View Filing Data

Print Document View Excel Document

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Oct. 31, 2018	Dec. 01, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Trading Symbol	STCN
Entity Registrant Name	STEEL CONNECT, INC.
Entity Central Index Key	0000914712
Current Fiscal Year End Date	--07-31
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		61,386,888

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
ASSETS
Cash and cash equivalents	$ 83,366	$ 92,138
Trading securities	0	0
Accounts receivable, trade, net of allowance for doubtful accounts of $481 and $480 at October 31, 2018 and July 31, 2018, respectively	115,747	99,254
Inventories, net	29,969	47,786
Restricted cash	12,785	11,688
Prepaid expenses and other current assets	34,187	13,415
Total current assets	276,054	264,281
Property and equipment, net	104,658	106,632
Goodwill	254,352	254,352
Other intangible assets, net	184,865	192,964
Other assets	7,798	8,821
Total assets	827,727	827,050
LIABILITIES, CONTINGENTLY REDEEMABLE PREFERRED STOCK & STOCKHOLDERS' EQUITY
Accounts payable	90,773	78,212
Accrued expenses	84,929	88,330
Restricted cash	12,785	11,688
Current portion of long-term debt	5,727	5,727
Other current liabilities	38,408	42,125
Convertible Notes payable	47,575	50,274
Total current liabilities	280,197	276,356
Convertible Notes payable	14,510	14,256
Long-term debt, excluding current portion	381,679	383,111
Other long-term liabilities	10,712	10,507
Total long-term liabilities	406,901	407,874
Total liabilities	687,098	684,230
Contingently redeemable preferred stock, $0.01 par value per share. 35,000 shares authorized, issued and outstanding at October 31, 2018 and July 31, 2018	35,198	35,192
Stockholders' equity:
Preferred stock, $0.01 par value per share. 4,965,000 shares authorized, issued and outstanding at October 31, 2018 and July 31, 2018
Common stock, $0.01 par value per share. Authorized 1,400,000,000 shares; 61,386,888 issued and outstanding shares at October 31, 2018; 60,742,859 issued and outstanding shares at July 31, 2018	614	608
Additional paid-in capital	7,468,647	7,467,855
Accumulated deficit	(7,365,332)	(7,363,569)
Accumulated other comprehensive income	1,502	2,734
Total stockholders' equity	105,431	107,628
Total liabilities, contingently redeemable preferred stock and stockholders' equity	$ 827,727	$ 827,050

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Accounts receivable, trade, allowance for doubtful accounts	$ 481	$ 480
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares Authorized	4,965,000	4,965,000
Preferred stock, shares issued	4,965,000	4,965,000
Preferred stock, shares outstanding	4,965,000	4,965,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares Authorized	1,400,000,000	1,400,000,000
Common stock, shares issued	61,386,888	60,742,859
Common stock, shares outstanding	61,386,888	60,742,859
Contingent Convertible Preferred Stock
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares Authorized	35,000	35,000
Preferred stock, shares issued	35,000	35,000
Preferred stock, shares outstanding	35,000	35,000

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Net revenue	$ 215,133	$ 102,522
Cost of revenue	176,933	93,448
Gross profit	38,200	9,074
Operating expenses
Selling, general and administrative	26,565	12,904
Amortization of intangible assets	8,099
Total operating expenses	34,664	12,904
Operating income (loss)	3,536	(3,830)
Other income (expense):
Interest income	323	164
Interest expense	(11,057)	(2,107)
Other gains, net	944	1,422
Total other expense	(9,790)	(521)
Loss before income taxes	(6,254)	(4,351)
Income tax expense	1,131	1,087
Gains on investments in affiliates, net of tax	(20)	(201)
Net loss	(7,365)	(5,237)
Less: Preferred dividends on redeemable preferred stock	(536)
Net loss attributable to common stockholders	$ (7,901)	$ (5,237)
Basic and diluted net loss per share attributable to common stockholders:	$ (0.13)	$ (0.09)
Weighted average common shares used in basic and diluted loss per share:	60,712	55,260

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Net loss	$ (7,365)	$ (5,237)
Other comprehensive income (loss):
Foreign currency translation adjustment	(1,622)	272
Net unrealized holding gain on securities, net of tax	(15)	(13)
Pension liability adjustments, net of tax	405	26
Other comprehensive income (loss)	(1,232)	285
Comprehensive loss	$ (8,597)	$ (4,952)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income
Balance at Jul. 31, 2017	$ 62,971	$ 556	$ 7,457,051	$ (7,398,949)	$ 4,313
Balance, shares at Jul. 31, 2017		55,555,973
Net loss	(5,237)			(5,237)
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises	3		3
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises, shares		1,353
Share-based compensation	292		292
Other comprehensive items	285				285
Balance at Oct. 31, 2017	58,314	$ 556	7,457,346	(7,404,186)	4,598
Balance, shares at Oct. 31, 2017		55,557,326
Balance at Jul. 31, 2018	$ 107,628	$ 608	7,467,855	(7,363,569)	2,734
Balance, shares at Jul. 31, 2018	60,742,859	60,742,859
Net loss	$ (7,365)			(7,365)
Effect of adoption of accounting standards	6,138			6,138
Preferred dividends	(536)			(536)
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises	6		6
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises, shares		3,107
Restricted stock grants		$ 6	(6)
Restricted stock grants, shares		640,922
Share-based compensation	792		792
Other comprehensive items	(1,232)				(1,232)
Balance at Oct. 31, 2018	$ 105,431	$ 614	$ 7,468,647	$ (7,365,332)	$ 1,502
Balance, shares at Oct. 31, 2018	61,386,888	61,386,888

