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

cui20191112_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):

November 12, 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. ☐

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 November 12, 2019, CUI Global, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the quarter and year-to-date September 30, 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 November 12, 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 12th day of November 2019.

 

 

    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_164625.htm

Exhibit 99.1

 

 

CUI GLOBAL REPORTS THIRD QUARTER 2019 FINANCIAL RESULTS

 

TUALATIN, Ore., November 12, 2019 -- CUI Global, Inc. (NASDAQ: CUI), (the “Company”) today reported unaudited financial results for the three and nine months ended September 30, 2019.

 

Note: In accordance with ASC 360-10 Impairment and Disposal of Long-Lived Assets and ASC 205-20 Discontinued Operations, as a result of CUI Global’s divestiture of its Electromechanical components business on September 30, 2019, and the classification of the majority of the remaining assets and liabilities that comprise the Power and Electromechanical segment, as held for sale within 12 months the Company has reclassified its Power and Electromechanical segment as discontinued operations for the three and nine-month periods ended September 30, 2019 and September 30, 2018. As a result, the review of the third quarter results presented here focuses on the Company's continuing operations, which consists of its Energy segment. On November 8, 2019, the Company entered into an asset purchase agreement to sell the majority of its Power business for $32.0 million.

 

Third Quarter 2019 Unaudited Financial Performance Summary: (comparisons to prior year period)

 

 

●

Total revenues were $6.1 million compared to $5.2 million;

 

 

●

Gross profit was $1.4 million compared to $1.3 million;

 

 

●

Gross margin was 23.4% compared to 25.6%;

 

 

●

Operating loss was $3.7 million compared to an operating loss of $3.3 million.

 

Nine Months 2019 Unaudited Financial Performance Summary: (comparisons to prior year period)

 

 

●

Total revenues were $17.8 million compared to $12.9 million;

 

 

●

Gross profit was $4.3 million compared to $3.0 million;

 

 

●

Gross margin was 24.3% compared to 23.6%;

 

 

●

Operating loss was $11.1 million compared to an operating loss of $13.3 million.

 

Balance Sheet and Backlog Summary:

 

 

●

Cash and cash equivalents were $1.7 million at September 30, 2019.

 

 

●

Debt as of September 30, 2019 was $0.9 million including $0.7 million on a line of credit that is classified as liability held for sale.

 

 

●

Energy segment backlog was $10.8 million at September 30, 2019 as compared to $15.7 million at December 31, 2018.

 

Financial Accounting Standard Board Accounting Standard Update 2016-02

 

Effective January 1, 2019, the Company adopted Financial Accounting Standard Board Accounting Standard Update 2016-02, Leases (Topic 842), which requires lessee recognition of lease assets and lease liabilities on the balance sheet, at the beginning of fiscal 2019.  As a result of the new lease standard, at September 30, 2019, $5.6 million was included with non-current assets, $0.8 million with current liabilities and $5.0 million with non-current liabilities, on the condensed consolidated balance sheets.

 

 
 

 

“Our third quarter results reflect continued strength in our engineering and integration services in North America that offset lower revenue from our U.K. operations due to the continued headwinds associated with Brexit,” said William Clough, executive chairman of CUI Global. “We also took steps to unlock the value of our Power and Electromechanical segment in support of CUI Global’s strategy to become a diversified energy infrastructure services company. We completed the sale of our Electromechanical components business during the quarter and yesterday announced the sale of the majority of our remaining Power business to Bel Fuse for $32 million. With these transactions, we move forward with a recast balance sheet and the financial resources to support the company’s Energy-centric growth strategy with Jim O’Neil as CEO.”

 

Jim O’Neil, vice chairman and CEO of CUI Global, stated, “Secular trends in the oil and natural gas, electric power and telecommunications industries have created a sustained market opportunity that is ripe for a market entrant with a differentiated value proposition and disciplined acquisition strategy. With the divestiture of the majority Power and Electromechanical segment, we turn our full attention to executing on our strategy to diversify our Energy business into the infrastructure services market and build a recurring revenue and earnings stream through acquisitions and organic growth. With CUI Global as the foundation of a diversified platform for growth, we believe we have the right strategy and the financial means to establish the company as an industry leader and support a sustainable growth trajectory.”

 

 

Conference Call

 

Management will host a conference call today, November 12, 2019 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 3962226. 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 November 28, 2019. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 3962226. 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 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.

 

 

CUI Global Investor Relations Counsel:

LHA Investor Relations

Sanjay M. Hurry

T: 212-838-3777

[email protected]

 

 
 

 

CUI Global, Inc.

