared to 30.9%

 

Consolidated net loss was $(7.8) million compared to $(5.3) million;

 

Loss per diluted share was $(0.27) compared to $(0.20) per diluted share;

 

Adjusted EBITDA was $(2.1) million compared to $(2.3) million.

 

Note 2: Full year 2018 financial results include a $4.3 million impairment of goodwill ($3.1 million impairment to goodwill during the fourth quarter of 2018), a $1.5 million impairment to deposits and other assets included in cost of revenues and an inventory reserve of $1.4 million related to slow-moving inventory that reflect slower than anticipated revenue growth and delays associated with existing customer contracts that have not yet resumed in the Energy segment.

 

 

 

 

Subsequent Events:

 

 

CUI Inc. and CUI-Canada secured a binding commitment from Bank of America Merrill Lynch on a revolving line of credit of up to $10 million. The new credit facility will replace the Company’s existing U.S.-based revolver facility and UK-based overdraft facility with more favorable terms. The Company expects this loan to be closed by April 30, 2019;

 

The Company agreed to terms with Virtual Power Systems (VPS) for an approximately 20% equity interest in VPS.  In exchange for the equity interest, CUI Global will invest another $345 thousand into VPS, convert its $655 thousand of convertible notes receivable to equity, and contribute ICE-related inventory, lab equipment, certifications, intellectual property and other related assets into VPS. In conjunction with the new equity position, CUI Global will receive a board seat and also place an observational non-voting advisor to the VPS board.

 

2018 Fourth Quarter Highlights:

 

 

CUI Global announced that its wholly-owned energy division, Orbital Gas Systems ("Orbital"), secured purchase orders for integration projects totaling $3.3 million from a single customer;

 

The Company announced the sale and leaseback of its corporate headquarters in Tualatin, Oregon. Net proceeds to CUI Global were $4.2 million after expenses and the payoff of a mortgage note payable and interest rate swap derivative.

 

Fiscal 2018 Financial Performance Summary: (ASC Topic 605 basis)

 

 

Total revenues would have been $91.4 million compared to $83.3 million;

     
 

Gross profit would have been $26.9 million compared to $27.9 million;

     
 

Gross margin would have been 29.4% compared to 33.5%;

     
 

Consolidated net loss would have been $(19.1) million compared to $(12.6) million; and

     
 

Loss per basic share would have been $(0.67) compared to $(0.56) per basic share.

 

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

 

 

Total revenues would have been $24.3 million compared to $21.1 million;

     
 

Gross profit would have been $6.1 million compared to $6.5 million;

     
 

Gross margin would have been 25.0% compared to 30.9%;

     
 

Consolidated net loss would have been $(8.1) million compared to $(5.3) million; and

     
 

Loss per basic share would have been $(0.28) compared to $(0.20) per basic share.

 

2

 

 

“We delivered record revenues and are reporting a very strong consolidated backlog exiting 2018 while executing on initiatives across our two business segments to sustain our growth trajectory,” stated William Clough, president and CEO of CUI Global. “P&EM segment profitability increased on 19% higher revenue driven by broad-based strength across our product lines. Notably, we secured our first ICE Block award and initiated a proof of concept trial with SAP’s Co-Innovation Lab that we take as confirmation by a marketplace leader of the ICE platform’s market potential and validation of the platform’s unique approach to data center power utilization. In our Energy business, our new, larger facility in Houston and the passage of a biomethane feed-in tariff in the U.K. resulted in segment revenue up 8%. We progressed opportunities in North American and Western Europe for direct sales of our gas technology solutions and globally through our new distribution channel with SAMSON. Finally, we bolstered our resources to fund our growth goals through the sale of the Tualatin facility.

 

“In 2019, we moved to secure additional non-dilutive capital with a $10 million line of credit with Bank of America Merrill Lynch that ensures we can continue to execute on our growth strategy without losing a step,” continued Mr. Clough. “We also secured an equity investment in VPS that will enable us to monetize growing adoption of VPS’ software-defined power platform beyond power utilization to include compute, storage and networking resources within data centers while continuing to supply ICE Switch and ICE Block for data center operators.”

 

Concluded Mr. Clough, “Looking ahead, our optimism for continued growth is founded in a broadened Energy opportunity-set and continued strong P&EM performance. As the evolution of the global energy mix towards less carbon-intensive sources gains pace, we have positioned our gas technology solutions to take advantage of the shift towards natural gas and renewable natural gases (RNG), such as biomethane. The regulatory environment is also becoming increasingly favorable as energy authorities globally advance pipeline reform that include RNGs. Against this backdrop we remain focused on driving further adoption of our gas technology solutions: California’s recent adoption of a biomethane procurement program advances the state’s environmental and energy policies and should catalyze demand for our biomethane-to-grid solutions, joining an already robust biomethane market in the U.K.; the certification process for GasPT with a leading global turbine manufacturer has resumed, and we have line-of-sight to a limited-scale public utility deployment in North America; and our strategic partnership with SAMSON puts GasPT in front of every energy operator of significance globally.”