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Cash flows from operating activities:
Net loss	$ (7,365)	$ (5,237)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	5,533	1,892
Amortization of intangible assets	8,099
Amortization of deferred financing costs	247	177
Accretion of debt discount	1,051	1,041
Share-based compensation	792	292
Other (gains) losses, net	(944)	(1,422)
Gains on investments in affiliates and impairments	(20)	(201)
Changes in operating assets and liabilities, net of business acquired:
Accounts receivable, net	(17,558)	(3,808)
Inventories, net	(3,815)	2,926
Prepaid expenses and other current assets	2,781	(1,511)
Accounts payable, accrued restructuring and accrued expenses	11,301	(1,879)
Refundable and accrued income taxes, net	(442)	1,409
Other assets and liabilities	2,873	(1,353)
Net cash provided by (used in) operating activities	2,533	(7,674)
Cash flows from investing activities:
Additions to property and equipment	(4,006)	(2,464)
Proceeds from the disposition of property and equipment	14	4,247
Proceeds from the sale of Trading Securities		13,775
Proceeds from investments in affiliates	20	201
Net cash (used in) provided by investing activities	(3,972)	15,759
Cash flows from financing activities:
Payment of long-term debt	(1,500)
Payment of preferred dividends	(536)
Purchase of the Company's Convertible Notes	(3,700)
Repayments on capital lease obligations	(148)	(79)
Proceeds from issuance of common stock	6	3
Net cash used in financing activities	(5,878)	(76)
Net effect of exchange rate changes on cash, cash equivalents, and restricted cash	(358)	(32)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(7,675)	7,977
Cash, cash equivalents, and restricted cash, beginning of period	103,826	124,124
Cash, cash equivalents, and restricted cash, end of period	$ 96,151	$ 132,101

NATURE OF OPERATIONS

3 Months Ended

Oct. 31, 2018

NATURE OF OPERATIONS

(1) NATURE OF OPERATIONS

Steel Connect, Inc. (“Steel Connect” or the “Company”) together with its consolidated subsidiaries, operates through its wholly owned subsidiaries, ModusLink Corporation and ModusLink PTS, Inc. (together “ModusLink” or “Supply Chain“), and IWCO Direct Holdings, Inc. (“IWCO Direct” or “IWCO”). The Company was formerly known as ModusLink Global Solutions, Inc. until it changed its name to Steel Connect, Inc. effective February 27, 2018.

ModusLink is a supply chain business process management company serving clients in markets such as consumer electronics, communications, computing, medical devices, software, and retail. ModusLink designs and executes elements in its clients’ global supply chains to improve speed to market, product customization, flexibility, cost, quality and service. The Company also produces and licenses an entitlement management solution for activation, provisioning, entitlement subscription and data collection from physical goods (connected products) and digital products.

ModusLink has an integrated network of strategically located facilities with 20 sites operating in 21 languages in various countries, including numerous sites throughout North America, Europe and Asia. The Company previously operated under the names ModusLink Global Solutions, Inc., CMGI, Inc. and CMG Information Services, Inc. and was incorporated in Delaware in 1986.

IWCO Direct delivers data-driven marketing solutions for its customers. Its full range of services includes strategy, creative and execution for omnichannel marketing campaigns, along with postal logistics programs for direct mail. Through its Mail-Gard^® division, IWCO Direct also offers business continuity and disaster recovery services to protect against unexpected business interruptions, along with providing print and mail outsourcing services.

IWCO has administrative offices in Chanhassen, MN. and has three facilities in Chanhassen, MN., one facility in Little Falls, MN., one facility in Warminster, PA. and two facilities in Hamburg PA.

Historically, the Company has financed its operations and met its capital requirements primarily through funds generated from operations, the sale of our securities, borrowings from lending institutions, and sale of facilities that were not fully utilized. The Company believes it has access to adequate resources to meet its needs for normal operating costs, capital expenditures, mandatory debt redemptions and working capital for its existing business for at least twelve months from the date of this filing. These resources include cash and cash equivalents, a credit agreement with PNC Bank (the “Credit Agreement”) the securitization of trade receivables and the revolving credit facility and cash, if any, provided by operating activities.

