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CUI Global Reports Unaudited Second Quarter 2014 Financial Results

Companies mentioned in this article: CUI Global, Inc.

TUALATIN, Ore., Aug. 11, 2014 /PRNewswire/ -- CUI Global, Inc. (NASDAQ: CUI), a platform company dedicated to the acquisition, development, and commercialization of new, innovative products, today reported their unaudited financial results for the second quarter, ended June 30, 2014.

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Second Quarter 2014 Financial Performance Summary: (Comparisons to 2Q 2013)

    --  Quarterly revenue was up 6% to $19.2 million from $18.2 million
    --  Gross Profit margin was 40%, as compared to 39%
    --  Consolidated loss of $(66) thousand or $(0.00) per share versus $437
        thousand profit or $0.02 per share
    --  Quarterly adjusted EBITDA was $1.3 million or $0.06 a share, as compared
        to $1.8 million or $0.10 a share in Q2 2013
    --  Year to date Adjusted EBITDA was $2.2 million or $0.10 a share, as
        compared to $1.8 million or $0.12 a share in 2013
    --  Cash and cash equivalents were $15.2 million with an additional $12.0
        million in short-term investments
    --  Power and Electro-Mechanical segment unaudited backlog of $14.0 million
        as of June 30, 2014
    --  Gas segment unaudited backlog of $23.7 million as of June 30, 2014

CUI Global's President & CEO, William Clough commented, "We are pleased with our second quarter and year to date results, as we continue to build on our momentum from the first quarter. We saw increases in revenues in both segments and our backlog remains robust."

"We have now signed up 33 new distributors in Europe and North America. In addition, we announced in early May the fact that National Grid had selected our IRIS technology for use in remotely controlling their entire grid. Since that announcement, we have continued discussions with GE and are now preparing a presentation of the IRIS technology for joint marketing and sales presentation with GE to such North American customers as Kinder-Morgan, Williams Pipeline, Spectra Energy and others," Clough continued.

Clough explained, "We believe these distributor agreements and our cooperation with GE's Intelligent Platform Group represent significant steps in our plan to develop a substantial distribution network for our ground breaking technology and, specifically, for sales targeting North American energy producers and transporters."

"Sales of our GasPTi product remain steady, as we have now received orders for 21 units in 2014. In addition, we have now completed a four month field trial of six units by Snam Rete Gas. Those trials went very well, with all six units passing the testing. The VE technology remains a strong product for us and is now being considered by a number of large energy producers and transporters in North America and Europe for implementation on their pipelines, both as sampling systems and as thermowell replacements," concluded Clough.

For the quarter ended June 30, 2014, CUI Global produced consolidated total revenues of $19.2 million and year to date consolidated total revenues of $36.1 million. Gross revenues for the second quarter grew 14% sequentially from first quarter revenues of $16.9 million and 6% year-over-year, when compared to $18.2 million in the second quarter of 2013.

The cost of revenue for the quarter ended June 30, 2014, was $11.5 million, versus $11.1 million for the same period in 2013. The increase when compared to the second quarter of 2013 is primarily the result of increased revenues associated with growth in the power and electro-mechanical segment. As a percentage of sales, the cost of revenue remained relatively consistent at 60% for Q2 2014 compared with 61% in Q2 2013 with the change associated with the product mix delivered during the period. Gross profit was $14.7 million year to date versus $10.9 million in 2013 and $7.7 million for the quarter ended June 30, 2014 versus $7.0 million during Q2 2013.

SG&A decreased 3% as a percentage of revenues for the second quarter sequentially from first quarter and increased 5% as a percentage of revenues as compared to the quarter ended 2013.

The company reported a net loss of $(66) thousand or $(0.00) per share (EPS) for the quarter ended June 30, 2014 as compared with a net profit of $437 thousand or $0.02 per share in the prior year period. The net loss, during the quarter ended June 30, 2014 as compared to the prior year period is primarily the result of consistent increases for selling, general and administrative expenses related to the increased revenues and selling and marketing efforts associated with introducing new technologies and Orbital to the global marketplace.

The earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter were $868 thousand or $0.04 EBITDA per share. Adjusted EBITDA for the second quarter 2014 was $1.3 million or $0.06 per share.

