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CUI Global Reports Unaudited First Quarter 2014 Financial Results

Companies mentioned in this article: CUI Global, Inc.

TUALATIN, Ore., May 19, 2014 /PRNewswire/ -- CUI Global, Inc. (CUI), a platform company dedicated to the acquisition, development, and commercialization of new, innovative products, today reported their unaudited financial results for the first quarter, ended March 31, 2014.


First Quarter 2014 Financial Performance Summary: (Comparisons to Q1 2013)

    --  Revenue was up 68% to $16.9 million from $10.1 million
    --  Gross Profit margin was 41%, as compared to 39%
    --  Consolidated net loss of $(488) thousand or $(0.02) per share versus
        $(462) thousand or $(0.04) per share
    --  Adjusted EBITDA was $900 thousand or $0.04 a share, as compared to $(25)
        thousand in Q1 2013
    --  Cash and cash equivalents were $15.2 million with an additional $11.7
        million in short-term investments
    --  Power and Electro-Mechanical segment unaudited backlog of $15.2 million
        as of March 31, 2014
    --  Gas segment unaudited backlog of $22.7 million as of March 31, 2014

For the quarter ended March 31, 2014, CUI Global produced consolidated total revenues of $16.9 million. Gross revenues for the first quarter grew 11% sequentially from fourth quarter revenues of $15.2 million and 68% year-over-year, when compared to $10.1 million in the first quarter of 2013. SG&A decreased as a percentage of revenues from 39% in Q1 2013 to 37% in Q1 2014. Gross profit was for the quarter was $7.0 million, a 77% increase from the $3.9 million in first quarter 2013.

The cost of revenue for the quarter ended March 31, 2014 was $9.9 million, versus $6.1 million for the same period in 2013. The increase when compared to the first quarter of 2013 is primarily the result of increased revenues associated with the addition of Orbital Gas Systems in Q2 2013 and approximately $1.2 million of revenue growth in the power and electro-mechanical segment during the first quarter of 2014. As a percentage of sales, the cost of revenue remained relatively consistent at 59% for Q1 2014 compared with 61% in Q1 2013 with the change associated with the product mix delivered during the period.

The company reported a net loss of $(487,918) or $(0.02) per share (EPS) for the quarter ended March 31, 2014. In the prior year period, the Company reported a net loss of $(462,092) or $(0.04) per share. The net loss, during the quarter ended March 31, 2014 as compared to the prior year period is primarily the result of $785 thousand of amortization expense associated with the intangibles from the Orbital Gas Systems Limited acquisition and consistent increases in operating expenses offset by increased revenues. Adjusted net income for the first quarter of 2014 was $521,676 or $0.03 per share as compared with an adjusted loss of $(374,303) or $(0.03) per share in the prior year comparable quarter.

The earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter were $728 thousand or $0.04 EBITDA per share. Adjusted EBITDA for the first quarter 2014 was $900 thousand or $0.04 per share.

Operating activities generated negative cash flow of $103 thousand during the quarter ended March 31, 2014, versus positive cash flow from operations of $63 thousand for the same period in 2013. The change in cash provided by operations is related to the changes in the operating assets and liabilities balances associated with increases revenues during the quarter as well as the net loss during the quarter.

In addition, as an operating unit, the power and electro-mechanical segment (CUI, Inc. and CUI Japan) posted YTD revenues of $10.8 million, which represented a $1.2 million (12%) increase as compared to the same period in 2013.

The sales order back log at March 31, 2014 was a consolidated $37.9 million.

The company had $15.2 million of cash and cash equivalents as of March 31, 2014, a decrease of $1.34 million since December 31, 2013. The Company had an additional $11.7 million in short-term investments, an increase of $0.86 million since December 31, 2013.

CUI Global's president & CEO, William Clough commented, "We are pleased to be off to a good start in 2014 as we have been able to build on the momentum created towards the end of 2013. We saw significant increases in revenues in both segments and our backlog remains robust."

"Our distribution agreements with Ives Equipment Corporation and Benchmark Instrumentation & Analytical Services represent significant steps in our plan to develop a substantial distribution network for our ground breaking technology, while our agreement with Yokogawa United Kingdom Ltd., is another example of the value (in both credibility and revenue) of the Orbital acquisition," Clough continued.

Clough explained, "Additionally, we were pleased to hear that National Grid had recognized our VE® Technology as the preferred option for British Natural Gas Pipelines, and plan to recommend the technology to the European Union and Britain as best practice. We were especially pleased to announce the adoption of our IRIS-RTU units by National Grid in a joint press release between ourselves and GE Intelligent Platforms Group - A release that was included on GE's proprietary website (http://www.ge-ip.com/news/national-grid-adopts-cui-global-inc-s-iris-software-for-improved-monitoring-and-control-of-its-natural-gas-transmission-system/n3204) and publicized through GE's social networks.