At October 31, 2018 and July 31, 2018, the Company had cash and cash equivalents of $83.4 million and $92.1 million, respectively. As of October 31, 2018, the Company had a deficiency in working capital which was primarily driven by the partial reclassification of the Company’s convertible notes from long-term to current and the additional liabilities assumed as a result of the IWCO acquisition. At October 31, 2018, the Company had a readily available borrowing capacity under its revolving credit and security agreement with PNC Bank and National Association of $9.0 million. At October 31, 2018, IWCO had a readily available borrowing capacity under its revolving credit facility by and among MLGS Merger Company, Inc. (“MLGS”), Instant Web, LLC and Cerberus Business Finance, LLC of $25.0 million. Per that certain financing agreement by and among MLGS, Instant Web, LLC, IWCO and Cerberus Business Finance, LLC (the “Financing Agreement”) and the credit facilities provided thereunder, IWCO is permitted to make distributions to Steel Connect, an aggregate amount not to exceed $5.0 million in any fiscal year and pay reasonable documented expenses incurred by Steel Connect. Steel Connect is entitled to receive additional cash remittances under a “U.S. Federal Income Tax Sharing Agreement.” As of October 31, 2018, SPHG Group Holdings LLC (“SPHG Holdings”) held $14.9 million principal amount of the Company’s 5.25% Convertible Senior Notes (the “Notes”). SPHG Holdings has confirmed to the Company that it will not require a cash payment on Notes when they mature and for a period of greater than twelve months from the date of this filing. The Company believes it will generate sufficient cash to meet its debt covenants under the Credit Agreement and the Financing Agreement to which certain of its subsidiaries are a party, to repay or restructure its the Notes, and that it will be able to obtain cash through its current credit facilities and through securitization of certain trade receivables. The Company’s historical operating results and working capital deficit indicate substantial doubt exists related to the Company’s ability to continue as a going concern. The Company believes that the actions discussed above are probable of occurring and mitigating the substantial doubt raised by the Company’s historical operating results and satisfying the Company’s estimated liquidity needs 12 months from the issuance of the financial statements. However, the Company cannot predict, with certainty, the outcome of its actions to generate liquidity, including the availability of additional debt refinancing or factoring of receivables, or whether such actions would generate the expected liquidity as currently planned. Our conclusion on going concern is predicated upon the factoring of certain accounts receivable balances, which has not yet occurred.

BASIS OF PRESENTATION

3 Months Ended

Oct. 31, 2018

BASIS OF PRESENTATION

(2) BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes for the year ended July 31, 2018, which are contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on December 4, 2018. The results for the three months ended October 31, 2018 are not necessarily indicative of the results to be expected for the full fiscal year. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

All significant intercompany transactions and balances have been eliminated in consolidation.

The Company considers events or transactions that occur after the balance sheet date but before the issuance of financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. For the period ended October 31, 2018, the Company evaluated subsequent events for potential recognition and disclosure through the date these financial statements were filed.

RECENT ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Oct. 31, 2018

RECENT ACCOUNTING PRONOUNCEMENTS

(3) RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606 or the new standard), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. On August 1, 2018, the Company adopted this guidance and all the related amendments using the modified retrospective method for all contracts not completed as of the date of adoption. For contracts that were modified before the effective date, the Company reflected the aggregate effect of all modifications when identifying performance obligations and allocating transaction price in accordance with practical expedient ASC 606-10-65-1-(f)-4, which did not have a material effect on the Company’s assessment of the cumulative effect adjustment upon adoption. The Company recognized the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

In August 2014, the FASB issued ASU No. 2014-15 Presentation of Financial Statements—Going Concern (Subtopic 205-40), which amends the accounting guidance related to the evaluation of an entity’s ability to continue as a going concern. The amendment establishes management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern in connection with preparing financial statements for each annual and interim reporting period. The update also gives guidance to determine whether to disclose information about relevant conditions and events when there is substantial doubt about an entity’s ability to continue as a going concern. The Company adopted this guidance as of the first quarter of fiscal year 2018 and has provided additional disclosures in accordance with the new standard.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330), which provides guidance related to inventory measurement. The new standard requires entities to measure inventory at the lower of cost and net realizable value thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The Company adopted this guidance beginning the first quarter of fiscal year 2018. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’s accounting. This ASU will be effective for the Company beginning in the first quarter of fiscal year 2020. The Company is currently evaluating the effect the guidance will have on the Company’s financial statement disclosures, results of operations and financial position.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The Company retrospectively adopted this guidance during the first quarter of fiscal year 2018 by utilizing the modified retrospective transition method. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. Entities will also have to disclose the nature of their restricted cash and restricted cash equivalent balances. We adopted this accounting standard update beginning in the first quarter of fiscal year 2019 using a retrospective transition method to each period presented. The restricted cash balance on our consolidated balance sheets represents funds held on the behalf of the Company’s clients. The application of this accounting standard update did not have a material impact on our Consolidated Statements of Cash Flows. Prior period information has been retrospectively adjusted due to the adoption of ASU 2016-18, Statement of Cash Flows, Restricted Cash in the beginning of the first quarter of fiscal year 2018.

In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715), which requires that the service cost component of net periodic pension and postretirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense). This ASU became effective beginning in the first quarter of fiscal year 2019. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

REVENUE RECOGNITION

3 Months Ended

Oct. 31, 2018

REVENUE RECOGNITION

(4) REVENUE RECOGNITION

Adoption of ASC Topic 606, “Revenue from Contracts with Customers”

On August 1, 2018, the Company adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of August 1, 2018. Results for reporting periods beginning after August 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605.

