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ModusLink Global Solutions Reports 2013 Fourth Quarter and Fiscal Year Financial Results



  ModusLink Global Solutions Reports 2013 Fourth Quarter and Fiscal Year
  Financial Results

Business Wire

WALTHAM, Mass. -- October 15, 2013

ModusLink Global Solutions^™, Inc. (NASDAQ: MLNK) today reported financial
results for its 2013 fourth quarter and fiscal year ended July 31, 2013.
Results for those periods are summarized in the following paragraphs. An
annual report on Form 10-K for the period can be accessed through
www.moduslink.com.

Fourth Quarter Financial Summary and Supplemental Information

  * Net revenue of $181.0 million, an increase of 4.5%, compared to the fourth
    quarter of fiscal 2012
  * Gross margin of 11.1%, compared to 6.6% in the fourth quarter of fiscal
    2012; improvement reflects favorable revenue mix, actions to reduce costs
    and other items
  * SG&A expenses of $19.8 million, a 29.2% reduction, compared to the fourth
    quarter of fiscal 2012 primarily due to lower employee related costs and
    professional fees
  * Operating loss of $5.7 million, including restructuring charges of $5.7
    million, compared to operating loss of $18.1 million, including
    restructuring charges of $1.2 million, in the fourth quarter of fiscal
    2012
  * Adjusted EBITDA of $7.7 million, compared to $(5.0) million in the fourth
    quarter of fiscal 2012
  * Net loss of $8.8 million, or $0.17 per share, compared with net loss of
    $20.2 million, or $0.46 per share, in the fourth quarter of fiscal 2012
  * During fiscal 2013, the Company reduced the number of full time employees
    from approximately 3,870 to 3,250, a reduction of 16%

ModusLink reported net revenue of $181.0 million for the fourth quarter of
fiscal 2013, compared to net revenue of $173.1 million in the fourth quarter
of fiscal 2012. Operating loss for the fourth quarter of fiscal 2013 was $5.7
million, compared to operating loss of $18.1 million in the fourth quarter of
the previous year. Net loss for the fourth quarter of fiscal 2013 was $8.8
million, or $0.17 per share, which included net loss from discontinued
operations of $6 thousand. Net loss for the fourth quarter of the previous
year was $20.2 million, or $0.46 per share, which included net loss from
discontinued operations of $5.3 million, or $0.12 per share.

The increase in revenue for the fourth quarter of fiscal 2013 was primarily
driven by higher revenue from a program for a consumer electronics client and
an aftermarket services program related to the repair and refurbishment of
mobile devices. The reduced operating loss for the fourth quarter of fiscal
2013 was primarily due to improved gross margin, which was favorably impacted
by (a) improved revenue mix, (b) the effects of actions taken by the Company
to reduce cost, (c) the recognition of previously deferred revenue for a
client program, which increased revenue by $1.6 million and gross margin by 80
basis points and (d) gross margin for the fourth quarter of the prior year
included a previously disclosed $3.6 million inventory write-off related to a
canceled client program, which negatively impacted gross margin by 210 basis
points for the period. Also contributing to the reduced operating loss for the
fourth quarter of fiscal 2013 was a 29.2% decline in selling, general and
administrative expenses (SG&A), which was primarily due to lower employee
related costs and professional fees.

Both gross margin and SG&A expenses for the fourth quarter of fiscal 2013
benefited from the Company’s actions to reduce capacity and costs during the
year. Among those actions were the consolidation of two significant facilities
and several non-strategic sites in the U.S. and Europe, as well as a 16%
reduction in workforce, which declined from approximately 3,870 full time
employees to approximately 3,250 during fiscal 2013.

ModusLink reported Adjusted EBITDA of $7.7 million for the fourth quarter of
fiscal 2013, compared to Adjusted EBITDA of $(5.0) million for the same period
in fiscal 2012. EBITDA represents earnings before interest, income tax
expense, depreciation and amortization, and Adjusted EBITDA represents EBITDA
excluding certain items. Please refer to the non-GAAP information and table
reconciling the Company’s Adjusted EBITDA to its GAAP net income/(loss) below.