"We also introduced a new family of digital point of load dc-dc modules that set performance benchmarks in efficiency, power density, and transient response to address the rapidly-rising power challenges in distributed power architectures. We believe these products will be a key driver in our future revenue growth. I believe our positive results are a testament to the entire CUI Global team. Today, the company has some of the 'best-in-class' engineering solutions being delivered to a broad customer base in the natural gas, energy, utility, power generation, emissions, manufacturing, networking and automotive industries and we are optimistic about the future. Each of the announcements we made in the first quarter represents another major stride for CUI Global as we continue to put the pillars for success in place. We are at the forefront of an abundant opportunity as a Company, and we look forward to carrying forward our focus and determination throughout the remainder of 2014 and beyond," concluded Clough.


The Company will conduct a conference call and webcast to review the results on Monday, May 19, 2014 at 4:30pm ET.

To access the call, please dial the toll free number at (888) 734-0328 and provide the Conference ID: 41597858. For international callers, please dial (678) 894-3054. At the conclusion of the call, a replay will be available until May 30, 2014. To access the replay of the call dial (855) 859-2056 and provide the same Conference 41597858.

A simultaneous webcast will also be available via: http://www.media-server.com/m/p/3koyep5c

                                                                                                                              Condensed Consolidated Balance Sheets

                                                                                                                                                                                   March 31,                            December 31,

                                                                                                                                                                                                      2014                                  2013
                                                                                                                                                                                                      ----                                  ----



    Current Assets:

                                          Cash and cash equivalents                                                                                                  $15,235,396                            $16,575,508

                                          Short term investments held to maturity                                                                                     11,733,934                             10,868,961

                                           Trade accounts receivable, net of allowance of $187,009 and $285,348,
                                           respectively                                                                                                               10,729,587                              9,055,561

                                          Inventories, net of allowance of $552,466 and $549,981, respectively                                                         6,811,660                              7,027,644

                                          Costs in excess of billings                                                                                                    404,818                                552,012

                                          Prepaid expenses and other                                                                                                   1,173,773                                603,960

                                          Total current assets                                                                                                        46,089,168                             44,683,646

    Property and equipment, net                                                                                                                                                                  8,401,164                             8,206,563

    Other assets:

                                          Investment - equity method                                                                                                     298,381                                283,011

                                          Other intangible assets, net                                                                                                22,782,154                             23,512,394

                                          Deposits and other                                                                                                              33,718                                 25,364

                                          Notes receivable, net of allowance of $564,194 and $564,194                                                                          -                                      -

                                          Goodwill, net                                                                                                                                         22,536,713                            22,448,613

                                          Total other assets                                                                                                          45,650,966                             46,269,382

                                          Total assets                                                                                                                                        $100,141,298                           $99,159,591
                                                                                                                                                                                              ============                           ===========

    Liabilities and stockholders' equity:

    Current liabilities:

                                          Accounts payable                                                                                                            $5,241,673                             $4,146,262

                                          Mortgage note payable, current portion                                                                                          77,789                                 76,814

                                          Leases payable, current                                                                                                         78,741                                 83,904

                                          Accrued expenses                                                                                                             1,705,895                              2,253,773

                                          Accrued taxes payable                                                                                                          462,821                                263,804

                                          Accrued compensation                                                                                                           570,279                                426,402

                                          Billings in excess of costs                                                                                                  6,446,357                              6,787,231

                                          Unearned revenue                                                                                                             1,669,386                              1,257,346

                                          Total current liabilities                                                                                                   16,252,941                             15,295,536

                                          Long term leases payable                                                                                                       102,532                                 58,363

                                          Derivative liability                                                                                                           483,398                                427,818

                                           Long term mortgage note payable, net of current portion due of $77,789 and
                                           $76,814, respectively                                                                                                       3,584,226                              3,604,242

                                          Long term notes payable, related party                                                                                       5,303,683                              5,303,683

                                          Deferred tax liabilities, net                                                                                                2,957,448                              3,111,361

                                          Total long term liabilities                                                                                                 12,431,287                             12,505,467

                                          Total liabilities                                                                                                           28,684,228                             27,801,003
                                                                                                                                                                      ----------                             ----------

    Commitments and contingencies

    Stockholders' equity:

                                           Common stock, par value $0.001; 325,000,000 shares authorized; 20,620,358 shares
                                           issued                                                                                                                         20,620                                 20,567
                                              and outstanding at March 31, 2014 and  20,566,663 shares issued and outstanding
                                              December 31, 2013

                                          Additional paid-in capital                                                                                                 146,954,437                            146,614,995

                                          Accumulated deficit                                                                                                        (77,602,853)                          (77,114,935)

