8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 11, 2016

 

 

ModusLink Global Solutions, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-35319   04-2921333
(State or other jurisdiction of incorporation)   (Commission File No.)   (IRS Employer Identification No.)

 

1601 Trapelo Road, Suite 170

Waltham, Massachusetts

  02451
(Address of principal executive offices)   (Zip Code)

(781) 663-5000

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 


 

Item 2.02 Results of Operations and Financial Condition.

On March 11, 2016, ModusLink Global Solutions, Inc. (the “Registrant”) reported its results of operations for its second quarter of fiscal year 2016 ended January 31, 2016. A copy of the press release issued by the Registrant concerning the foregoing results is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.

  

Description

99.1    Press Release.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    ModusLink Global Solutions, Inc.
Date: March 11, 2016     By:   /S/ JOSEPH B. SHERK
    Name:   Joseph B. Sherk
    Title:  

Principal Financial Officer and Principal

Accounting Officer

EX-99.1

Exhibit 99.1

MODUSLINK REPORTS FINANCIAL RESULTS FOR SECOND QUARTER OF FISCAL 2016

WALTHAM, Mass.— March 11, 2016—ModusLink Global Solutions™, Inc. (the “Company”) (NASDAQ: MLNK), on March 11, 2016, reported financial results for its second quarter of fiscal year 2016 ended January 31, 2016. Results for the three and six month periods ended January 31, 2016 are summarized in the following paragraphs. For a full discussion of the results, please see the Company’s report on Form 10-Q, which can be accessed through www.moduslink.com.

Second Quarter Financial Summary

 

¡ Net revenue of $120.0 million for the three months ended January 31, 2016, as compared to $148.3 million in the same period in the prior year.
¡ Gross margin of 3.0% for the three months ended January 31, 2016, as compared to 11.2% in the same period in the prior year.
¡ SG&A expenses of $14.8 million for the three months ended January 31, 2016, compared to $14.6 million in the same period in the prior year.
¡ Operating loss of $(11.7) million for the three months ended January 31, 2016, compared to operating income of $0.6 million in the same period in the prior year.
¡ Negative Adjusted EBITDA of $(7.0) million for the three months ended January 31, 2016, compared to Adjusted EBITDA of $4.7 million in the same period in the prior year.
¡ Net loss of $(13.9) million, or $(0.27) per basic and diluted share, for the three months ended January 31, 2016, compared with net loss of $(1.6) million, or $(0.03) per basic and diluted share, in the same period in the prior year.

Year-to-Date Financial Summary

 

¡ Net revenue of $261.1 million for the six months ended January 31, 2016, as compared to $335.8 million in the same period in the prior year.
¡ Gross margin of 6.2% for the six months ended January 31, 2016, as compared to 10.6% in the same period in the prior year.
¡ SG&A expenses of $29.0 million for the six months ended January 31, 2016, compared to $30.2 million in the same period in the prior year.
¡ Operating loss of $(14.5) million for the six months ended January 31, 2016, compared to operating income of $1.8 million in the same period in the prior year.
¡ Negative Adjusted EBITDA of $(6.4) million for the six months ended January 31, 2016, compared to adjusted EBITDA of $12.2 million in the same period in the prior year.
¡ Net loss of $(28.7) million, or $(0.55) per basic and diluted share, for the six months ended January 31, 2016, compared with net loss of $(1.3) million, or $(0.03) per basic and diluted share, in the same period in the prior year.


The decrease in net revenue, gross margin, operating income and adjusted EBITDA for the three months ended January 31, 2016, as compared to the same period in the prior year, was primarily driven by decreased revenue associated with a consumer electronics client and an aftermarket services program related to the repair and refurbishment of mobile devices, partially offset by increases in revenue from other consumer electronics and consumer products clients. The lower revenue from the consumer electronics client affected results in the Americas and Asia. The lower revenue from the aftermarket services program affected results in the Americas.