For fiscal year 2013, net revenue was $754.5 million, compared to net revenue
of $713.9 in the previous year. Operating loss for fiscal 2013 was $28.2
million, compared to operating loss of $34.9 million in fiscal 2012. Net loss
for fiscal 2013 was $40.4 million, or $0.86 per share, which included net loss
from discontinued operations of $1.0 million, or $0.02 per share. Net loss for
the previous year was $38.1 million, or $0.87 per share, which included net
loss from discontinued operations of $10.5 million, or $0.24 per share.
ModusLink reported Adjusted EBITDA of $15.2 million for fiscal 2013, compared
to Adjusted EBITDA of $5.2 million for fiscal 2012.

On January 11, 2013, the Company sold its Tech for Less (“TFL”) operations.
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.

About ModusLink Global Solutions

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 and retail. The Company’s
operating infrastructure annually supports more than $80 billion of its
clients’ revenue and manages approximately 451 million product shipments
through more than 25 sites 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.

Non-GAAP Information

In addition to the financial measures prepared in accordance with generally
accepted accounting principles, the Company uses Adjusted EBITDA, a non-GAAP
financial measure, to assess its performance. EBITDA represents earnings
before interest, income tax expense, depreciation and amortization. We define
Adjusted EBITDA as EBITDA excluding the effects of professional fees
associated with our SEC inquiry and financial restatement, strategic
alternatives and other professional fees, the settlement of the TFL
acquisition escrow, executive severance and employee retention, restructuring,
share-based compensation, impairments of goodwill and long-lived assets, other
non-operating gains or losses, net, equity in losses of affiliates and
impairments, and discontinued operations.

We believe that providing Adjusted EBITDA to investors is useful as this
measure provides important supplemental information of our performance to
investors and permits investors and management to evaluate the operating
performance of our core supply chain business. We use Adjusted EBITDA in
internal forecasts and models when establishing internal operating budgets,
supplementing the financial results and forecasts reported to our Board of
Directors, determining a component of incentive compensation for executive
officers and other key employees based on operating performance and evaluating
short-term and long-term operating trends in our core supply chain business.
We believe that the Adjusted EBITDA financial measure assists in providing an
enhanced understanding of our underlying operational measures to manage the
core supply chain business, to evaluate performance compared to prior periods
and the marketplace, and to establish operational goals. We believe that these
non-GAAP financial adjustments are useful to investors because they allow
investors to evaluate the effectiveness of the methodology and information
used by management in our financial and operational decision making.

Adjusted EBITDA is a non-GAAP financial measure and should not be considered
in isolation or as a substitute for financial information provided in
accordance with U.S. GAAP. This non-GAAP financial measure may not be computed
in the same manner as similarly titled measures used by other companies.

A table reconciling the Company’s EBITDA and Adjusted EBITDA to its GAAP net
income/(loss), is included 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. 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;
and increased competition and technological changes in the markets in which
the Company competes. 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.

                                                                    
                                                                      
ModusLink Global Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
                                                                      
                                                       July 31,      July 31,
                                                       2013          2012
Assets:
Cash and cash equivalents                              $ 77,916      $ 52,369
Available-for-sale securities                            61            131
Accounts receivable, net                                 142,098       148,931
Inventories, net                                         61,322        83,990
Prepaid and other current assets                         9,689         10,466
Total current assets                                     291,086       295,887
Property and equipment, net                              34,290        40,772
Investments in affiliates                                7,970         10,803
Goodwill                                                 3,058         3,058
Intangible assets, net                                   1,764         2,897
Other assets                                             5,528         5,465
                                                       $ 343,696     $ 358,882
Liabilities:
Current portion of capital lease obligations           $ 98          $ 73
Accounts payable                                         110,148       110,520
Accrued restructuring                                    4,670         1,724
Accrued expenses                                         34,748        41,753
Other current liabilities                                26,157        26,778
Current liabilities of discontinued operations           610           1,528
Total current liabilities                                176,431       182,376
Long-term portion of accrued restructuring               494           -
Long-term portion of capital leases obligations          303           69
Other long-term liabilities                              9,563         11,012
Non-current liabilities of discontinued operations       -             293
                                                       $ 186,791     $ 193,750
Stockholders' equity:
                                                         156,905       165,132
                                                       $ 343,696     $ 358,882

                                                                                                
                                                                                                  
ModusLink Global Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
                                                                                                  
                   Three months ended                            Twelve months ended
                   July 31,                                      July 31,
                   2013            2012            Fav           2013            2012            Fav
                                                   (Unfav)                                       (Unfav)
                                                                                                  
