ModusLink Reports Financial Results for Third Quarter of Fiscal 2014 Business Wire WALTHAM, Mass. -- June 9, 2014 ModusLink Global Solutions^™, Inc. (NASDAQ: MLNK) today reported financial results for its third quarter of fiscal year 2014 ended April 30, 2014. Results for that period are summarized in the following paragraphs. For a full discussion of the results, please see the Company’s quarterly report on Form 10-Q, which can be accessed through www.moduslink.com. Third Quarter Financial Summary *Net revenue of $173.3 million compared to $173.0 million in the third quarter of fiscal 2013 *Gross margin of 9.1% compared to 8.9% in the third quarter of fiscal 2013 *SG&A expenses of $17.1 million, a 11.3% reduction compared to the third quarter of fiscal 2013 *Operating loss of $5.1 million compared to operating loss of $6.8 million in the third quarter of fiscal 2013 *Net loss of $9.5 million, or $0.18 per share, compared with net loss of $8.3 million, or $0.17 per share, in the third quarter of fiscal 2013 *Adjusted EBITDA of $3.4 million compared to $2.2 million in the third quarter of fiscal 2013 ModusLink reported net revenue of $173.3 million for the third quarter of fiscal 2014, compared to $173.0 million in the third quarter of fiscal 2013. The change in net revenue was primarily driven by increased revenue from an aftermarket services program in the Americas related to the repair and refurbishment of mobile devices, and revenue growth from programs for a consumer electronics client, which primarily benefited results in the Americas and Europe. Revenue growth from those programs was partially offset by lower revenues from certain programs for clients in the computing, software and communications markets. Operating loss for the third quarter of fiscal 2014 was $5.1 million, compared to an operating loss of $6.8 million in the third quarter of the previous year. The improvement in operating loss for the third quarter of fiscal 2014 was primarily driven by a more favorable revenue mix, lower professional fees and improved operational cost efficiency. Net loss for the third quarter of fiscal 2014 was $9.5 million, or $0.18 per share, compared to a net loss of $8.3 million, or $0.17 per share. For the third quarter of fiscal 2014, Adjusted EBITDA was $3.4 million compared to $2.2 million for the same period in fiscal 2013. 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. About ModusLink ModusLink Corporation, a wholly owned subsidiary of ModusLink Global Solutions, Inc. (NASDAQ: MLNK), executes comprehensive supply chain and logistics services that are designed to 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 operations are supported by 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 ofprofessional fees associated with our SEC inquiry and financial restatement, strategic alternatives and other professional fees, executive severance and employee retention, restructuring, share-based compensation, impairments of goodwill and long-lived assets, unrealized foreign exchange gains or losses, net, 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 any 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; failure to realize expected benefits of restructuring and cost-cutting actions; difficulties integrating technologies, operations and personnel in accordance with the Company’s business strategy; client or program 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; 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 theSecurities 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. The Company does not undertake any obligations to update forward-looking statements made by it. ModusLink Global Solutions, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands) (unaudited) April 30, July 31, April 30, 2014 2013 2013 Assets: Cash and cash equivalents $ 170,554 $ 77,916 $ 71,176 Accounts receivable, net 139,051 142,098 151,660 Inventories 62,275 61,322 70,331 Prepaid expenses and other current 11,747 9,750 11,047 assets Total current assets 383,627 291,086 304,214 Property and equipment, net 27,009 34,290 35,329 Investments in affiliates 7,000 7,970 9,326 Goodwill 3,058 3,058 3,058 Other intangible assets, net 935 1,764 2,045 Other assets 7,357 5,528 6,991 Total assets $ 428,986 $ 343,696 $ 360,963 Liabilities: Accounts payable $ 99,977 $ 110,148 $ 112,417 Accrued restructuring 2,538 4,670 3,347 Accrued expenses 39,681 34,748 39,328 Other current liabilities 25,488 26,865 28,936 Total current liabilities 167,684 176,431 184,028 Long-term portion of accrued 235 494 - restructuring Notes payable 72,320 - - Other long-term