The decrease in net revenue, gross margin, operating income and adjusted EBITDA for the six months ended January 31, 2016, as compared to the same period in the prior year, was primarily driven by decreased revenue associated with a major computing market client, an aftermarket services program related to the repair and refurbishment of mobile devices and a major consumer electronics client, partially offset by an increase in revenue from other clients in the consumer electronics and consumer products industries. The lower revenue from the computing market clients affected results in the Americas, Asia and Europe. The lower revenue from the aftermarket services program affected results in the Americas. The lower revenues from the major consumer electronics client affected results in the Americas and Asia.

For the three months ended January 31, 2016, negative Adjusted EBITDA was $(7.0) million compared to Adjusted EBITDA of $4.7 million for the same period in the prior year. 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 the six months ended January 31, 2016, negative Adjusted EBITDA was $(6.4) million compared to Adjusted EBITDA of $12.2 million for the same period in the prior year. 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 Global Solutions, Inc.

ModusLink Global Solutions, Inc. (NASDAQ: MLNK), through its wholly-owned subsidiaries, ModusLink Corporation and ModusLink PTS, Inc. (together “ModusLink”), 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. ModusLink’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 of SEC inquiry and financial restatement costs, strategic consulting and other related professional fees, restructuring, share-based compensation, impairment of long-lived assets, unrealized foreign exchange gains and losses, net, other non-operating gains and losses, net, and gains and losses, and equity in gains and losses, of affiliates and impairments.

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; the Company’s ability to preserve and monetize its net operating losses; 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; failure to settle disputes and litigation on terms favorable to the Company; 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 the Securities and Exchange Commission, including the Company’s most recent Annual Report on Form 10-K. 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.

Contact:

Mary Conway

781-663-5012

ir@moduslink.com


ModusLink Global Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     January 31,
2016
     July 31,
2015
 

Assets:

     

Cash and cash equivalents

   $ 141,434       $ 119,431   

Trading securities

     27,982         78,716   

Accounts receivable, net

     162,044         131,216   

Inventories

     48,235         48,740   

Funds held for clients

     31,920         21,807   

Prepaid and other current assets

     22,794         13,732   
  

 

 

    

 

 

 

Total current assets

     434,409         413,642   
  

 

 

    

 

 

 

Property and equipment, net

     21,494         22,736   

Other assets

     9,455         10,124   
  

 

 

    

 

 

 

Total assets

   $ 465,358       $ 446,502   
  

 

 

    

 

 

 

Liabilities:

     

Accounts payable

   $ 158,564       $ 120,118   

Accrued restructuring

     1,075         1,528   

Accrued expenses

     40,311         38,970   

Other current liabilities

     57,662         50,737   
  

 

 

    

 

 

 

Total current liabilities

     257,612         211,353   
  

 

 

    

 

 

 

Notes payable

     80,337         77,864   

Other long-term liabilities

     12,550         12,684   
  

 

 

    

 

 

 

Total liabilities

     350,499         301,901   
  

 

 

    

 

 

 

Stockholders' equity:

     114,859         144,601   
  

 

 

    

 

 

 

Total liabilities and stockholders' equity

   $ 465,358       $ 446,502   
  

 

 

    

 

 

 


ModusLink Global Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended January 31,     Six Months Ended January 31,  
     2016     2015     Fav
(Unfav)
    2016     2015     Fav
(Unfav)
 

Net revenue

   $ 119,966      $ 148,310        (19.1 %)    $ 261,055      $ 335,754        (22.2 %) 

Cost of revenue

     116,311        131,716        11.7     244,948        300,322        18.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     3,655        16,594        (78.0 %)      16,107        35,432        (54.5 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     3.0     11.2     (8.1 %)      6.2     10.6     (4.4 %) 

Operating expenses:

            