Net revenue        $ 181,001       $ 173,129       4.5    %      $ 754,504       $ 713,947       5.7    %
Cost of              160,908         161,679       0.5    %        680,134         645,388       (5.4   %)
revenue
                                                                                                  
Gross profit         20,093          11,450        75.5   %        74,370          68,559        8.5    %
                     11.1    %       6.6     %     4.5    %        9.9     %       9.6     %     0.3    %
Operating
expenses:
Selling,
general and          19,823          28,001        29.2   %        86,972          94,737        8.2    %
administrative
Amortization
of intangible        281             284           1.1    %        1,133           1,139         0.5    %
assets
Impairment of
goodwill &           -               -                             -               1,128         100.0  %
long-lived
assets
Restructuring,       5,664           1,219         (364.6 %)       14,497          6,416         (126.0 %)
net
Total
operating            25,768          29,504        12.7   %        102,602         103,420       0.8    %
expenses
                                                                                                  
Operating loss       (5,675  )       (18,054 )     68.6   %        (28,232 )       (34,861 )     19.0   %
                                                                                                  
Other income         (1,356  )       5,145         (126.4 %)       (7,319  )       10,288        (171.1 %)
(expense)
                                                                                                  
                                                                                                  
Loss from
continuing           (7,031  )       (12,909 )     45.5   %        (35,551 )       (24,573 )     (44.7  %)
operations
before taxes
Income tax
expense              1,804           1,986         9.2    %        3,779           3,035         (24.5  %)
(benefit)
Loss from
continuing           (8,835  )       (14,895 )     40.7   %        (39,330 )       (27,608 )     (42.5  %)
operations
                                                                                                  
Discontinued
operations,
net of income
taxes:
Loss from
discontinued         (6      )       (5,346  )     99.9   %        (1,025  )       (10,500 )     90.2   %
operations
                                                                                                  
                                                                                                  
Net loss           $ (8,841  )     $ (20,241 )     56.3   %      $ (40,355 )     $ (38,108 )     (5.9   %)
                                                                                                  
                                                                                                  
Basic and
diluted loss
per share:
                                                                                                  
Loss from
continuing         $ (0.17   )     $ (0.34   )     49.5   %      $ (0.84   )     $ (0.63   )     (33.0  %)
operations
                                                                                                  
Loss from
discontinued         (0.00   )       (0.12   )     99.9   %        (0.02   )       (0.24   )     90.9   %
operations
                                                                                                  
Net loss           $ (0.17   )     $ (0.46   )     62.8   %      $ (0.86   )     $ (0.87   )     1.1    %
                                                                                                  
Shares used in
computing            51,421          43,811                        46,654          43,565   
basic loss per
share
                                                                                                  
Shares used in
computing            51,421          43,811                        46,654          43,565   
diluted loss
per share

                                                                  
                                                                    
ModusLink Global Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Information by Operating
Segment
(In thousands)
(Unaudited)
                                                                    
                                                                    
                   Three months ended              Twelve months ended
                   July 31,        July 31,        July 31,        July 31,
                   2013            2012            2013            2012
                                                                    
Net revenue:
                                                                    
Americas           $ 72,353        $ 62,105        $ 268,490       $ 249,940
Asia                 48,099          50,374          212,963         218,880
Europe               48,522          52,299          237,222         211,319
All other            12,027          8,351           35,829          33,808   
Total net          $ 181,001       $ 173,129       $ 754,504       $ 713,947  
revenue
                                                                    
Operating
income (loss):
                                                                    
Americas           $ 1,590         $ (7,848  )     $ (230    )     $ (14,108 )
Asia                 6,462           3,234           22,841          21,450
Europe               (8,512  )       (2,735  )       (22,091 )       (15,718 )
All other            605             256             349             634      
Total segment
operating            145             (7,093  )       869             (7,742  )
income (loss)
Other
reconciling          (5,820  )       (10,961 )       (29,101 )       (27,119 )
items
Total              $ (5,675  )     $ (18,054 )     $ (28,232 )     $ (34,861 )
operating loss
                                                                    
Non-GAAP
operating
income (loss):
                                                                    