Operating activities generated positive cash flow of $49 thousand during the six months ended June 30, 2014, versus positive cash flow from operations of $603 thousand for the same period in 2013. The change in cash provided by operations is primarily related to the changes in the operating assets associated primarily with increased revenues during the period as well as the net income generated by operating activities exclusive of non-cash expenses during the year to date period.

In addition, as an operating unit, the power and electro-mechanical segment (CUI, Inc. and CUI Japan) posted revenues of $13.6 million for the quarter, which represented a $985 thousand (8%) increase as compared to the same period in 2013. The gas segment posted revenues of $5.6 million in the second quarter.

The power and electro-mechanical segment unaudited order back log was $14.0 million and the gas segment unaudited order back log was $23.7 million as of June 30, 2014.

The company had $15.2 million of cash and cash equivalents as of June 30, 2014, a decrease of $1.4 million since December 31, 2013. The Company had an additional $12.0 million in short-term investments, an increase of $1.1 million since December 31, 2013.

CONFERENCE CALL

The Company will conduct a conference call and webcast to review the results on Tuesday, August 12, 2014 at 9:00am ET.

To access the call, please dial the toll free number at (888) 734-0328 and provide the Conference ID: 81760447. For international callers, please dial (678) 894-3054. At the conclusion of the call, a replay will be available until August 23, 2014. To access the replay of the call dial (855) 859-2056 and provide the same Conference 81760447. This replay will be available until August 23, 2014.

A simultaneous webcast will also be available via: http://www.media-server.com/m/p/fpj9fmny


                                                        Condensed Consolidated Balance Sheets


                                                                                      June 30,              December 31,
                                                                                                      2014                     2013
                                                                                                      ----                     ----

                                                                                    (unaudited)

    Assets:

    Current assets:

                        Cash and cash
                        equivalents                                                            $15,182,145              $16,575,508

                        Short term
                        investments
                        held to
                        maturity                                                                11,955,454               10,868,961

                        Trade accounts
                        receivable, net
                        of allowance of
                        $239,102 and                                                            11,257,374                9,055,561
                                      $285,348, respectively

                        Inventories, net
                        of allowance of
                        $511,128 and
                        $549,981,                                                                 7,175,904                7,027,644
                         respectively

                        Costs in excess
                        of billings                                                                      -                 552,012

                        Prepaid expenses
                        and other                                                                1,116,496                  603,960


                       Total current assets                                                     46,687,373               44,683,646


    Property and equipment, net                                                                8,315,414                8,206,563


    Other assets:

                        Investment -
                        equity method                                                              325,121                  283,011

                        Other intangible
                        assets, net                                                             22,236,921               23,512,394

                        Deposits and
                        other                                                                       34,219                   25,364

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

                       Goodwill, net                                                            22,761,679               22,448,613


                       Total other assets                                                       45,357,940               46,269,382

                       Total assets                                                           $100,360,727              $99,159,591
                                                                                              ============              ===========


    Liabilities and Stockholders'
     Equity:

    Current liabilities:

                       Accounts payable                                                         $4,686,227               $4,146,262

                        Mortgage note
                        payable,
                        current portion                                                             78,764                   76,814

                        Leases payable,
                        current portion                                                             64,279                   83,904

                       Accrued expenses                                                          2,368,734                2,253,773

                        Accrued taxes
                        payable                                                                    397,047                  263,804

                        Accrued
                        compensation                                                               553,959                  426,402

                        Billings in
                        excess of costs                                                          5,766,757                6,787,231

                       Unearned revenue                                                          1,684,932                1,257,346


                       Total current liabilities                                                15,600,699               15,295,536

                        Long term leases
                        payable                                                                     93,644                   58,363

                        Derivative
                        liability                                                                  544,981                  427,818

                       Long term
                        mortgage note
                        payable, net of
                        current portion
                        due of                                                                   3,564,210                3,604,242
                           $78,764 and $76,814, respectively

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

                        Deferred tax
                        liabilities,
                        net                                                                      2,856,846                3,111,361


                       Total long term liabilities                                              12,363,364               12,505,467

                       Total liabilities                                                        27,964,063               27,801,003
                                                                                                ----------               ----------


