ModusLink Global Solutions Reports Financial Results for Second Quarter of Fiscal 2013

  ModusLink Global Solutions Reports Financial Results for Second Quarter of
  Fiscal 2013

Business Wire

WALTHAM, Mass. -- March 7, 2013

ModusLink Global Solutions^™, Inc. (NASDAQ: MLNK) today reported financial
results for its second quarter of fiscal year 2013 ended January 31, 2013.

Financial Summary

  *Net revenue of $203.4 million, compared to $169.4 million in the second
    quarter of fiscal 2012, an increase of 20.1%
  *Gross margin, as a percentage of revenue, of 10.0%, compared to 9.1% in
    the second quarter of fiscal 2012
  *Operating loss of $8.5 million, compared to operating loss of $12.5
    million in the second quarter of fiscal 2012
  *Non-GAAP operating income of $0.2 million, compared to Non-GAAP operating
    loss of $3.3 million in the second quarter of fiscal 2012
  *Working capital of $99.1 million, compared to $113.5 million at July 31,
    2012

As previously reported, the Company sold its Tech for Less (“TFL”) operations
on January 11, 2013. Therefore, revenue and results from continuing operations
exclude the results of TFL, which have been reclassified to discontinued
operations in the Company’s statements of operations for all periods.

Consolidated Financial Results

“Since joining ModusLink in January 2013, I have been working with the
management team thoroughly reviewing the Company and its operations,” said
John J. Boucher, president and chief executive officer of ModusLink Global
Solutions. “I believe that ModusLink has the right clients, services and
capabilities to drive long-term growth.”

“As we develop the long-term strategic plan for the Company to achieve
profitable growth, our near-term priorities are continuing to reduce costs,
evaluating our global operations, improving asset efficiency and maintaining a
high level of client services,” said Boucher.

“Results for the second quarter reflected growth in revenue from new programs
and stability in our base business. We benefited from increased unit volumes
from several clients that resulted in total revenue exceeding our
expectations. Although expenses remained high due to costs related to the
restatement and other initiatives, we expect to have an improved cost
structure as we benefit from continued cost reduction actions,” concluded
Boucher.

ModusLink reported net revenue of $203.4 million for the second quarter of
fiscal 2013, an increase of 20.1%, compared to net revenue of $169.4 million
reported in the second quarter of fiscal 2012. Revenue from new programs in
the second quarter of fiscal 2013 was $44.6 million, compared to $14.1 million
in the same period last year, an increase of 216.3%. Driving the increase was
a program in Europe for a consumer products client and an engagement with a
consumer electronics client that commenced new programs in recent quarters and
contributed to revenue in all regions. ^(1)

Revenue from the Company’s base business increased 2.3% in the second quarter
of fiscal 2013 to $158.8 million, compared to $155.3 million in the same
period last year. Contributing to the increase was growth in revenue from a
program supporting a major product launch for a software client, as well as
increased revenue from an aftermarket services program.

Gross profit was $20.3 million, or 10.0% of revenue, for the second quarter of
fiscal 2013, compared to $15.4 million, or 9.1% of revenue, in the second
quarter of fiscal 2012. The increase in gross margin as a percentage of
revenue was primarily due to higher revenue and the effects of the Company’s
cost reduction actions.

Operating results for the second quarter of fiscal 2013 included selling,
general and administrative expenses (SG&A) of $23.7 million, compared to $23.2
million in the same quarter of fiscal 2012. Included in SG&A for the second
quarter of fiscal 2013 were expenses of $4.6 million related primarily to the
restatement process and other professional fees.

Restructuring expenses for the second quarter of fiscal 2013 were $4.8
million, compared to $4.5 million in the second quarter of fiscal 2012.
Restructuring expenses in the second quarter of fiscal 2013 related to
previously announced cost reduction actions and included employee severance
and other costs. Since the beginning of fiscal 2013, ModusLink has reduced its
workforce by approximately 8.0%. Restructuring expenses for the second quarter
of the previous year related to the Company’s actions to reduce facility and
employee costs associated with facilities in Ireland, France, the Netherlands,
China and the U.S.

Operating loss for the second quarter of fiscal 2013 was $8.5 million,
compared to operating loss of $12.5 million in the second quarter of fiscal
2012.