The Company recognizes revenue from its contracts with customers primarily from the sale of supply chain management services and marketing solutions offerings. Revenue is recognized when control of the promised goods or services is transferred to a customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. For ModusLink’s supply chain management services arrangements and IWCO’s marketing solutions offerings, the services are considered to be transferred over time as they are performed. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

ModusLink’s revenue primarily comes from the sale of supply chain management services to its clients. Under the new standard, the majority of these arrangements consist of two distinct performance obligations (i.e. a warehousing and inventory management service and a separate kitting, packaging and assembly service), each of which is recognized over time as services are performed using an input method based on the level of efforts expended. A significant portion of ModusLink’s revenue from these arrangements continues to be recognized over time as the services are performed based on an input method of efforts expended which corresponds with the transfer of value to the customer. For the limited population of contracts where the Company previously recognized revenues upon completion of all services and historically recognized revenue at a point in time (generally upon product shipment), the new standard accelerates the recognition of revenue as the Company’s performance enhances assets that the customer controls and therefore revenue is recognized over time based on an input method of efforts expended which corresponds with the transfer of value to the customer.

Revenue from the sale of perpetual licenses sold in ModusLink’s e-Business operations is now recognized at a point in time upon execution of the relevant license agreement and when delivery has taken place.

Revenue recognized related to the majority of IWCO’s marketing solutions offerings, which typically consist of a single integrated performance obligation, is now recognized over time as the Company performs because the products have no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.

Revenue Recognition

In accordance with Topic 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from customers which are subsequently remitted to government authorities. To achieve this core principle, the Company applies the following five steps:

Identify the contract(s) with a customer - A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to those goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company’s arrangements with customers are typically documented within a master services agreement (MSA) together with a statement of work (SOW) or business requirements document (BRD). Depending on the nature of the goods and/or services being provided, a contract will be created at the time that the Company and the customer have entered into an MSA and SOW or BRD, and the Company has received some form of authorization or acknowledgment from the customer as to the request for the specified services. For certain goods and/or services, a contract does not exist until the Company receives a firm order to commence the specified activities. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

Identify the performance obligations in the contract - Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, the Company must apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

The Company’s contracts typically do not include options that would result in a material right. If options to purchase additional goods or services are included in customer contracts, the Company evaluates the option in order to determine if the Company’s arrangement include promises that may represent a material right and needs to be accounted for as a performance obligation in the contract with the customer. The Company did not note any significant provisions within its typical contracts that would create a material right.

Determine the transaction price - The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts as of October 31, 2018 contained a significant financing component. Determining the transaction price requires significant judgment.

Allocate the transaction price to the performance obligations in the contract - If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price (SSP) basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct good or service that forms part of a single performance obligation. The Company determines SSP based on the price at which the performance obligation is sold separately. If the SSP is not observable through past transactions, the Company estimates the SSP taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

Recognize revenue when (or as) the Company satisfies a performance obligation - The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

Disaggregation of Revenue

The following table presents the Company’s revenues disaggregated by major good or service line, timing of revenue recognition, and sales channel (in thousands). The table also includes a reconciliation of the disaggregated revenue with the reportable segments.


	Three Months Ended October 31, 2018
	Americas		Asia		Europe		Direct Marketing		e-Business		Consolidated Total
	(In thousands)
Major Goods/Service Lines
Supply chain management services	$	17,440	$	44,256	$	19,521	$	—	$	5,409	$	86,626
Perpetual software licenses		—		—		—		—		—		—
Marketing solutions offerings		—		—		—		128,094		—		128,094
Other		—		—		—		—		413		413

		17,440		44,256		19,521		128,094		5,822		215,133
Timing of Revenue Recognition
Goods transferred over time		—		—		—		128,094		—		128,094
Services transferred over time		17,440		44,256		19,521		—		5,822		87,039

		17,440		44,256		19,521		128,094		5,822		215,133
Total Revenue
Revenue from contracts with customers		17,440		44,256		19,521		128,094		5,822		215,133

	$	17,440	$	44,256	$	19,521	$	128,094	$	5,822	$	215,133

Over the three months ended October 31, 2018, the Company had no revenue recognized at a point in time. Prior period amounts have not been adjusted under the modified retrospective method.

Supply chain management services.

ModusLink’s revenue primarily comes from the sale of supply chain management services to its clients. Amounts billed to customers under these arrangements include revenue attributable to the services performed as well as for materials procured on the customer’s behalf as part of its service to them. The majority of these arrangements consist of two distinct performance obligations (i.e. warehousing/inventory management service and a separate kitting/packaging/assembly service), revenue related to each of which is recognized over time as services are performed using an input method based on the level of efforts expended.

Perpetual software licenses.

Revenue from the sale of perpetual software licenses in the Company’s e-Business operations is recognized at a point in time upon execution of the relevant license agreement and when delivery has taken place.

Marketing solutions offerings.