Condensed Consolidated Balance Sheets

 

   

September 30,

    

December 31,

  

(in thousands, except share and per share amounts)

  

2019

    

2018

  
   

(unaudited)

          

Assets:

                

Current Assets:

                

Cash and cash equivalents

   $ 1,728     $ 3,979  

Trade accounts receivable, net of allowance of $25 and $17, respectively

     4,589       5,034  

Inventories

     1,580       1,622  

Contract assets

     2,567       1,744  

Note receivable, current portion

     —       318  

Prepaid expenses and other current assets

     1,462       1,512  

Assets held for sale - current

     30,486       21,272  

Total current assets

     42,412       35,481  
                 

Property and equipment, less accumulated depreciation of

                

1,284 and $1,182, respectively

     4,211       4,536  

Investment in VPS - equity method

     5,198       —  

Right of use assets - Operating leases

     5,615       —  

Other intangible assets, less accumulated amortization of $9,462 and $8,889, respectively

     4,271       5,314  

Restricted cash

     —       523  

Note receivable - related party

     3,183       —  

Convertible note receivable

     —       655  

Deposits and other assets

     69       508  

Assets held for sale - noncurrent

     —       23,150  

Total assets

   $ 64,959     $ 70,167  
                 

Liabilities and Stockholders' Equity:

                

Current Liabilities:

                

Accounts payable

   $ 3,096     $ 1,520  

Short-term overdraft facility

     —       1,344  

Notes payable - current

     269       —  

Operating lease obligations - current portion

     754       —  

Accrued expenses

     2,599       1,893  

Contract liabilities

     2,222       1,956  

Deferred gain on leaseback, current portion

     —       289  

Liabilities held for sale - current

     10,059       11,584  

Total current liabilities

     18,999       18,586  
                 

Operating lease obligations, less current portion

     4,977       —  

Deferred tax liabilities

     1,584       1,914  

Deferred gain on leaseback, less current portion

     —       2,599  

Liabilities held for sale - noncurrent

     —       5,327  

Other long-term liabilities

     166       203  

Total liabilities

     25,726       28,629  
                 

Commitments and contingencies

                
                 

Stockholders' Equity:

                

Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at September 30, 2019 or December 31, 2018

     —       —  

Common stock, par value $0.001; 325,000,000 shares authorized; 28,680,260 shares issued and outstanding at September 30, 2019 and 28,552,886 shares issued and outstanding at December 31, 2018

     29       29  

Additional paid-in capital

     170,049       169,898  

Accumulated deficit

     (126,685

)

     (123,993

)

Accumulated other comprehensive loss

     (4,160

)

     (4,396

)

Total stockholders' equity

     39,233       41,538  

Total liabilities and stockholders' equity

   $ 64,959     $ 70,167  

 

 
 

 

CUI Global, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

(In thousands, except per share amounts)

  

For the three months ended September 30,

    

For the nine months ended September 30,

  
   

2019

    

2018

    

2019

    

2018

  
                                 

Total revenues

   $ 6,073     $ 5,155     $ 17,793     $ 12,908  
                                 

Cost of revenues

     4,652       3,834       13,464       9,860  
                                 

Gross profit

     1,421       1,321       4,329       3,048  
                                 

Operating expenses:

                                

Selling, general and administrative

     4,793       4,222       14,092       13,773  

Depreciation and amortization

     359       382       1,136       1,145  

Research and development

     20       47       123       116  

Provision (credit) for bad debt

     (18

)

     4       110       5  

Impairment of goodwill

     —       —       —       1,263  

Other operating income

     (11

)

     —       (13

)

     —  
                                 

Total operating expenses

     5,143       4,655       15,448       16,302  
                                 

Continuing loss from operations

     (3,722

)

     (3,334

)

     (11,119

)

     (13,254

)
                                 

Loss from equity method investment in VPS

     (354

)

     —       (710

)

     —  

Fair value gain on equity method investment purchase

     —       —       629       —  

Other income (expense)

     (463

)

     (43

)

     (575

)

     (79

)

Interest expense

     (4

)

     (60

)

     (35

)

     (164

)
                                 

Loss from continuing operations before taxes

     (4,543

)

     (3,437

)

     (11,810

)

     (13,497

)
                                 

Income tax benefit

     (1,310

)

     (396

)

     (1,598

)

     (1,042

)
                                 

loss from continuing operations

     (3,233

)

     (3,041

)

     (10,212

)

     (12,455

)
                                 

Discontinued operations

                                

Income from operations of discontinued electromechanical components business (including gain on disposal of $3,631)

     3,944       1,760       5,598       3,656  

Income tax expense

     1,023       253       966       762  

Income from discontinued operations

     2,921       1,507       4,632       2,894  
                                 

Net loss

   $ (312

)

   $ (1,534

)

   $ (5,580

)

   $ (9,561

)
                                 

Basic and diluted weighted average

                                

common shares outstanding

     28,691,206       28,527,234       28,636,918       28,507,286  
                                 

Loss from continuing operations per common share - basic and diluted

   $ (0.11

)

   $ (0.11

)

   $ (0.35

)

   $ (0.44

)
                                 

Earnings from discontinued operations - basic and diluted

     0.10       0.06       0.16       0.10  
                                 

Earnings per common share - basic and diluted

   $ (0.01

)

   $ (0.05

)

   $ (0.19

)

   $ (0.34

)

 

 
 

 

CUI Global, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

(in thousands)

  

For the nine months ended September 30,

  
   

2019

    

2018

  