Other expense for the second quarter of fiscal 2013 was $3.2 million, compared
to other income of $0.6 million in the second quarter of fiscal 2012. Other
expense for the second quarter of fiscal 2013 was comprised primarily of
losses and a non-cash impairment charge associated with the Company’s
@Ventures portfolio and also included foreign exchange transaction losses,
compared to foreign exchange transaction gains in the second quarter of 2012.

For the second quarter of fiscal 2013, net loss from continuing operations was
$12.4 million, or ($0.29) per share, compared to net loss from continuing
operations of $12.3 million, or ($0.29) per share, for the second quarter of
fiscal 2012.

Including results from discontinued operations, net loss for the second
quarter of fiscal 2013 was $12.6 million, or ($0.29) per share, compared to
net loss of $12.9 million, or ($0.30) per share, for the same period in fiscal
2012.

Excluding net charges related to depreciation, amortization of intangible
assets, impairment of goodwill and intangible assets, share-based
compensation, and restructuring, the Company reported a non-GAAP operating
income of $0.2 million for the second quarter of fiscal 2013, compared to
non-GAAP operating loss of $3.3 million for the same period in fiscal 2012.

As of January 31, 2013, the Company had working capital of $99.1 million,
compared to $113.5 million at July 31, 2012. Included in working capital as of
January 31, 2013 were cash, cash equivalents and marketable securities
totaling $51.8 million, compared to $52.5 million at July 31, 2012. The
Company concluded the quarter with no outstanding bank debt.

For the second quarter of fiscal 2013, net cash used in operating activities
of continuing operations was $4.9 million, compared to $10.2 million in the
same period in fiscal 2012.

Update on Steel Holdings Investment

As announced on February 11, 2013, the Company has entered into an Investment
Agreement with Steel Partners Holdings L.P. (“Steel Holdings”). Under the
terms of the agreement, Steel Holdings would purchase 7.5 million newly issued
shares of common stock at a price of $4.00 per share, representing a cash
investment in the Company, before fees and expenses, of $30 million. In
addition, at the closing of the transaction the Company would issue Steel
Holdings warrants to acquire 2.0 million shares at an exercise price of $5.00
per share. The Company expects to close such transaction on or soon after
March 12, 2013, subject to obtaining stockholder approval of the transaction
at the Company’s 2012 Annual Meeting of Stockholders to be held on March 12,
2013, and the satisfaction of other enumerated closing conditions.

Conference Call Information

As previously announced, ModusLink Global Solutions, Inc. will hold a
conference call to discuss its fiscal 2013 second quarter results at 5:00 p.m.
ET on March 7, 2013. Investors can listen to the conference call on the
Internet at www.ir.moduslink.com. To listen to the live call, go to the
website at least 15 minutes prior to the start time to download and install
the necessary audio software.

About ModusLink Global Solutions, Inc.

ModusLink Global Solutions Inc. (NASDAQ: MLNK) executes comprehensive supply
chain and logistics services that improve clients’ revenue, cost,
sustainability and customer experience objectives. ModusLink is a trusted and
integrated provider to the world’s leading companies in consumer electronics,
communications, computing, medical devices, software, luxury goods and retail.
The Company’s operating infrastructure annually supports more than $80 billion
of its clients’ revenue and manages approximately 470 million product
shipments through more than 30 sites in 15 countries across North America,
Europe, and the Asia/Pacific region. For details on ModusLink's flexible and
scalable solutions visit www.moduslink.com and www.valueunchained.com, the
blog for supply chain professionals.

(1) New programs defined as client programs that have been executed for fewer
than 12 months. Base business defined as client programs that have been
executed for 12 months or more.

