ModusLink Reports Financial Results for Third Quarter of Fiscal 2014

  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
ir@moduslink.com
 
Press spacebar to pause and continue. Press esc to stop.