IWCO’s revenue is generated through the provision of data-driven marketing solutions, primarily through providing direct mail products to customers. Revenue related to the majority of IWCO’s marketing solutions contracts, which typically consist of a single integrated performance obligation, is recognized over time as the Company performs because the products have no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.

Other.

Other revenue consists of cloud-based software subscriptions, software maintenance and support service contracts, and fees for professional services. Revenue related to these arrangements is recognized on a straight-line basis over the term of the agreement or over the term of the agreement in proportion to the costs incurred in satisfying the obligations under the contract.

Significant Judgments

The Company’s contracts with customers may include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. For arrangements with multiple performance obligations, the Company allocates revenue to each performance obligation based on its relative standalone selling price. Judgment is required to determine the standalone selling price for each distinct performance obligation. The Company generally determines standalone selling prices based on the prices charged to customers and uses a range of amounts to estimate standalone selling prices when we sell each of the products and services separately and need to determine whether there is a discount that needs to be allocated based on the relative standalone selling prices of the various products and services. The Company typically has more than one range of standalone selling prices for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, the Company may use information such as the type of customer and geographic region in determining the range of standalone selling prices.

The Company may provide credits or incentives to customers, which are accounted for as variable consideration when estimating the transaction price of the contract and amounts of revenue to recognize. The amount of variable consideration to include in the transaction price is estimated at contract inception using either the estimated value method or the most likely amount method based on the nature of the variable consideration. These estimates are updated at the end of each reporting period as additional information becomes available and revenue is recognized only to the extent that it is probable that a significant reversal of any amounts of variable consideration included in the transaction price will not occur.

Practical Expedients and Exemptions

The Company has elected to make the following accounting policy elections through the adoption of the following practical expedients:

Right to Invoice

Where applicable, the Company will recognize revenue from a contract with a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date and the amount to which the entity has a right to invoice.

Sales and Other Similar Taxes

The Company will exclude sales taxes and similar taxes from the measurement of transaction price and will ensure that it complies with the disclosure requirements of ASC 235-10-50-1 through 50-6.

Significant Financing Component

The Company will not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Cost to Obtain a Contract

The Company will recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less and there are no renewal periods on which the Company does not pay commissions that are not commensurate with those originally paid.

Promised Goods or Services that are Immaterial in the Context of a Contract

The Company has elected to assess promised goods or services as performance obligations that are deemed to be immaterial in the context of a contract. As such, the Company will not aggregate and assess immaterial items at the entity level. That is, when determining whether a good or service is immaterial in the context of a contract, the assessment will be made based on the application of ASC 606 at the contract level.

Contract Balances

Timing of revenue recognition may differ from timing of invoicing to customers. The Company records contract assets and liabilities related to its contracts with customers as follows:

•

Accounts receivable when revenue is recognized prior to receipt of cash payments and if the right to such amounts is unconditional and solely based on the passage of time

•

Contract asset when the Company recognizes revenue based on efforts expended but the right to such amount is conditional upon satisfaction of another performance obligations. Contract assets are primarily comprised of fees related to marketing solutions offerings and supply chain management services. The Company notes that its contract assets are all short-term in nature and are included in prepaid expenses and other current assets in the Company’s condensed consolidated balance sheets

•

Deferred revenue when cash payments are received or due in advance of performance. Deferred revenue is primarily comprised of fees related to supply chain management services, cloud-based software subscriptions and software maintenance and support service contracts, which are generally billed in advance. Deferred revenue also includes other offerings for which we have been paid in advance and earn the revenue when we transfer control of the product or service. The deferred revenue balance is classified as a component of other current liabilities and other long-term liabilities on the balance sheet.

The opening balance of contract assets was $24.0 million as of August 1, 2018. During the three months ended October 31, 2018, substantially all of this entire balance was classified as accounts receivable, trade, upon billing to the customer where such amounts became unconditional. As of October 31, 2018, the contract asset balance was $22.7 million.

The opening balance of current deferred revenue and long-term deferred revenue was $3.7 million and $184 thousand, respectively, as of August 1, 2018. As of October 31, 2018, current deferred revenue and long-term deferred revenue was $3.4 million and $212 thousand, respectively.

Changes in deferred revenue during the three months ended October 31, 2018, were as follows (in thousands):


Balance at beginning of period	$	3,858
Deferral of revenue		503
Recognition of deferred amounts upon satisfaction of performance obligation		(720	)

Balance at end of period	$	3,641

We expect to recognize approximately $3.4 million of the unearned amount in fiscal year 2019 and $212 thousand in fiscal year 2020.

Assets Recognized from the Costs to Obtain a Contract with a Customer

Prior to the adoption of Topic 606, the Company expensed incremental costs to obtain a contract, which represented commissions, as the liability was incurred. In accordance with Topic 606, the Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the period over which such costs would be amortized is greater than one year. The Company has determined that certain commissions programs meet the requirements to be capitalized. However, as of August 1, 2018, the total commission expense that had been incurred under the commissions programs identified was not material and therefore, the Company determined that no amounts were required to be capitalized at the date of adoption. For the three months ended October 31, 2018, the total commission expense that had been incurred under the commissions programs identified was not material and the Company determined that no amounts were required to be capitalized at October 31, 2018.