 

 

 

Conference Call

 

Management will host a conference call today, March 18, 2019 at 4:30 PM 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) 734-0328 and provide conference ID 6496402. For international callers, please dial (678) 894-3054. 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 April 3, 2019. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 6496402. 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.

 

3

 

 

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.

 

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
[email protected]  [email protected]

           

 

- Financial Tables to Follow -

 

4

 

 

CUI Global, Inc.

Consolidated Balance Sheets

 

 

   

December 31,

   

December 31,

 

(In thousands, except share and per share data)

 

2018

   

2017

 

Assets:

               

Current Assets:

               

Cash and cash equivalents

  $ 3,979     $ 12,646  

Trade accounts receivable, net of allowance of $167 and $135, respectively

    14,416       10,833  

Inventories, net of allowance of $2,495 and $946, respectively

    13,042       13,892  

Contract assets

    1,744       2,299  

Note receivable, current portion

    318       13  

Prepaid expenses and other

    1,982       1,593  

Total current assets

    35,481       41,276  

Property and equipment, less accumulated depreciation of $4,234 and $4,155, respectively

    5,973       11,242  

Goodwill

    13,089       17,641  

Other intangible assets, less accumulated amortization of $13,190 and $11,900, respectively

    13,861       15,568  

Restricted cash

    523        

Note receivable, less current portion

          317  

Convertible notes receivable

    655        

Deposits and other assets

    585       1,865  

Total assets

  $ 70,167     $ 87,909  
                 

Liabilities and Stockholders' Equity:

               

Current Liabilities:

               

Accounts payable

  $ 6,480     $ 5,110  

Short-term overdraft facility

    1,344        

Line of credit

    979        

Mortgage note payable, current portion

          94  

Accrued expenses

    4,851       4,186  

Contract liabilities

    2,226       8,829  

Refund liabilities

    2,417       695  

Deferred gain on leaseback, current portion

    289        

Total current liabilities

    18,586       18,914  
                 

Long term note payable, related party

    5,304       5,304  

Long term mortgage note payable, less current portion

          3,256  

Derivative liability

          356  

Deferred tax liabilities

    1,922       2,414  

Deferred gain on leaseback, less current portion

    2,599        

Other long-term liabilities

    218       179  

Total liabilities

    28,629       30,423  
                 

Commitments and contingencies

               
                 

Stockholders' Equity:

               

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

           

Common stock, par value $0.001; 325,000,000 shares authorized; 28,552,886 shares issued and outstanding at December 31, 2018 and 28,406,856 shares issued and outstanding at December 31, 2017

    29       28  

Additional paid-in capital

    169,898       169,527  

Accumulated deficit

    (123,993

)

    (108,559

)

Accumulated other comprehensive loss

    (4,396

)

    (3,510

)

Total stockholders' equity

    41,538       57,486  

Total liabilities and stockholders' equity

  $ 70,167     $ 87,909  

 

 

 

 

CUI Global, Inc.

Consolidated Statements of Operations

 

 

   

(Unaudited)

                 

(In thousands, except per share amounts)

 

For the three months ended December 31,

   

For the year ended December 31,

 
   

2018

   

2017

   

2018

   

2017

 
                                 

Total revenues

  $ 26,952     $ 21,135     $ 96,789     $ 83,275  
                                 

Cost of revenues

    20,516       14,614       67,879       55,406  
                                 

Gross profit

    6,436       6,521       28,910       27,869  
                                 

Operating expenses:

                               

Selling, general and administrative

    9,396       8,443       36,341       33,921  

Depreciation and amortization

    535       526       2,152       2,163  

Research and development

    714       605       2,802       2,525  

Provision (credit) for bad debt

    43       7       33       (13

)

Impairment of goodwill and intangible assets

    3,084       3,152       4,347       3,155  

Other operating expenses

    10       38       13       47  
                                 

Total operating expenses

    13,782       12,771       45,688       41,798  
                                 

Loss from operations

    (7,346

)

    (6,250

)

    (16,778

)

    (13,929

)

                                 

Other (expense) income

    (213

)

    65       (251

)

    234  

Interest expense

    (132

)

    (126

)

    (502

)

    (500

)

                                 

Loss before taxes

    (7,691

)

    (6,311

)

    (17,531

)

    (14,195

)

                                 

Income tax expense (benefit)

    74       (1,046

)

    (206

)

    (1,606

)

                                 

Net loss

    (7,765

)

  $ (5,265

)

  $ (17,325

)

  $ (12,589

)

                                 

Basic and diluted weighted average number of shares outstanding

    28,547,149       26,635,684       28,517,339       22,397,865  
                                 

Basic and diluted loss per common share

  $ (0.27

)

  $ (0.20

)

  $ (0.61

)

  $ (0.56

)

 

 

 

 

CUI Global, Inc.