Americas           $ 2,792         $ (5,768  )     $ 5,708         $ (7,675  )
Asia                 8,474           4,456           30,230          26,811
Europe               (2,185  )       (1,649  )       (7,679  )       (6,061  )
All other            1,031           1,091           2,920           2,941    
Total segment
non-GAAP             10,112          (1,870  )       31,179          16,016
operating
income (loss)
Other
reconciling          (5,468  )       (10,741 )       (27,355 )       (25,284 )
items
Total non-GAAP
operating          $ 4,644         $ (12,611 )     $ 3,824         $ (9,268  )
income (loss)

 
 
ModusLink Global Solutions, Inc. and Subsidiaries
Reconciliation of Selected Non-GAAP Measures to GAAP Measures
(In thousands)
(Unaudited)
                                                                  
NON-GAAP OPERATING INCOME (LOSS) TO GAAP OPERATING LOSS AND NET LOSS^1
                                                                    
                    Three months ended             Twelve months ended
                    July 31,       July 31,        July 31,        July 31,
                    2013           2012            2013            2012
                                                                    
                                                                    
Non-GAAP
operating           $ 4,644        $ (12,611 )     $ 3,824         $ (9,268  )
income (loss)
                                                                    
Depreciation          (3,907 )       (3,357  )       (14,118 )       (13,920 )
Amortization of
intangible            (281   )       (284    )       (1,133  )       (1,139  )
assets
Impairment of
goodwill and          -              -               -               (1,128  )
long-lived
assets
Share-based           (467   )       (583    )       (2,308  )       (2,990  )
compensation
Restructuring,        (5,664 )       (1,219  )       (14,497 )       (6,416  )
net
                                                                    
GAAP operating      $ (5,675 )     $ (18,054 )     $ (28,232 )     $ (34,861 )
loss
                                                                    
Other income          (1,356 )       5,145           (7,319  )       10,288
(expense), net
Income tax
(expense)             (1,804 )       (1,986  )       (3,779  )       (3,035  )
benefit
Loss from
discontinued          (6     )       (5,346  )       (1,025  )       (10,500 )
operations
                                                                    
Net loss            $ (8,841 )     $ (20,241 )     $ (40,355 )     $ (38,108 )
                                                                    
                                                                    
NET LOSS TO EBITDA AND ADJUSTED EBITDA^2
                    Three months ended             Twelve months ended
                    July 31,       July 31,        July 31,        July 31,
                    2013           2012            2013            2012
                                                                    
                                                                    
Net loss            $ (8,841 )     $ (20,241 )     $ (40,355 )     $ (38,108 )
                                                                    
Interest income       (71    )       (70     )       (300    )       (380    )
Interest              88             95              612             373
expense
Income tax            1,804          1,986           3,779           3,035
expense
Depreciation          3,907          3,357           14,118          13,920
Amortization of
intangible            281            284             1,133           1,139
assets
                                                                    
EBITDA              $ (2,832 )     $ (14,589 )     $ (21,013 )     $ (20,021 )
                                                                    
SEC inquiry and
financial             2,522          3,096           10,761          3,114
restatement
costs
Strategic
alternatives
and other             35             977             1,270           9,686
professional
fees
Settlement of
TFL acquisition       -              -               -               (3,399  )
escrow
Executive
severance and         154            2,111           1,417           2,111
employee
retention
Restructuring         5,664          1,219           14,497          6,416
Share-based           467            583             2,308           2,990
compensation
Impairment of
goodwill and          -              -               -               1,128
long-lived
assets
Other
non-operating         208            (4,056  )       592             (11,442 )
(gains) losses,
net
Equity in
losses of             1,430          284             4,365           4,109
affiliates and
impairments
Discontinued          6              5,346           1,025           10,500
operations
                                                                    
Adjusted EBITDA     $ 7,654        $ (5,029  )     $ 15,222        $ 5,192    
                                                                    
                                                                    
^1 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.
                                                                    
                                                                    
^2 The Company defines Adjusted EBITDA as net income (loss) excluding net
charges related to interest income, interest expense, income tax expense,
depreciation, amortization of intangible assets, SEC inquiry and restatement
costs, strategic alternatives and other professional fees, settlement of TFL
acquisition escrow, executive severance and employee retention, restructuring,
share-based compensation, impairment of goodwill and long-lived assets, other
non-operating (gains) losses, net, equity in losses of affiliates and
impairments and discontinued operations.

Contact:

ModusLink Global Solutions, Inc.
Robert Joyce, 781-663-5120
ir@moduslink.com
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