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

cui20200329_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 30, 2020

 

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. ☐

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.001 par value

CUI

Nasdaq Capital Market

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On March 30, 2020, CUI Global, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the year ended December 31, 2019. 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 30, 2020

 

 

 

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 30th day of March 2020.

 

 

CUI Global, Inc.

(Registrant)

 

 By:

   /s/ Daniel N. Ford

 

        Daniel N. Ford

 

        Chief Financial Officer

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_179458.htm

Exhibit 99.1

 

 

CUI Global Reports Fourth Quarter and Full Year 2019 Financial Results


Continues Transformation into Diversified Energy Infrastructure Services Company with Accretive, Platform Acquisition of Reach Construction Group

 

HOUSTON, March 30, 2020 -- CUI Global, Inc. (Nasdaq: CUI) ("CUI Global" or the “Company”) today reported unaudited financial results for the three and twelve months ended December 31, 2019.

 

Financial and Operating Highlights:

 

 

Reported total revenues of $5.7 million for the fourth quarter of 2019 and $23.5 million for the full year 2019, compared to $7.4 million and $20.3 million for the fourth quarter and full year 2018, respectively;

 

Gross profit was $1.5 million for the fourth quarter of 2019 and $5.8 million for the full year 2019, compared to a gross loss of $0.5 million for the fourth quarter of 2018 and gross profit of $2.6 million for the full year 2018;

 

Gross margin was 26.0% for the fourth quarter of 2019 and 24.7% for the full year 2019, compared to (6.6%) and 12.6% for the fourth quarter and full year 2018, respectively;

 

Operating loss was $4.9 million for the fourth quarter of 2019 and $16.0 million for the full year 2019, compared to $8.9 million for the fourth quarter of 2018 and $22.1 million for the full year 2018;

 

Cash and cash equivalents were $23.4 million at December 31, 2019;

 

Energy segment backlog was $9.6 million at December 31, 2019, compared to $15.7 million at December 31, 2018;

 

Completed the sale of electromechanical components business of the Company’s Power and Electromechanical segment to a private entity for total consideration of $15 million;

 

Sold the majority of its remaining Power business to Bel Fuse (Nasdaq: BELFA and Nasdaq: BELFB) for $32.0 million in cash, subject to post-closing adjustments;

 

Authorized a share repurchase program under which CUI may repurchase up to $5.0 million of CUI Global common stock at market prices;

 

Subsequent to year end, announced the acquisition of Reach Construction Group (“Reach”), an engineering, procurement and construction (“EPC”) company with expertise in the renewable energy industry.

 

Commentary

 

“In 2019, our Energy segment continued to take advantage of operators increasing capital investment in energy services infrastructure,” said Jim O'Neil, vice chairman and CEO of CUI Global. “At the same time, we laid the groundwork for our plan to become a diversified energy infrastructure services company. This included the sale of our electromechanical components business of our legacy Power and Electromechanical segment for a total consideration of $15 million. Following this, we sold the majority of our remaining Power business to Bel Fuse for $32 million in gross proceeds, which continued our transformation and strengthened our balance sheet. More recently, we announced another major milestone with the accretive, platform acquisition of Reach Construction Group.

 

Mr. O’Neil continued, “Reach’s utility-scale solar energy expertise and established relationships with solar developers and panel manufacturers represents a strong addition to our energy infrastructure services focused operations. This acquisition extends our energy services business into the rapidly growing areas of alternative and renewable energy, and also expands our engineering and construction capabilities to deploy a broader set of service offerings in the energy infrastructure market. Going forward, we will continue to grow our existing energy business and use our strong balance sheet to pursue attractive acquisition opportunities. By executing on this targeted acquisition strategy, focused on innovative companies in complementary industries, we will develop a diversified platform for growth and create long-term value for our shareholders.”

 

 

 

Conference Call

 

Management will host a conference call today, March 30, 2020 at 5:00 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 7065114. 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 16, 2020. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 7065114. 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.

 

CUI Global, Inc. is a publicly traded company dedicated to maximizing shareholder value through the acquisition and development of innovative companies to create a diversified energy services platform. CUI Global's Energy business, Orbital Gas Systems is a leader in innovative gas solutions with more than 30 years of experience in design, installation and the commissioning of industrial gas sampling, measurement and delivery systems providing solutions to the energy, power and processing markets.  Orbital Gas Systems manufactures and delivers a broad range of technologies including environmental monitoring, gas metering, process control, telemetry, gas sampling and BioMethane. As a publicly traded company, shareholders can participate in the opportunities, revenues, and profits generated by the products, technologies, and market channels of CUI Global and its subsidiaries. But most important, 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: http://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.

 

Investor Relations:
KCSA Strategic Communications
David Hanover
T: 212-896-1220
[email protected]

 

 

 

CUI Global, Inc.