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

The cumulative effect of the changes made to the Company’s consolidated August 1, 2018 balance sheet for the adoption of Topic 606 were as follows (in thousands):


	July 31,			Adjustments Due			August 1,
	2018			to ASU 2014-09			2018
Assets
Inventories, net	$	47,786		$	(21,233	)	$	26,553
Prepaid expenses and other current assets		13,415			24,041			37,456
Total current assets		264,281			2,808			267,089
Total assets	$	827,050		$	2,808		$	829,858

Liabilities
Other Current Liabilities	$	42,125		$	(3,330	)	$	38,795
Total current liabilities		276,356			(3,330	)		273,026
Total liabilities		684,230			(3,330	)		680,900
Stockholders’ equity
Accumulated deficit		(7,363,569	)		6,138			(7,357,431	)
Total stockholders’ equity		107,628			6,138			113,766
Total liabilities, contingently redeemable preferred stock and stockholders’ equity	$	827,050		$	2,808		$	829,858

The Company reduced opening accumulated deficit by $6.1 million as of August 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact attributable to the acceleration of revenue related to ModusLink’s supply chain management services arrangements and IWCO’s marketing solutions offerings where the Company previously recognized revenues upon completion of all services and historically recognized revenue at a point in time (generally upon product shipment or when the products were complete). The adoption of ASC 606 primarily resulted in an acceleration of revenue as of August 1, 2018, which in turn generated additional deferred tax liabilities that ultimately reduced the Company’s net deferred tax asset position. As the Company fully reserves its net deferred tax assets in the jurisdictions impacted by the adoption of Topic 606, this impact was offset by a corresponding reduction to the valuation allowance.

In accordance with the requirements of the new standard, the disclosure of the impact of the adoption on the Company’s consolidated balance sheet and statement of operations was as follows (in thousands, except per share amounts):

Balance Sheet:


	October 31, 2018
				Balances without			Effect of Change
	As Reported			Adoption of ASC 606			Higher/(Lower)
Assets
Inventories, net	$	29,969		$	51,392		$	(21,423	)
Prepaid expenses and other current assets		34,187			11,524			22,663
Total current assets		276,054			274,814			1,240
Total assets	$	827,727		$	826,487		$	1,240

Liabilities
Other Current Liabilities	$	38,408		$	44,041		$	(5,633	)
Total current liabilities		280,197			285,830			(5,633	)
Total liabilities		687,098			692,731			(5,633	)
Stockholders’ equity
Accumulated deficit		(7,365,332	)		(7,372,205	)		6,873
Total stockholders’ equity		105,431			98,558			6,873
Total liabilities, contingently redeemable preferred stock and stockholders’ equity	$	827,727		$	826,487		$	1,240

Statement of Operations:


	Three Months Ended October 31, 2018
				Balances without			Effect of Change
	As Reported			Adoption of ASC 606			Higher/(Lower)
Net revenue	$	215,133		$	214,208		$	925
Cost of revenue		176,933			176,743			190
Gross profit		38,200			37,465			735
Loss before income taxes		(6,254	)		(6,989	)		735
Net loss		(7,365	)		(8,100	)		735
Net loss attributable to common stockholders	$	(7,901	)	$	(8,636	)	$	735
Basic and diluted net loss per share attributable to common stockholders:	$	(0.13	)	$	(0.14	)	$	0.01

The impact to revenues for the quarter ended October 31, 2018 was an increase of $0.9 million as a result of applying Topic 606 primarily related to the acceleration of revenue related to IWCO’s marketing solutions arrangements for certain contracts with customers that under Topic 606 are being recognized over time based on an input method of efforts expended which depicts the transfer of value to the customer.

INVENTORIES

3 Months Ended

Oct. 31, 2018

INVENTORIES

(5) INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Cost is determined by both the moving average and the first-in, first-out methods. Materials that the Company typically procures on behalf of its clients that are included in inventory include materials such as compact discs, printed materials, manuals, labels, hardware accessories, hard disk drives, phone chassis, consumer packaging, shipping boxes and labels, power cords and cables for client-owned electronic devices.

Inventories consisted of the following:


	October 31,		July 31,
	2018		2018
	(In thousands)
Raw materials	$	25,803	$	23,208
Work-in-process		1,291		16,147
Finished goods		2,875		8,431

	$	29,969	$	47,786

The Company continuously monitors inventory balances and records inventory provisions for any excess of the cost of the inventory over its estimated net realizable value. The Company also monitors inventory balances for obsolescence and excess quantities as compared to projected demands. The Company’s inventory methodology is based on assumptions about average shelf life of inventory, forecasted volumes, forecasted selling prices, contractual provisions with its clients, write-down history of inventory and market conditions. While such assumptions may change from period to period, in determining the net realizable value of its inventories, the Company uses the best information available as of the balance sheet date. If actual market conditions are less favorable than those projected, or the Company experiences a higher incidence of inventory obsolescence because of rapidly changing technology and client requirements, additional inventory provisions may be required. Once established, write-downs of inventory are considered permanent adjustments to the cost basis of inventory and cannot be reversed due to subsequent increases in demand forecasts. Accordingly, if inventory previously written down to its net realizable value is subsequently sold, gross profit margins may be favorably impacted. IWCO’s inventory consists primarily of raw materials (paper) used to produce direct mail packages and work-in-process. Finished goods are generally not a significant element of the inventory as they are generally mailed after the production and sorting process.