Non-GAAP Information

The Company believes that its non-GAAP measure of operating income/(loss)
("non-GAAP operating income/(loss)") provides investors with a useful,
supplemental measure of the Company’s operating performance by excluding the
impact of non-cash charges and restructuring activities. Each of the excluded
items was excluded because it may be considered to be of a non-operational or
non-cash nature. Historically, the Company has recorded significant impairment
and restructuring charges. These charges, as well as charges related to
depreciation, amortization of intangible assets and stock-based compensation,
have been excluded for the purpose of enhancing the understanding by both
management and investors of the underlying baseline operating results and
trends of the business, which management uses to evaluate our financial
performance for purposes of planning and forecasting future periods. Non-GAAP
operating income/(loss) does not have any standardized definition and,
therefore, is unlikely to be comparable to similar measures presented by other
reporting companies. Non-GAAP operating income/(loss) should not be evaluated
in isolation of, or as a substitute for, the Company’s financial results
prepared in accordance with United States generally accepted accounting
principles. The Company’s usage of non-GAAP operating income/(loss), and the
underlying methodology in excluding certain charges, is not necessarily an
indication of the results of operations that may be expected in the future, or
that the Company will not, in fact, incur such charges in future periods. A
table reconciling the Company’s non-GAAP operating income/(loss) to its GAAP
operating income/(loss) and its GAAP net income/(loss) is included in the
statement of operations information in this release.

ModusLink Global Solutions is a registered trademark of ModusLink Global
Solutions, Inc. All other company names and products are trademarks or
registered trademarks of their respective companies.

This release contains forward-looking statements, which address a variety of
subjects including, for example, the success and impact of the Company’s
initiatives to reduce costs; the Company’s ability to develop a long-term
strategic plan to achieve profitable growth; the Company’s ability to achieve
its near-term priorities to reduce costs, evaluate its global operations,
improve asset efficiency and maintain high levels of customer services; the
Company’s expectations regarding an improved cost structure and the
expectation as to the closing of the Steel Holdings transaction. All
statements other than statements of historical fact, including without
limitation, those with respect to the Company’s goals, plans, expectations and
strategies set forth herein are forward-looking statements. The following
important factors and uncertainties, among others, could cause actual results
to differ materially from those described in these forward-looking statements:
the Company’s ability to execute on its business strategy, including its cost
reduction plans and the continued and increased demand for and market
acceptance of its services, which could negatively affect the Company’s
ability to meet its revenue, operating income and cost savings targets,
maintain and improve its cash position, expand its operations and revenue,
lower its costs, improve its gross margins, reach and sustain profitability,
reach its long-term objectives and operate optimally; uncertainties and
volatility relating to global economic conditions, especially in the
technology sector; unanticipated declines in, or failure to achieve the
anticipated levels of, the demand for our clients’ products; potential strains
on managerial and operational resources resulting from expanded operations;
failure to realize expected benefits of restructuring and cost-cutting
actions; inability to expand operations in accordance with the Company’s
business strategy; insufficient cash balances that could prevent the Company
from meeting business or investment goals; difficulties integrating
technologies, operations and personnel in accordance with the Company’s
business strategy; customer losses; demand variability in supply chain
management clients, to which the Company sells on a purchase order basis
rather than pursuant to contracts with minimum purchase requirements; risks
inherent with conducting international operations; changes in tax rates in
jurisdictions where profits are determined to be earned and taxed; changes in
estimates of tax credits, benefits and deductions; unfavorable resolution of
issues arising from tax audits with various tax authorities, including payment
of interest and penalties and the ability to realize deferred tax assets;
adverse conditions in the mergers and acquisitions or IPO markets, which could
prevent liquidity for securities in the Company’s venture capital portfolio;
increased competition and technological changes in the markets in which the
Company competes; and the Steel Holdings transaction is subject to certain
enumerated closing conditions and there can be no assurance that such
conditions will be met and the transaction will be consummated. For a detailed
discussion of cautionary statements that may affect the Company’s future
results of operations and financial results, please refer to the Company's
filings with the Securities and Exchange Commission, including the Company's
most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
Forward-looking statements represent management's current expectations and are
inherently uncertain. We do not undertake any obligation to update
forward-looking statements made by us except as otherwise required under
federal securities laws.