                                          Accumulated other comprehensive gain                                                                                         2,084,866                              1,837,961

                                          Total stockholders' equity                                                                                                  71,457,070                             71,358,588

                                          Total liabilities and stockholders' equity                                                                                $100,141,298                            $99,159,591
                                                                                                                                                                    ============                            ===========

                                                                                                                           Condensed Consolidated Statements of Operations


                                                                                                                                                                                        For the three months ended March 31,




                                                                                                Product Sales                                                                                                                $10,052,246


                                                                                                Revenue from freight                                                                                                               7,114


                                                                                                Total revenue                                                                                                                 10,059,360


    Cost of revenues                                                                                                                                                                                                           6,115,212


    Gross profit                                                                                                                                                                                                               3,944,148


    Operating expenses

                                                                                                Selling, general and administrative                                                                                            3,938,621


                                                                                                Depreciation and amortization                                                                                                    143,529


                                                                                                Research and development                                                                                                         244,690


                                                                                                Bad debt                                                                                                                          (5,000)


                                                                                                Total operating expenses                                                                                                       4,321,840


    Loss from operations                                                                                                                                                                                                        (377,692)


    Other income (expense)

                                                                                                Other income                                                                                                                      61,238


                                                                                                Other expense                                                                                                                     (4,945)


                                                                                                Unrealized (loss) on derivative                                                                                                        -


                                                                                                Earnings from equity investment                                                                                                    2,103


                                                                                                Amortization of investment premiums and discounts                                                                                      -


                                                                                                Amortization of debt offering costs and debt discount                                                                            (18,333)


                                                                                                Interest expense                                                                                                                (114,474)


    Total other income (expense), net                                                                                                                                                                                            (74,411)


    Loss before taxes                                                                                                                                                                                                           (452,103)


                                                                                                (Benefit) provision for taxes                                                                                                      9,989


    Consolidated net (loss)                                                                                                                                                                     $(462,092)


    Basic and diluted (loss) per common share                                                                                                                                                      $(0.04)


    Basic weighted average common and common                                                                                                                                                                                  10,883,280
        equivalent shares outstanding

                                                                                                                           Condensed Consolidated Statements of Cash Flows


                                                                                                                                                                                        For the three months ended March 31,

                                                                                                                                                                                                     2014                           2013
                                                                                                                                                                                                     ----                           ----


    Net (loss)                                                                                                                                                               $(487,918)                     $(462,092)

    Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:

                                                                                                 Stock, warrants, options and notes issued for compensation and
                                                                                                 services                                                                                         224,495                         87,789

                                                                                                Unrealized loss on derivative                                                                      55,580                              -

                                                                                                 Non-cash interest expense, including amortization of debt offering
                                                                                                 costs                                                                                                  -                         18,333

                                                                                                Non-cash profit on equity method investment                                                       (15,370)                        (2,103)

                                                                                                Allowance for bad debt expense and returns allowance                                             (108,000)                        (5,000)

                                                                                                Amortization of intangibles                                                                       862,970                         67,527

                                                                                                Deferred income taxes                                                                            (181,057)                             -

                                                                                                Inventory reserve                                                                                   2,485                        (30,000)

                                                                                                (Gain) loss on disposal of assets                                                                   4,754                              -

                                                                                                Depreciation                                                                                      255,475                        143,609

    (Increase) decrease in assets:

                                                                                                Trade accounts receivable                                                                      (1,535,010)                     1,133,052

                                                                                                Inventories                                                                                       236,996                       (289,625)

                                                                                                Costs in excess of billings                                                                       152,182                              -

                                                                                                Prepaid expenses and other current assets                                                        (431,235)                      (684,307)

                                                                                                Deposits and other assets                                                                          (8,354)                        10,380

    Increase (decrease) in liabilities:

                                                                                                Accounts payable                                                                                1,075,676                       (237,010)

                                                                                                Accrued expenses                                                                                 (553,904)                       214,090

                                                                                                Accrued compensation                                                                              141,402                        (25,259)

                                                                                                Accrued taxes payable                                                                             196,467                              -

                                                                                                Unearned revenue                                                                                  412,040                        123,124

                                                                                                Billings in excess of costs                                                                      (402,209)                             -

                                                                                                NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                              (102,535)                        62,508
                                                                                                                                                                                                 --------                         ------


                                                                                                Purchase of short term investments held to maturity                                              (864,973)                             -

                                                                                                Purchase of property and equipment                                                               (356,423)                      (103,955)

                                                                                                NET CASH (USED IN) INVESTING ACTIVITIES                                                        (1,221,396)                      (103,955)
                                                                                                                                                                                               ----------                       --------


                                                                                                 Proceeds from (payments to) demand notes payable, net of debt
                                                                                                 offering costs                                                                                         -                       (459,448)