    Commitments and contingencies


    Stockholders' equity

                       Common stock,
                        par value
                        $0.001;
                        325,000,000
                        shares                                                                      20,634                   20,567
                        authorized;
                          20,634,072
                          shares issued
                          and outstanding
                          at
                         June 30, 2014
                          and 20,566,663
                          shares issued
                          and outstanding
                         at December 31,
                          2013

                        Additional paid-
                        in capital                                                             147,263,288              146,614,995

                        Accumulated
                        deficit                                                               (77,669,315)            (77,114,935)

                        Accumulated
                        other
                        comprehensive
                        gain                                                                     2,782,057                1,837,961


                       Total stockholders' equity                                               72,396,664               71,358,588

                        Total liabilities and
                        stockholders' equity                                                  $100,360,727              $99,159,591
                                                                                              ============              ===========


                                                                                   Condensed Consolidated Statements of Operations

                                                                                                     (unaudited)


                                                                                                                                           For the three months ended June
                                                                                                                                                     30,                                For the six months ended June 30,

                                                                                                                                                     2014                          2013                          2014                      2013
                                                                                                                                                     ----                          ----                          ----                      ----

    Revenues:

                                              Product sales                                                                                   $19,202,860                   $18,138,599                   $36,092,981               $28,190,845

                                              Revenue from freight                                                                                 11,333                        12,492                        21,121                    19,606


                                              Total revenue                                                                                    19,214,193                    18,151,091                    36,114,102                28,210,451


    Cost of revenues                                                                                                                         11,506,825                    11,148,154                    21,412,512                17,263,366


    Gross profit                                                                                                                              7,707,368                     7,002,937                    14,701,590                10,947,085


    Operating expenses:

                                              Selling, general and administrative                                                               6,494,599                     5,289,249                    12,686,299                 9,227,870

                                              Depreciation and amortization                                                                     1,076,155                       920,478                     2,129,168                 1,064,007

                                              Research and development                                                                            328,765                       198,775                       598,617                   443,465

                                              Bad debt                                                                                             30,231                        47,470                      (77,769)                   42,470


                                              Total operating expenses                                                                          7,929,750                     6,455,972                    15,336,315                10,777,812


    Income (loss) from operations                                                                                                             (222,382)                      546,965                     (634,725)                  169,273
                                                                                                                                               --------                       -------                      --------                   -------


    Other income (expense):

                                              Other income                                                                                         70,195                        56,057                       152,064                   117,295

                                              Other expense                                                                                      (65,580)                      (4,961)                     (65,875)                  (9,906)

                                              Unrealized (loss) on derivative                                                                    (61,583)                            -                    (117,163)                        -

                                               Earnings (loss) from equity
                                               investment                                                                                          26,740                       (6,229)                       42,110                   (4,126)

                                               Gain (loss) on disposals of fixed
                                               assets                                                                                                   -                            -                      (4,754)                        -

                                               Amortization of investment premiums
                                               and discounts                                                                                     (17,319)                            -                     (32,301)                        -

                                               Amortization of debt offering costs
                                               and debt discount                                                                                        -                     (18,333)                            -                 (36,666)

                                              Interest expense                                                                                  (127,783)                     (86,979)                    (253,274)                (201,453)


                                              Total other income (expense), net                                                                 (175,330)                     (60,445)                    (279,193)                (134,856)


    Income (loss) before taxes                                                                                                                (397,712)                      486,520                     (913,918)                   34,417

                                              (Benefit) provision for taxes                                                                     (331,250)                       49,287                     (359,538)                   59,276

    Consolidated net income (loss)                                                                                               $(66,462)                  $437,233                    $(554,380)                     $(24,859)
                                                                                                                                  ========                   ========                     =========                       ========


    Basic income (loss) per common share                                                                                           $(0.00)                     $0.02                       $(0.03)                       $(0.00)
                                                                                                                                    ======                      =====                        ======                         ======

    Diluted income (loss) per common share                                                                                         $(0.00)                     $0.02                       $(0.03)                       $(0.00)
                                                                                                                                    ======                      =====                        ======                         ======

    Basic weighted average common shares outstanding                                                                                         20,628,347                    18,835,103                    20,608,048                14,881,158
                                                                                                                                             ==========                    ==========                    ==========                ==========

    Diluted weighted average common and common                                                                                               20,628,347                    18,851,315                    20,608,048                14,881,158
      equivalent shares outstanding