ModusLink Global Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
                                                               
                                         January 31,   July 31,    January 31,
                                           2013        2012        2012
Assets:
Cash and cash equivalents                $  51,790     $ 52,369    $  95,618
Available-for-sale securities               14           131          132
Trade accounts receivable, net              151,573      148,931      156,195
Inventories, net                            83,053       83,990       94,675
Prepaid and other current assets            11,807       10,466       10,325
Current assets of discontinued             283         -           -
operations
Total current assets                       298,520     295,887     356,945
Property and equipment, net                 38,193       40,772       43,493
Investments in affiliates                   9,556        10,803       12,352
Goodwill                                    3,058        3,058        3,058
Intangible assets, net                      2,327        2,897        4,029
Other assets                               6,671       5,465       10,318
                                         $  358,325    $ 358,882   $  430,195
Liabilities:
Current portion of capital lease         $  99         $ 73        $  89
obligations
Accounts payable                            125,472      110,520      135,970
Current portion of accrued                  4,575        1,724        4,978
restructuring
Accrued expenses                            40,422       41,753       37,776
Other current liabilities                   27,411       26,778       39,489
Current liabilities of discontinued        1,471       1,528       1,452
operations
Total current liabilities                  199,450     182,376     219,754
Long-term portion of accrued                -            -            109
restructuring
Long-term portion of capital leases         40           69           104
obligations
Other long-term liabilities                 11,037       11,012       12,030
Non-current liabilities of                 101         293         983
discontinued operations
                                            11,178       11,374       13,226
Stockholders' equity                       147,697     165,132     197,215
                                         $  358,325    $ 358,882   $  430,195
                                                                      
                                                                      


ModusLink Global Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                                                              
                 Three months ended                      Six months ended
                 January 31,                             January 31,
                               2012          Fav                       2012          Fav
                  2013      (As          (Unfav)      2013      (As          (Unfav)
                               Restated)                               Restated)
                                                                                     
Net revenue      $ 203,436     $ 169,435     20.1   %    $ 400,487     $ 367,265     9.0    %
Cost of            183,158       154,026     (18.9  %)     361,585       326,084     (10.9  %)
revenue
                                                                                
Gross margin      20,278      15,409     31.6   %     38,902      41,181     (5.5   %)
                   10.0    %     9.1     %   0.9    %      9.7     %     11.2    %   (1.5   %)
Operating
expenses:
Selling,
general and        23,721        23,181      (2.3   %)     47,862        44,330      (8.0   %)
administrative
Amortization
of intangible      285           285         -             569           569         -
assets
Restructuring,    4,798       4,463      (7.5   %)    6,268       5,219      (20.1  %)
net
Total
operating         28,804      27,929     (3.1   %)    54,699      50,118     (9.1   %)
expenses
                                                                                     
Operating          (8,526  )     (12,520 )   31.9   %      (15,797 )     (8,937  )   (76.8  %)
income (loss)
                                                                                     
Other income      (3,217  )    559        (675.5 %)    (4,868  )    1,390      (450.2 %)
(expense)
                                                                                     
                                                                                     
Income (loss)
from
continuing         (11,743 )     (11,961 )   1.8    %      (20,665 )     (7,547  )   (173.8 %)
operations
before taxes
Income tax
expense           674         380        (77.4  %)    1,583       2,251      29.7   %
(benefit)
Income (loss)
from               (12,417 )     (12,341 )   (0.6   %)     (22,248 )     (9,798  )   (127.1 %)
continuing
operations
                                                                                     
Discontinued
operations,
net of income
taxes:
Income (loss)
from              (133    )    (535    )   75.1   %     (960    )    (1,933  )   50.3   %
discontinued
operations
                                                                                     
                                                                                     
Net Income       $ (12,550 )   $ (12,876 )   2.5    %    $ (23,208 )   $ (11,731 )   (97.8  %)
(loss)
                                                                                     
                                                                                     
Basic and
diluted
earnings
(loss) per
share:
                                                                                     
Income (loss)
from             $ (0.29   )   $ (0.29   )   -           $ (0.51   )   $ (0.23   )   (121.7 %)
continuing
operations
                                                                                     
Income (loss)
from              -           (0.01   )   -           (0.02   )    (0.04   )   50.0   %
discontinued
operations
                                                                                     
Net income       $ (0.29   )   $ (0.30   )   3.3    %    $ (0.53   )   $ (0.27   )   (96.3  %)
(loss)
                                                                                     
Shares used in
computing
basic earnings    43,654      43,434                  43,629      43,367  
(loss) per
share
                                                                                     