Consolidated Balance Sheets

 

   

December 31,

   

December 31,

 

(In thousands, except share and per share amounts)

 

2019

   

2018

 

Assets:

               

Current Assets:

               

Cash and cash equivalents

  $ 23,351     $ 3,979  

Trade accounts receivable, net of allowance of $47 and $17, respectively

    5,295       5,034  

Inventories

    1,631       1,622  

Contract assets

    2,309       1,744  

Note receivable, current portion

          318  

Prepaid expenses and other current assets

    2,215       1,512  

Assets held for sale, current portion

    6,893       21,272  

Total current assets

    41,694       35,481  

Property and equipment, less accumulated depreciation of $1,441 and $1,284, respectively

    4,454       4,540  

Investment in VPS - equity method

    4,865        

Right of use assets - Operating leases

    5,524        

Other intangible assets, less accumulated amortization of $11,191 and $9,601, respectively

    4,298       5,353  

Restricted cash

          523  

Note receivable

    3,253        

Convertible note receivable

          655  

Deposits and other assets

    70       508  

Assets held for sale, noncurrent portion

          23,107  

Total assets

  $ 64,158     $ 70,167  
                 

Liabilities and Stockholders' Equity:

               

Current Liabilities:

               

Accounts payable

  $ 2,904     $ 1,520  

Short-term overdraft facility

          1,344  

Notes payable, current

    473        

Operating lease obligations - current portion

    821        

Accrued expenses

    5,159       1,893  

Contract liabilities

    1,668       1,956  

Deferred gain on leaseback, current portion

          289  

Liabilities held for sale, current portion

    4,970       11,584  

Total current liabilities

    15,995       18,586  
                 

Operating lease obligations, less current portion

    4,852        

Deferred gain on leaseback, less current portion

          2,599  

Liabilities held for sale, noncurrent portion

          7,241  

Other long-term liabilities

    194       203  

Total liabilities

    21,041       28,629  
                 

Commitments and contingencies

               
                 

Stockholders' Equity:

               

Preferred stock. par value $0.001; 10,000,000 shares authorized no shares issued at December 31, 2019 or 2018

           

Common stock, par value $0.001; 325,000,000 shares authorized; 28,383,373 shares issued and outstanding at December 31, 2019 and 28,552,886 shares issued and outstanding at December 31, 2018

    29       29  

Additional paid-in capital

    170,106       169,898  

Treasury stock at cost; 353,063 shares held at December 31, 2019 and 0 shares held at December 31, 2018

    (413

)

     

Accumulated deficit

    (122,234

)

    (123,993

)

Accumulated other comprehensive loss

    (4,371

)

    (4,396

)

Total stockholders' equity

    43,117       41,538  

Total liabilities and stockholders' equity

  $ 64,158     $ 70,167  

 

 

 

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,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Revenues

  $ 5,700     $ 7,434     $ 23,492     $ 20,342  
                                 

Cost of revenues

    4,217       7,924       17,680       17,783  
                                 

Gross profit

    1,483       (490

)

    5,812       2,559  
                                 

Operating expenses:

                               

Selling, general and administrative

    5,972       4,855       20,063       18,629  

Depreciation and amortization

    389       387       1,544       1,549  

Research and development

    16       39       139       155  

Provision (credit) for bad debt

    21       8       131       13  

Impairment of goodwill and intangible assets

          3,084             4,347  

Other operating expenses

    (7

)

          (20

)

     
                                 

Total operating expenses

    6,391       8,373       21,857       24,693  
                                 

Loss from operations

    (4,908

)

    (8,863

)

    (16,045

)

    (22,134

)

                                 

Other (expense) income

    1,132       (254

)

    567       (316

)

Interest expense

    (26

)

    (52

)

    (61

)

    (216

)

                                 

Loss before income taxes and equity in net loss of affiliate

    (3,802

)

    (9,169

)

    (15,539

)

    (22,666

)

                                 

Net loss of affiliate

    (333

)

          (1,043

)

     
                                 

Loss from continuing operations before taxes

    (4,135

)

    (9,169

)

    (16,582

)

    (22,666

)

                                 

Income tax expense (benefit)

    (1,191

)

    (300

)

    (2,956

)

    (1,342

)

                                 

Net loss from continuing operations, net of income taxes

    (2,944

)

    (8,869

)

    (13,626

)

    (21,324

)

                                 

Income from operations of discontinued power and electromechanical components businesses (including gain on disposal of $14,100)

    6,673       1,478       12,908       5,135  

Income tax expense

    (722

)

    374       411       1,136  

Income from discontinued operations, net of income taxes

    7,395       1,104       12,497       3,999  

Net loss

  $ 4,451     $ (7,765

)

  $ (1,129

)

  $ (17,325

)

Basic and diluted weighted average number of shares outstanding

    28,706,671       28,547,149       28,654,500       28,517,339  
                                 

Loss from continuing operations per common share - basic and diluted

  $ (0.10

)

  $ (0.31

)

  $ (0.48

)

  $ (0.75

)

Earnings from discontinued operations per common share - basic and diluted

  $ 0.26     $ 0.04     $ 0.44     $ 0.14  

Basic and diluted loss per common share

  $ 0.16     $ (0.27

)

  $ (0.04

)

  $ (0.61

)

 

 

 

CUI Global, Inc.