                           Condensed Consolidated Statements of Cash Flows (unaudited)


                                                                                       For the six months ended June 30,

                                                                                                  2014                            2013
                                                                                                  ----                            ----

    CASH FLOWS FROM OPERATING
     ACTIVITIES

    Net (loss)                                                              $(554,380)                     $(24,859)

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

                                        Stock,  options
                                         and notes
                                         issued for
                                         compensation
                                         and services                                          526,692                         295,541

                                         Unrealized loss
                                         on derivative                                         117,163                               -

                                        Non-cash
                                         interest
                                         expense,
                                         including
                                         amortization of
                                         debt offering
                                         costs                                                       -                         36,666

                                        Non-cash
                                         (profit) loss
                                         on equity
                                         method
                                         investment                                           (42,110)                          4,126

                                        Allowance for
                                         bad debt
                                         expense and
                                         returns
                                         allowance                                            (47,769)                         42,470

                                         Amortization of
                                         investment
                                         premiums and
                                         discounts                                              32,301                               -

                                         Amortization of
                                         intangibles                                         1,739,207                         866,403

                                         Deferred income
                                         taxes                                               (349,127)                      (142,455)

                                         Inventory
                                         reserve                                              (47,859)                         18,400

                                         Loss on disposal
                                         of assets                                               4,754                               -

                                        Depreciation                                           516,844                         327,999

    (Increase) decrease in assets:

                                         Trade accounts
                                         receivable                                        (2,020,815)                      1,654,312

                                        Inventories                                           (21,082)                      (898,397)

                                         Costs in excess
                                         of billings                                           570,091                          90,871

                                         Prepaid expenses
                                         and other
                                         current assets                                      (358,939)                      (673,266)

                                         Deposits and
                                         other assets                                          (8,855)                         11,360

    Increase (decrease) in
     liabilities:

                                        Accounts payable                                       470,658                         456,307

                                        Accrued expenses                                        93,371                     (1,514,443)

                                         Accrued
                                         compensation                                          119,169                         124,547

                                         Accrued taxes
                                         payable                                               124,546                       (401,223)

                                        Unearned revenue                                       427,586                         259,539

                                         Billings in
                                         excess of costs                                   (1,242,763)                         68,803

                                         NET CASH PROVIDED BY OPERATING
                                         ACTIVITIES                                             48,683                         602,701
                                                                                                ------                         -------

    CASH FLOWS FROM INVESTING
     ACTIVITIES:

                                         Cash paid upon
                                         acquisition,
                                         net of cash
                                         received                                                    -                   (17,709,507)

                                         Investment in
                                         patents                                                     -                        (2,500)

                                        Purchase of
                                         short term
                                         investments
                                         held to
                                         maturity                                          (6,282,980)                              -

                                        Maturities of
                                         short term
                                         investments
                                         held to
                                         maturity                                            5,164,186                               -

                                         Proceeds from
                                         notes
                                         receivable                                                  -                         18,116

                                         Purchase of
                                         property and
                                         equipment                                           (483,262)                      (442,086)

                                         NET CASH USED IN INVESTING
                                         ACTIVITIES                                        (1,602,056)                   (18,135,977)
                                                                                            ----------                     -----------

    CASH FLOWS FROM FINANCING
     ACTIVITIES:

                                        Payments on
                                         demand notes
                                         payable, net of
                                         debt offering
                                         costs                                                       -                      (459,448)

                                         Payments on
                                         leases payable,
                                         net of proceeds                                      (70,719)                        (3,736)

                                         Payments on
                                         notes and loans
                                         payable                                              (38,082)                              -

                                         Payments on
                                         notes payable,
                                         related party                                               -                    (2,000,000)

                                        Proceeds from
                                         sales of common
                                         stock, and
                                         exercise of
                                         warrants and
                                         options, net of                                             -                     45,135,280
                                          offering costs

                                         NET CASH (USED IN) PROVIDED BY
                                         FINANCING ACTIVITIES                                (108,801)                     42,672,096
                                                                                              --------                      ----------

    EFFECT OF EXCHANGE RATE CHANGE ON
     CASH                                                                                    268,811                        (73,111)

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

    Cash and cash equivalents at end
     of period                                                                            15,182,145                      28,105,549