Consolidated Statements of Cash Flows

 

(in thousands)

 

For the year ended December 31,

 
   

2018

   

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (17,325

)

  $ (12,589

)

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

               

Depreciation

    1,103       1,009  

Amortization of intangibles

    1,902       1,841  

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

    229       425  

Non-cash gain and unrealized gain on derivative liability

    (129

)

    (111

)

Non-cash royalties, net

    (7

)

    (3

)

Provision (credit) for bad debt expense

    33       (13

)

Deferred income taxes

    (352

)

    (1,767

)

Non-cash unrealized foreign currency loss (gain)

    246       (362

)

Impairment of goodwill and intangible assets

    4,347       3,155  

Inventory reserves

    1,592       138  

Impairment of deposits and other assets

    1,509        

Loss on disposal of assets

    13       47  
                 

(Increase) decrease in operating assets:

               

Trade accounts receivable

    (3,841

)

    (1,150

)

Inventories

    (2,235

)

    (411

)

Contract assets

    (61

)

    591  

Prepaid expenses and other current assets

    (392

)

    (421

)

Deposits and other assets

    (59

)

    (506

)

Increase (decrease) in operating liabilities:

               

Accounts payable

    1,436       (1,163

)

Accrued expenses

    1,116       (464

)

Refund liabilities

    852       130  

Contingent consideration

          3  

Contract liabilities

    (2,260

)

    2,252  

NET CASH USED IN OPERATING ACTIVITIES

    (12,283

)

    (9,369

)

                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Proceeds on sale of building, net

    7,720        

Payment for restricted investment

    (400

)

     

Purchase of property and equipment

    (1,042

)

    (893

)

Proceeds from sale of property and equipment

          8  

Investments in other intangible assets

    (492

)

    (638

)

Investment in convertible notes receivable

    (655

)

     

Proceeds from notes receivable

    19       39  

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

    5,150       (1,484

)

                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from overdraft facility

    19,532       9,782  

Payments on overdraft facility

    (18,122

)

    (9,782

)

Proceeds from line of credit

    19,955       22,332  

Payments on line of credit

    (18,976

)

    (22,332

)

Payments on capital lease obligations

    (3

)

    (29

)

Payments on mortgage note payable

    (3,350

)

    (89

)

Payment to closeout derivative liability

    (227

)

     

Payments on contingent consideration

    (45

)

    (61

)

Proceeds from sales of common stock, net of offering costs

          18,905  

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

    (1,236

)

    18,726  
                 

Effect of exchange rate changes on cash

    225       156  

Net (decrease) increase in cash, cash equivalents and restricted cash

    (8,144

)

    8,029  

Cash, cash equivalents and restricted cash at beginning of year

    12,646       4,617  
                 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR

  $ 4,502     $ 12,646  

 

 

 

 

Reconciliation of Non-GAAP Financial Measures

 

EBITDA, Adjusted EBITDA and Adjusted Net Income (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 Income (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 Income (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 Income (loss) are not terms defined by GAAP and as a result our measure of EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) might not be comparable to similarly titled measures used by other companies. However, EBITDA, Adjusted EBITDA and Adjusted Net Income (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 Income (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 Income (loss) eliminates the amortization expenses associated with intangible assets acquired with Orbital Gas Systems Limited and CUI-Canada, as well as non-cash expenses associated with impairments and stock and stock options for compensation, royalties and services during the period.

 

 

 

 

(In thousands)

 

                               

(Unaudited)

 

For the Three Months Ended

   

For the year ended

 
   

December 31

   

December 31

 
   

2018

   

2017

   

2018

   

2017

 

EBITDA:

                               

Net (loss)

  $ (7,765

)

  $ (5,265

)

  $ (17,325

)

  $ (12,589

)

Plus: Interest expense

    132       126       502       500  

Plus: (Benefit) provision for taxes

    74       (1,046

)

    (206

)

    (1,606

)

Plus: Depreciation and amortization

    760       718       3,005       2,850  

EBITDA

  $ (6,799

)

  $ (5,467

)

  $ (14,024

)

  $ (10,845

)

                                 
                                 

Adjusted EBITDA:

                               

Plus: Bad debt

    43       7       33       (13

)

Plus: Impairment of goodwill and intangible assets

    3,084       3,152       4,347       3,155  

Plus: Impairment of Energy segment deposits and other assets

    1,509             1,509        

Non-cash loss (gain) and unrealized gain on derivative liability

    35       (56

)

    (129

)

    (111

)

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

    41       112       229       425  

Adjusted EBITDA

  $ (2,087

)

  $ (2,252

)

  $ (8,035

)

  $ (7,389

)

                                 

Adjusted net income (loss):

                               

Net (loss)

  $ (7,765

)

  $ (5,265

)

  $ (17,325

)

  $ (12,589

)

Plus: Impairment of goodwill and intangible assets

    3,084       3,152       4,347       3,155  

Plus: Impairment of Energy segment deposits and other assets

    1,509             1,509        

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

    297       316       1,233       1,232  

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

    41       112       229       425  

Adjusted net income (loss)

  $ (2,834

)

  $ (1,685

)

  $ (10,007

)

  $ (7,777

)

 

 

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