Consolidated Statements of Cash Flows

 

(in thousands)

 

For the year ended December 31,

 
   

2019

   

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (1,129

)

  $ (17,325

)

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

               

Depreciation

    724       1,103  

Amortization of intangibles

    1,637       1,902  

Amortization of note receivable discount

    (70

)

     

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

    215       229  

Unrealized gain on derivative liability

          (129

)

Non-cash loss on equity method investment in affiliate

    1,043        

Non-cash fair value gain on equity method investment purchase

    (629

)

     

Non-cash royalties, net

    5       (7

)

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

    136       33  

Deferred income taxes

    (2,574

)

    (352

)

Non-cash unrealized foreign currency (gain) loss

    (422

)

    246  

Impairment of goodwill and other intangible assets

    278       4,347  

Inventory reserve

    79       1,592  

Impairment of deposits and other assets

          1,509  

Loss on disposal of assets

    31       13  

Gain on sale of businesses

    (14,100

)

     
                 

(Increase) decrease in operating assets:

               

Trade accounts receivable

    1,510       (3,841

)

Inventories

    (119

)

    (2,235

)

Contract assets

    (512

)

    (61

)

Prepaid expenses and other current assets

    121       (392

)

Right of use assets - Operating leases

    1,825        

Deposits and other assets

    31       (59

)

Increase (decrease) in operating liabilities:

               

Accounts payable

    1,708       1,436  

Operating lease liabilities

    (1,755

)

     

Accrued expenses

    2,189       1,116  

Refund liabilities

    (1,339

)

    852  

Contract liabilities

    (401

)

    (2,260

)

NET CASH USED IN OPERATING ACTIVITIES

    (11,518

)

    (12,283

)

                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Proceeds from sale of businesses

    35,396        

Proceeds from sale of building, net

          7,720  

Proceeds from sale of restricted investment

    400        

Cash paid for restricted investment

          (400

)

Purchases of property and equipment

    (321

)

    (1,042

)

Proceeds from sale of property and equipment

    21        

Cash paid for other intangible assets

    (353

)

    (492

)

Cash paid for convertible note receivable

          (655

)

Cash paid for equity-method investment

    (2,068

)

     

Proceeds from Notes receivable

    313       19  

NET CASH PROVIDED BY INVESTING ACTIVITIES

    33,388       5,150  
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from overdraft facility

    6,842       19,532  

Payments on overdraft facility

    (8,208

)

    (18,122

)

Proceeds from line of credit

    27,483       19,955  

Payments on line of credit

    (28,462

)

    (18,976

)

Payments on capital lease obligations

    (4

)

    (3

)

Payments on mortgage note payable

          (3,350

)

Payments on notes payable

    (303

)

     

Cash payments for repurchases of common stock

    (413

)

     

Payment to closeout derivative liability

          (227

)

Payments on contingent consideration

          (45

)

NET CASH USED IN FINANCING ACTIVITIES

    (3,065

)

    (1,236

)

                 

Effect of exchange rate changes on cash

    44       225  

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

    18,849       (8,144

)

Cash, cash equivalents and restricted cash at beginning of year

    4,502       12,646  
                 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR

  $ 23,351     $ 4,502  

 

 

 

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, Gains on sale of businesses, non-cash gains and losses related to the Company's equity method investment in VPS 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

 
   

2019

   

2018

   

2019

   

2018

 

EBITDA:

                               

Net income (loss)

  $ 4,451     $ (7,765

)

  $ (1,129

)

  $ (17,325

)

Plus: Interest expense

    29       132       338       502  

Plus: (Benefit) provision for taxes

    (1,913

)

    74       (2,545

)

    (206

)

Plus: Depreciation and amortization

    390       760       2,361       3,005  

EBITDA

  $ 2,957     $ (6,799

)

  $ (975

)

  $ (14,024

)

                                 
                                 

Adjusted EBITDA:

                               

Less: Gain on disposal of discontinued operation

    (10,469

)

          (14,100

)

     

Plus: Bad debt

    46       43       136       33  

Plus: Impairment of goodwill and intangible assets

    278       3,084       278       4,347  

Plus: Impairment of Energy segment deposits and other assets

          1,509             1,509  

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

          35             (129

)

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

    60       41       215       229  

Less: Pretax gain on assets contributed as part of the purchase of VPS

                (629

)

     

Plus: Non-cash loss on equity method investment in VPS

    333             1,043        

Adjusted EBITDA

  $ (6,795

)

  $ (2,087

)

  $ (14,032

)

  $ (8,035

)

                                 

Adjusted net income (loss):

                               

Net income (loss)

  $ 4,451     $ (7,765

)

  $ (1,129

)

  $ (17,325

)

Less: Gain on disposal of discontinued operation

    (10,469

)

          (14,100

)

     

Plus: Impairment of goodwill and intangible assets

    278       3,084       278       4,347  

Plus: Impairment of Energy segment deposits and other assets

          1,509             1,509  

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

    243       297       1,126       1,233  

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

    60       41       215       229  

Less: Pretax gain on assets contributed as part of the purchase of VPS

                (629

)

     

Plus: Non-cash loss on equity method investment in VPS

    333             1,043        

Adjusted net loss

  $ (5,104

)

  $ (2,834

)

  $ (13,196

)

  $ (10,007

)

 

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