GOODWILL AND INTANGIBLE ASSETS

3 Months Ended

Oct. 31, 2018

GOODWILL AND INTANGIBLE ASSETS

(6) GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill of $254.4 million as of October 31, 2018 relates to the Company’s Direct Marketing reporting unit. The purchase price allocation for the acquisition of IWCO Direct completed during December 2017, is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available. Additional information that existed as of the acquisition date but at that time was unknown to us may become known to us during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Adjustments in the purchase price allocation may require a recasting of the amounts allocated to goodwill retroactive to the period in which the acquisition occurred.

The Company conducts its goodwill impairment test on July 31 of each fiscal year. In addition, if and when events or circumstances change that could reduce the fair value of any of its reporting units below its carrying value, an interim test is performed. In making this assessment, the Company relies on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data. The Company’s goodwill of $254.4 million as of October 31, 2018 relates to the Company’s Direct Marketing reporting unit. There were no indicators of impairment identified related to the Company’s Direct Marketing reporting unit during the three months ended October 31, 2018.

Intangible assets, as of October 31, 2018, include trademarks and tradenames with a carrying balance of $14.5 million and customer relationships of $170.3 million. The trademarks and tradenames intangible asset are being amortized on a straight line basis over a 3 year estimated useful life. The customer relationship intangible asset is being amortized on a double-declining basis over an estimated useful life of 15 years. Intangible assets deemed to have finite lives are amortized over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly, or indirectly, to its future cash flows. Intangible assets are reviewed for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets, impairment exists when the carrying amount of the intangible asset exceeds its fair value. There were no indicators of impairment identified for the company’s intangible assets at October 31, 2018.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

3 Months Ended

Oct. 31, 2018

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

(7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The following table reflects the components of “Accrued expenses” and “Other current liabilities”:


	October 31,		July 31,
	2018		2018
	(In thousands)
Accrued sales taxes	$	21,418	$	21,390
Accrued other taxes		7,318		8,414
Accrued compensation		21,947		25,603
Accrued interest		450		1,437
Accrued audit, tax and legal		2,829		3,264
Accrued contract labor		3,773		1,932
Accrued worker’s compensation		6,148		6,126
Accrued other		21,046		20,164

	$	84,929	$	88,330


	October 31,		July 31,
	2018		2018
	(In thousands)
Accrued pricing liabilities	$	18,882	$	18,882
Customer postage deposits		11,006		12,638
Other		8,520		10,605

	$	38,408	$	42,125

As of October 31, 2018 and July 31, 2018, the Company had accrued pricing liabilities of approximately $18.9 million. As previously reported by the Company, several principal adjustments were made to its historic financial statements for periods ending on or before January 31, 2012, the most significant of which related to the treatment of vendor rebates in its pricing policies. Where the retention of a rebate or a mark-up was determined to have been inconsistent with a client contract (collectively referred to as “pricing adjustments”), the Company concluded that these amounts were not properly recorded as revenue. Accordingly, revenue was reduced by an equivalent amount for the period that the rebate was estimated to have been affected. A corresponding liability for the same amount was recorded in that period (referred to as accrued pricing liabilities). The Company believes that it may not ultimately be required to pay all of the accrued pricing liabilities based upon the expiration of statutes of limitations, and due in part to the nature of the interactions with its clients. The remaining accrued pricing liabilities at October 31, 2018 will be derecognized when there is sufficient information for the Company to conclude that such liabilities are not subject to escheatment and have been extinguished, which may occur through payment, legal release, or other legal or factual determination. The Company has not provided for any provision for interest and or penalties related to escheatment as it has concluded that such is not probable to occur and any potential interest and penalties cannot be reasonably estimated.

DEBT

3 Months Ended

Oct. 31, 2018

DEBT

(8) DEBT

5.25% Convertible Senior Notes Payable

On March 18, 2014, the Company entered into an indenture (the “Indenture”) with Wells Fargo Bank, National Association, as trustee, relating to the Company’s issuance of $100 million of 5.25% Convertible Senior Notes (the “Notes”). The Notes bear interest at the rate of 5.25% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2014. The Notes will mature on March 1, 2019, unless earlier repurchased or restructured by the Company or converted by the holder in accordance with their terms prior to such maturity date.

Holders of the Notes may convert all or any portion of their notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business or the business day immediately preceding the maturity date. Each $1,000 of principal of the Notes will initially be convertible into 166.2593 shares of our common stock, which is equivalent to an initial conversion price of approximately $6.01 per share, subject to adjustment upon the occurrence of certain events, or, if the Company obtains the required consent from its stockholders, into shares of the Company’s common stock, cash or a combination of cash and shares of its common stock, at the Company’s election. If the Company has received stockholder approval, and it elects to settle conversions through the payment of cash or payment or delivery of a combination of cash and shares, the Company’s conversion obligation will be based on the volume weighted average prices (“VWAP”) of its common stock for each VWAP trading day in a 40 VWAP trading day observation period. The Notes and any of the shares of common stock issuable upon conversion have not been registered. As of October 31, 2018, the if-converted value of the Notes did not exceed the principal value of the Notes.