Shares used in
computing
diluted           43,654      43,434                  43,629      43,367  
earnings
(loss) per
share
                                                                                     
                                                                                     


ModusLink Global Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Information
(In thousands)
(Unaudited)
                                                              
                                                                   
                    Three months ended               Six months ended
                    January 31,       January 31,    January 31,   January 31,
                      2013            2012        2013        2012    
                                                                   
Net revenue:
                                                                   
Americas            $  67,731         $  59,498      $ 131,641     $ 129,009
Asia                   60,356            51,124        116,731       111,863
Europe                 67,818            50,710        136,748       108,316
All other             7,531           8,103       15,367      18,077  
                    $  203,436       $  169,435    $ 400,487    $ 367,265 
                                                                   
Operating income
(loss):
                                                                   
Americas            $  (445     )     $  (3,084  )   $ (2,470  )   $ (3,204  )
Asia                   5,586             4,513         12,756        13,805
Europe                 (3,902   )        (7,177  )     (7,750  )     (8,865  )
All other             (954     )       (79     )    (536    )    777     
                       285               (5,827  )     2,000         2,513
Other
reconciling           (8,811   )       (6,693  )    (17,797 )    (11,450 )
items
                    $  (8,526   )     $  (12,520 )   $ (15,797 )   $ (8,937  )
                                                                   
Non-GAAP
operating income
(loss):
                                                                   
Americas            $  1,673          $  (1,272  )   $ 1,073       $ 54
Asia                   7,982             5,795         17,004        16,760
Europe                 (1,198   )        (2,225  )     (3,206  )     (2,521  )
All other             289             409         1,145       1,752   
                       8,746             2,707         16,016        16,045
Other
reconciling           (8,527   )       (5,970  )    (17,212 )    (10,090 )
items
                    $  219           $  (3,263  )   $ (1,196  )   $ 5,955   
                                                                   
Note: The Company defines non-GAAP operating income (loss) as total operating
income (loss), excluding net charges related to depreciation, amortization of
intangible assets, impairment of goodwill and long-lived assets, share-based
compensation, and restructuring.
                                                                   
                                                                   
TABLE RECONCILING NON-GAAP OPERATING INCOME (LOSS) TO GAAP OPERATING INCOME
AND NET INCOME (LOSS)
                                                                   
                                                                   
NON-GAAP            $  219            $  (3,263  )   $ (1,196  )   $ 5,955
Operating income
                                                                   
Adjustments:
Depreciation           (3,240   )        (3,511  )     (6,849  )     (7,224  )
Amortization of
intangible             (285     )        (285    )     (569    )     (569    )
assets
Stock-based            (422     )        (998    )     (915    )     (1,880  )
compensation
Restructuring,        (4,798   )       (4,463  )    (6,268  )    (5,219  )
net
GAAP Operating      $  (8,526   )     $  (12,520 )   $ (15,797 )   $ (8,937  )
income (loss)
                                                                   
Other income           (3,217   )        559           (4,868  )     1,390
(expense), net
Income tax             (674     )        (380    )     (1,583  )     (2,251  )
expense
Income (loss)
from                  (133     )       (535    )    (960    )    (1,933  )
discontinued
operations
Net income          $  (12,550  )     $  (12,876 )   $ (23,208 )   $ (11,731 )
(loss)
                                                                   
                                                                   
Reconciliations
for non-GAAP
measure:
                    Three months ended               Six months ended
                    January 31,                      January 31,
                      2013            2012        2013        2012    
Net cash
provided by
(used in)
operating           $  (4,947   )     $  (10,189 )   $ 3,833       $ (4,955  )
activities of
continuing
operations
Additions to
property and          (1,436   )       (3,015  )    (3,570  )    (4,765  )
equipment
Free cash flow      $  (6,383   )     $  (13,204 )   $ 263        $ (9,720  )
from operations

Contact:

ModusLink Global Solutions, Inc.
Investor:
Robert Joyce, 781-663-5120
ModusLink Investor Relations
ir@moduslink.com
or
Media:
Teresa Osborne, 781-663-5153
ModusLink Public Relations
teresa_osborne@moduslink.com
 
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