                                                                                                Proceeds from (payments to) leases payable, net of proceeds                                       (42,118)                             -

                                                                                                Proceeds from (payments to) notes and loans payable                                               (19,041)                             -

                                                                                                NET CASH (USED IN) FINANCING ACTIVITIES                                                           (61,159)                      (459,448)
                                                                                                                                                                                                  -------                       --------

    EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                                                                                                                        44,978                        (20,770)

    Cash and cash equivalents at beginning of period                                                                                                                                           16,575,508                      3,039,840

    Cash and cash equivalents at end of period                                                                                                                                                 15,235,396                      2,518,175

    NET (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                                                                            $(1,340,112)                     $(521,665)
                                                                                                                                                                           ===========                      =========

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

About CUI Inc.
CUI Inc. is a technology company dedicated to the development, commercialization, and distribution of new, innovative electro-mechanical products. Over the past 20 years, CUI has become a recognized name in electronic components worldwide in the areas of power, interconnect, motion control, and sound. CUI's solid customer commitment and honest corporate message are a hallmark in the industry. CUI is a wholly owned subsidiary of CUI Global, Inc.

For more information, please visit www.cui.com.

About Orbital Gas Systems Ltd.
Orbital Gas Systems Ltd ("Orbital-UK") is the largest natural gas systems integrator in the United Kingdom. For over 25 years, Orbital-UK has developed its portfolio of products, services and resources to offer a diverse range of personalized gas engineering solutions to the gas utilities, power generation, emissions, manufacturing and automotive industries. Orbital-UK's internationally recognized expertise in the natural gas industry, including bringing together the patented VE-technology with the ground-breaking GasPTi device, offers natural gas operators and users a comprehensive engineering array for the next generation of energy metering systems. Orbital-UK is a wholly owned subsidiary of CUI Global, Inc.

For more information, please visit www.orbital-uk.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.

Reconciliation of Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA are a non-GAAP financial measures and are reconciled in the table below. EBITDA and Adjusted EBITDA do not represent funds available for management's discretionary use and is not intended to represent cash flow from operations. EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA exclude components that are significant in understanding and assessing the company's results of operations and cash flows. In addition, EBITDA and Adjusted EBITDA are not terms defined by GAAP and as a result our measure of EBITDA and Adjusted EBITDA might not be comparable to similarly titled measures used by other companies. However, EBITDA and Adjusted EBITDA are used by management to evaluate, assess and benchmark the company's operational results and the company believes EBITDA and Adjusted EBITDA 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 eliminates the amortization expenses associated with intangible assets acquired with Orbital Gas Systems Limited in April 2013 as well as non-cash expenses associated with stock, warrants, options and notes issued for compensation and services during the period ended.

    Reconciliation of Unaudited Adjusted net income (loss)                                    For the period ended March

                                                                                                     2014                   2013
                                                                                                     ----                   ----

    Consolidated net (loss)                                                                     $(487,918)             $(462,092)

        Plus:  Amortization expense of Orbital acquisition related intangible assets              785,099                      -

        Plus:  Stock, warrants, options and notes issued for compensation and services            224,495                 87,789

    Adjusted net income (loss)                                                                   $521,676              $(374,303)
                                                                                                 ========              =========

    Adjusted income (loss) per common share                                                         $0.03                 $(0.03)
                                                                                                    =====                 ======

    Basic weighted average common and common equivalent shares outstanding                     20,587,523             10,883,280
                                                                                               ==========             ==========

    Reconciliation of Unaudited EBITDA and Adjusted EBITDA                                    For the period ended March

                                                                                                     2014                   2013
                                                                                                     ----                   ----

    Consolidated net (loss)                                                                     $(487,918)             $(462,092)

        Plus: Amortization of debt offering costs and debt discount                                     -                 18,333

        Plus:  Interest expense                                                                   125,491                114,474

        Plus:  Depreciation and amortization                                                    1,118,445                211,136

        Plus:  (Benefit) provision for taxes                                                      (28,288)                 9,989

    Earnings before interest, taxes, depreciation and amortization (EBITDA)                      $727,730              $(108,160)
                                                                                                 ========              =========

        Plus:  Bad debt                                                                          (108,000)                (5,000)

        Plus:  Unrealized loss on derivative                                                       55,580                      -

        Plus:  Stock, warrants, options and notes issued for compensation and services            224,495                 87,789

    Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA)    $899,805               $(25,371)
                                                                                                 ========               ========

      EBITDA per share                                                                              $0.04                 $(0.01)
                                                                                                    =====                 ======

      Adjusted EBITDA per share                                                                     $0.04                 $(0.00)
                                                                                                    =====                 ======

          Basic weighted avg shares outstanding                                                20,587,523             10,883,280
                                                                                               ==========             ==========

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SOURCE CUI Global, Inc.