CASH FLOWS FROM OPERATING ACTIVITIES:

                

Net loss

   $ (5,580

)

   $ (9,561

)

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

                

Depreciation

     645       816  

Amortization of intangibles

     1,326       1,429  

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

     155       188  

Unrealized gain on derivative liability

     —       (164

)

Non-cash loss on equity method investment in VPS

     710       —  

Non-cash fair value gain on equity method investment purchase

     (629

)

     —  

Gain on sale of electromechanical components business

     (3,631

)

     —  

Provision for (credit to) bad debt expense

     90       (10

)

Deferred income taxes

     (644

)

     (352

)

Inventory reserve

     135       274  

Non-cash unrealized foreign currency gains

     614       135  

Impairment of goodwill

     —       1,263  

(Gain) loss on disposal of assets

     (13

)

     3  
                 

(Increase) decrease in operating assets:

                

Trade accounts receivable

     1,196       (1,439

)

Inventories

     (31

)

     (3,727

)

Contract assets

     (891

)

     160  

Prepaid expenses and other current assets

     362       (285

)

Right of use assets - Operating leases

     743       —  

Deposits and other assets

     (248

)

     13  

Increase (decrease) in operating liabilities:

                

Accounts payable

     2,406       520  

Operating lease liabilities

     (687

)

     —  

Accrued expenses

     (122

)

     684  

Refund liabilities

     (367

)

     953  

Contract liabilities

     246       (853

)

NET CASH USED IN OPERATING ACTIVITIES

     (4,215

)

     (9,953

)
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

                

Purchases of property and equipment

     (278

)

     (644

)

Proceeds from sale of property and equipment

     14       —  

Cash paid for other intangible assets

     (269

)

     (348

)

Cash paid for convertible notes receivable

     —       (500

)

Cash paid for equity-method Investment

     (1,615

)

     —  

Proceeds from Notes receivable

     313       —  

Proceeds from sale of restricted investment

     400       —  

Proceeds from components division sale

     4,696       —  

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

     3,261       (1,492

)
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

                

Proceeds from overdraft facility

     6,842       13,895  

Payments on overdraft facility

     (8,208

)

     (12,570

)

Proceeds from line of credit

     20,889       6,696  

Payments on line of credit

     (21,188

)

     (6,039

)

Payments on financing lease obligations

     (3

)

     (2

)

Payments on mortgage note payable

     —       (71

)

Payments on notes payable

     (88

)

     —  

Payments on contingent consideration

     —       (45

)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

     (1,756

)

     1,864  
                 

Effect of exchange rate changes on cash

     (64

)

     148  

Net decrease in cash, cash equivalents and restricted cash

     (2,774

)

     (9,433

)

Cash, cash equivalents and restricted cash at beginning of period

     4,502       12,646  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 1,728     $ 3,213  

 

 
 

 

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 stock and stock options for compensation, royalties and services during the period, impairment of goodwill, the non-cash gains and loss on the Company’s equity-method investment and the non-cash gain on the sale of a discontinued operation.

 

 
 

 

(in thousands)

                                
   

For the Three Months Ended

    

For the nine months ended

  
   

September 30,

    

September 30,

  
   

2019

    

2018

    

2019

    

2018

  

EBITDA *:

                                

Net loss

   $ (312

)

   $ (1,534

)

   $ (5,580

)

   $ (9,561

)

Plus: Interest expense

     105       132       309       370  

Plus: Income tax expense (benefit)

     (287

)

     (143

)

     (632

)

     (280

)

Plus: Depreciation and amortization

     602       742       1,971       2,245  

EBITDA

     108       (803

)

     (3,932

)

     (7,226

)
                                 
                                 

Adjusted EBITDA *:

                                

Gain on disposal of discontinued operation

     (3,631

)

     —       (3,631

)

     —  

Plus: Provision (credit) for bad debt

     (48

)

     24       90       (10

)

Plus: Impairment of goodwill

     —       —       —       1,263  

Plus: Unrealized gain on derivative

     —       (38

)

     —       (164

)

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

     44       42       155       188  

Fair value gain on equity method investment purchase

     —       —       (629

)

     —  

Plus: Non-cash loss on equity-method investment

     354       —       710       —  

Adjusted EBITDA

   $ (3,173

)

   $ (775

)

   $ (7,237

)

   $ (5,949

)
                                 

Adjusted net loss *:

                                

Net loss

   $ (312

)

   $ (1,534

)

   $ (5,580

)

   $ (9,561

)

Gain on disposal of discontinued operation

     (3,631

)

     —       (3,631

)

     —  

Plus: Impairment of goodwill

     —       —       —       1,263  

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

     286       300       883       936  

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

     44       42       155       188  

Fair value gain on equity method investment purchase

     —       —       (629

)

     —  

Plus: Non-cash loss on equity-method investment

     354       —       710       —  

Adjusted net loss

   $ (3,259

)

   $ (1,192

)

   $ (8,092

)

   $ (7,174

)

 

 

* Includes the combined totals from continuing and discontinued operations.

 

 

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