liabilities 9,950 9,866 9,805 Total liabilities 250,189 186,791 193,833 Total stockholders' equity: 178,797 156,905 167,130 Total liabilities and stockholders' $ 428,986 $ 343,696 $ 360,963 equity ModusLink Global Solutions, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three months ended Nine months ended April 30, April 30, 2014 2013 Fav 2014 2013 Fav (Unfav) (Unfav) Net revenue $ 173,274 $ 173,016 0.1 % $ 558,700 $ 573,503 (2.6 %) Cost of 157,575 157,641 0.0 % 498,426 519,226 4.0 % revenue Gross profit 15,699 15,375 2.1 % 60,274 54,277 11.0 % 9.1 % 8.9 % 0.1 % 10.8 % 9.5 % 1.3 % Operating expenses: Selling, general and 17,100 19,287 11.3 % 54,787 67,149 18.4 % administrative Amortization of intangible 269 283 4.9 % 829 852 2.7 % assets Impairment of long-lived - - 0.0 % 500 - (100.0 %) assets Restructuring, 3,468 2,565 (35.2 %) 5,440 8,833 38.4 % net Total operating 20,837 22,135 5.9 % 61,556 76,834 19.9 % expenses Operating (5,138 ) (6,760 ) 24.0 % (1,282 ) (22,557 ) 94.3 % income (loss) Other income (3,640 ) (677 ) (437.7 %) (3,871 ) (4,510 ) 14.2 % (expense), net Income (loss) from continuing (8,778 ) (7,437 ) (18.0 %) (5,153 ) (27,067 ) 81.0 % operations before income taxes Income tax 700 392 (78.6 %) 2,590 1,975 (31.1 %) expense Equity in losses of - 418 100.0 % 134 1,453 90.8 % affiliates, net of tax Income (loss) from (9,478 ) (8,247 ) (14.9 %) (7,877 ) (30,495 ) 74.2 % continuing operations Discontinued operations, net of income taxes: Income (loss) from - (59 ) 100.0 % 80 (1,019 ) 107.9 % discontinued operations Net income $ (9,478 ) $ (8,306 ) (14.1 %) $ (7,797 ) $ (31,514 ) 75.3 % (loss) Basic and diluted net income (loss) per share: Income (loss) from $ (0.18 ) $ (0.17 ) (7.0 %) $ (0.15 ) $ (0.68 ) 77.4 % continuing operations Income (loss) from - - 0.0 % - (0.02 ) 100.0 % discontinued operations Net income $ (0.18 ) $ (0.17 ) (7.0 %) $ (0.15 ) $ (0.70 ) 78.1 % (loss) Shares used in computing income (loss) per share: Basic 51,498 47,968 51,502 45,046 Diluted 51,498 47,968 51,502 45,046 ModusLink Global Solutions, Inc. and Subsidiaries Condensed Consolidated Statements of Operations Information by Operating Segment (in thousands) (unaudited) Three months ended Nine months ended April 30, April 30, April 30, April 30, 2014 2013 2014 2013 Net revenue: Americas $ 74,429 $ 64,496 $ 229,791 $ 196,137 Asia 41,387 48,133 134,307 164,864 Europe 48,423 51,952 165,790 188,700 All other 9,035 8,435 28,812 23,802 Total net $ 173,274 $ 173,016 $ 558,700 $ 573,503 revenue Operating income (loss): Americas $ 2,736 $ 679 $ 8,304 $ (1,820 ) Asia 2,342 3,614 14,001 16,379 Europe (4,439 ) (5,868 ) (8,934 ) (13,579 ) All other (411 ) 301 98 (256 ) Total segment operating 228 (1,274 ) 13,469 724 income (loss) Other reconciling (5,366 ) (5,486 ) (14,751 ) (23,281 ) items Total operating $ (5,138 ) $ (6,760 ) $ (1,282 ) $ (22,557 ) income (loss) ModusLink Global Solutions, Inc. and Subsidiaries Reconciliation of Selected Non-GAAP Measures to GAAP Measures (in thousands) (unaudited) Net Income (Loss) to Adjusted EBITDA^1 Three months ended Nine months ended April 30, April 30, April 30, April 30, 2014 2013 2014 2013 Net income (loss) $ (9,478 ) $ (8,306 ) $ (7,797 ) $ (31,514 ) Interest income (159 ) (64 ) (326 ) (229 ) Interest expense 2,049 324 2,461 524 Income tax 700 392 2,590 1,975 expense Depreciation 3,627 3,362 10,198 10,211 Amortization of 269 283 829 852 intangible assets EBITDA (2,992 ) (4,009 ) 7,955 (18,181 ) SEC inquiry and financial 103 1,604 3,320 8,239 restatement costs Strategic alternatives and 30 (155 ) 85 1,235 other professional fees Executive severance and 1,080 224 1,080 1,262 employee retention Restructuring 3,468 2,565 5,440 8,833 Share-based 513 925 1,663 1,841 compensation Impairment of goodwill and - - 500 - long-lived assets Unrealized foreign exchange 25 483 (323 ) 2,750 (gains) losses, net Other non-operating (30 ) 127 (391 ) 366 (gains) losses, net Equity in losses of affiliates and 1,243 418 1,554 2,953 impairments Discontinued - 59 (80 ) 1,019 operations Adjusted EBITDA $ 3,440 $ 2,241 $ 20,803 $ 10,317 ^1 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 financial restatement costs, strategic alternatives and other professional fees, executive severance and employee retention, restructuring, share-based compensation, impairment of goodwill and long-lived assets, unrealized foreign exchange (gains) losses, net, 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 firstname.lastname@example.org
ModusLink Reports Financial Results for Third Quarter of Fiscal 2014
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