    NET (DECREASE) INCREASE IN CASH
     AND CASH EQUIVALENTS                                                 $(1,393,363)                   $25,065,709
                                                                           ===========                    ===========


                                        For the six months ended June
                                                 30,

                                                 2014                 2013
                                                 ----                 ----

    SUPPLEMENTAL DISCLOSURE OF
     CASH FLOW INFORMATION:

    Income taxes paid          $138,663        $62,948
                               ========        =======

    Interest paid              $254,925       $201,233
                               ========       ========


    SUPPLEMENTAL DISCLOSURE OF
     NON-CASH INVESTING AND
     FINANCING ACTIVITIES:

    Capital leases              $81,716        $16,381
                                =======        =======

About CUI Global, Inc.
Delivering Innovative Technologies for an Interconnected World . . . . .

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

For more information please visit www.cuiglobal.com

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

Reconciliation of Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, and Adjusted Net Income are a non-GAAP financial measures and are reconciled in the tables below. These non-GAAP financial measures do not represent funds available for management's discretionary use and are not intended to represent cash flow from operations. EBITDA, Adjusted EBITDA, and Adjusted Net Income should not be construed as substitutes 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 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 are not terms defined by GAAP and as a result our measure of these non-GAAP financial measures might not be comparable to similarly titled measures used by other companies. However, EBITDA, Adjusted EBITDA, and Adjusted Net Income are used by management to evaluate, assess and benchmark the company's operational results and the company believes these non-GAAP financial measures 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.


                                                                           For the 3 months ended June 30,            For the 6 months ended June 30,

                                                                                     2014                        2013              2014                      2013
                                                                                     ----                        ----              ----                      ----

    EBITDA:

                                                Consolidated Income (loss)      $(66,462)                   $437,233        $(554,380)                $(24,859)

                                                   Plus:  Interest expense        127,783                      86,979           253,274                   201,453

                                      Plus:  (Benefit) provision for taxes      (331,250)                     49,287         (359,538)                   59,276

                                                        Plus: Depreciation        261,369                     184,390           516,844                   327,999

                                                       Plus:  Amortization        876,237                     798,876         1,739,207                   866,403

                       Plus:  Amortization of debt offering costs and debt
                                                                  discount              -                     18,333                 -                   36,666

                                                                    EBITDA       $867,677                  $1,575,098        $1,595,407                $1,466,938
                                                                                 --------                  ----------        ----------                ----------

    Adjusted EBITDA:

                                                            Plus: Bad debt         30,231                      47,470          (77,769)                   42,470

                                      Plus:  Unrealized loss on derivative         61,583                           -          117,163                         -

                   Plus:  Stock, options and notes issued for compensation
                                                              and services        302,197                     207,752           526,692                   295,541


                                                           Adjusted EBITDA     $1,261,688                  $1,830,320        $2,161,493                $1,804,949
                                                                               ==========                  ==========        ==========                ==========


                                                          EBITDA per share          $0.04                       $0.08             $0.08                     $0.10
                                                                                    =====                       =====             =====                     =====

                                                 Adjusted EBITDA per share          $0.06                       $0.10             $0.10                     $0.12
                                                                                    =====                       =====             =====                     =====

                                 Basic weighted average shares outstanding     20,628,347                  18,835,103        20,608,048                14,881,158


    Adjusted net income (loss):

                                                Consolidated Income (loss)      $(66,462)                   $437,233        $(554,380)                $(24,859)

                        Plus:  Amortization expense of Orbital acquisition
                                                 related intangible assets        798,193                     731,345         1,583,292                   731,345

                   Plus:  Stock, options and notes issued for compensation
                                                              and services        302,197                     207,752           526,692                   295,541

                                                       Adjusted net income     $1,033,928                  $1,376,330        $1,555,604                $1,002,027
                                                                               ==========                  ==========        ==========                ==========

                                          Adjusted income per common share          $0.05                       $0.07             $0.08                     $0.07
                                                                                    =====                       =====             =====                     =====

                                 Basic weighted average shares outstanding     20,628,347                  18,835,103        20,608,048                14,881,158

Logo - http://photos.prnewswire.com/prnh/20120320/FL72629LOGO

SOURCE CUI Global, Inc.