Selling, general and administrative

     14,773        14,639        (0.9 %)      29,025        30,161        3.8

Amortization of intangible assets

     —          268        —          —          536        —     

Impairment of long-lived assets

     305        —          —          305        —          —     

Restructuring, net

     240        1,041        76.9     1,247        2,942        57.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     15,318        15,948        4.0     30,577        33,639        9.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (11,663     646        (1905.4 %)      (14,470     1,793        (907.0 %) 

Other income (expense), net

     (2,338     (1,853     (26.2 %)      (13,454     (1,629     (725.9 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before taxes

     (14,001     (1,207     (1060.0 %)      (27,924     164        (17126.8 %) 

Income tax expense

     206        549        62.5     1,056        1,706        38.1

(Gains) losses, and equity in losses, of affiliates, net of tax

     (259     (200     29.5     (259     (208     24.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (13,948   $ (1,556     (796.4 %)    $ (28,721   $ (1,334     (2053.0 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net loss per share

   $ (0.27   $ (0.03     $ (0.55   $ (0.03  

Diluted net loss per share

   $ (0.27   $ (0.03     $ (0.55   $ (0.03  

Weighted average common shares used in:

            

Basic earnings per share

     51,879        51,646          52,039        51,888     

Diluted earnings per share

     51,879        51,646          52,039        51,888     


ModusLink Global Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations Information by Operating Segment

(in thousands)

(unaudited)

 

     Three Months Ended
January 31,
    Six Months Ended
January 31,
 
     2016     2015     2016     2015  

Net revenue:

        

Americas

   $ 28,208      $ 53,242      $ 61,419      $ 135,040   

Asia

     44,476        45,493        98,407        88,448   

Europe

     38,656        40,626        83,399        95,041   

e-Business

     8,626        8,949        17,830        17,225   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

   $ 119,966      $ 148,310      $ 261,055      $ 335,754   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss):

        

Americas

   $ (4,911   $ (139   $ (7,997   $ 1,479   

Asia

     (325     4,677        3,046        8,030   

Europe

     (4,239     (952     (5,270     (2,330

e-Business

     (397     361        (901     522   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment operating income (loss)

     (9,872     3,947        (11,122     7,701   

Corporate-level activity

     (1,791     (3,301     (3,348     (5,908
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income (loss)

   $ (11,663   $ 646      $ (14,470   $ 1,793   
  

 

 

   

 

 

   

 

 

   

 

 

 


ModusLink Global Solutions, Inc. and Subsidiaries

Reconciliation of Selected Non-GAAP Measures to GAAP Measures

(in thousands)

(unaudited)

 

Net loss to Adjusted EBITDA1

        
     Three Months Ended
January 31,
    Six Months Ended
January 31,
 
     2016     2015     2016     2015  

Net income (loss)

   $ (13,948   $ (1,556   $ (28,721   $ (1,334

Interest income

     (114     (355     (202     (419

Interest expense

     2,777        2,619        5,506        5,286   

Income tax expense

     206        549        1,056        1,706   

Depreciation

     1,919        1,919        3,874        4,729   

Amortization of intangible assets

     —          268        —          536   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     (9,160     3,444        (18,487     10,504   

SEC inquiry and financial restatement costs

     345        30        167        7   

Strategic consulting and other related professional fees

     277        232        284        609   

Restructuring

     240        1,041        1,247        2,942   

Share-based compensation

     502        446        958        855   

Impairment of long-lived assets

     305        —          305        —     

Unrealized foreign exchange (gains) losses, net

     1,087        (1,537     1,816        (1,591

Other non-operating (gains) losses, net

     (384     1,224        7,540        (899

(Gains) losses, and equity in losses, of affiliates and impairments

     (259     (200     (217     (208
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (7,047   $ 4,680      $ (6,387   $ 12,219   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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 consulting and other related professional fees, restructuring, share-based compensation, impairment of long-lived assets, unrealized foreign exchange gains and losses, net, other non-operating gains and losses, net, and gains and losses, and equity in losses, of affiliates and impairments.