Holders will have the right to require the Company to repurchase their Notes, at a repurchase price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest, upon the occurrence of certain fundamental changes, subject to certain conditions. No fundamental changes occurred during the quarter ended October 31, 2018.

The Company may not redeem the Notes prior to the mandatory date, and no sinking fund is provided for the Notes. The Company will have the right to elect to cause the mandatory conversion of the Notes in whole, and not in part, at any time on or after March 6, 2017, if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company notifies holders of its election to mandatorily convert the Notes, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company notifies holders of its election to mandatorily convert the notes.

Per the Indenture, if the Notes are assigned a restricted CUSIP or the Notes are not otherwise freely tradable by holders at any time during the three months immediately preceding as of the 365th day after the last date of original issuance of the Notes, the Company shall pay additional interest on the Notes at a rate equal to 0.50% per annum of the principal amount of Notes outstanding until the restrictive legend on the Notes has been removed. The restrictive legend was removed on August 26, 2015 and, as such, the Company paid $0.2 million in additional interest associated with this restriction.

The Company has valued the debt using similar nonconvertible debt as of the original issuance date of the Notes and bifurcated the conversion option associated with the Notes from the host debt instrument and recorded the conversion option of $28.1 million in stockholders’ equity prior to the allocation of debt issuance costs. The initial value of the equity component, which reflects the equity conversion feature, is equal to the initial debt discount. The resulting debt discount on the Notes is being accreted to interest expense at the effective interest rate over the estimated life of the Notes. The equity component is included in the additional paid-in-capital portion of stockholders’ equity on the Company’s consolidated balance sheet. In addition, the debt issuance costs of $3.4 million are allocated between the liability and equity components in proportion to the allocation of the proceeds. During the first quarter of fiscal year 2017, the Company adopted ASU No. 2015-03. As such, the issuance costs allocated to the liability component ($2.5 million) are capitalized as a reduction of the principal amount of the Notes payable on the Company’s balance sheet and amortized, using the effective-interest method, as additional interest expense over the term of the Notes. The issuance costs allocated to the equity component is recorded as a reduction to additional paid-in capital.

During the three months ended October 31, 2018, the Company purchased $3.7 million in face value of the Notes in the open market at a purchase price of $3.7 million. The loss of $0.1 million on this transaction is presented as a component of other gains and losses. The fair value of the Company’s Notes payable, calculated as of the closing price of the traded securities, was $64.0 million and $66.7 million as of October 31, 2018 and July 31, 2018, respectively. This value does not represent the settlement value of these debt liabilities to the Company. The fair value of the Notes payable could vary each period based on fluctuations in market interest rates, as well as changes to our credit ratings. The Notes payable are traded and their fair values are based upon traded prices as of the reporting dates. As of October 31, 2018 and July 31, 2018, the net carrying value of the Notes was $62.1 million and $64.5 million, respectively. As of October 31, 2018 and July 31, 2018, SPHG Holdings held $14.9 million principal amount of the Notes. SPHG Holdings has confirmed to the Company that it will not require a cash payment on the Notes when they mature and for a period greater than twelve months from the date of this filing. As such, this amount is classified as long-term.


	October 31,			July 31,
	2018			2018
	(In thousands)
Carrying amount of equity component (net of allocated debt issuance costs)	$	26,961		$	26,961
Principal amount of Notes	$	63,925		$	67,625
Unamortized debt discount		(1,690	)		(2,843	)
Unamortized debt issuance costs		(150	)		(252	)

Net carrying amount	$	62,085		$	64,530

As of October 31, 2018, the remaining period over which the unamortized discount will be amortized is 4 months.


	Three Months Ended
	October 31,
	2018		2017
	(In thousands)
Interest expense related to contractual interest coupon	$	790	$	914
Interest expense related to accretion of the discount		1,051		1,041
Interest expense related to debt issuance costs		93		92

	$	1,934	$	2,047

During each of the three months ended October 31, 2018 and 2017, we recognized interest expense of $2.0 million related to the Notes. The effective interest rate on the Notes, including amortization of debt issuance costs and accretion of the discount, is 13.9%. The Notes bear interest of 5.25%.

PNC Bank Credit Facility

On June 30, 2014, two direct and wholly owned subsidiaries of the Company (the “Borrowers”) entered into a Credit Agreement, as borrowers and guarantors, with PNC Bank and National Association, as lender and as agent, respectively.

The Credit Agreement has a five (5) year term which expires on June 30, 2019. It includes a maximum credit commitment of $50.0 million, is available for letters of credit (with a sublimit of $5.0 million) and has a $20.0 million uncommitted accordion feature. The actual maximum credit available under the Credit Agreement varies from time to time and is determined by calculating the applicable borrowing base, which is based upon applicable percentages of the values of eligible accounts receivable and eligible inventory minus reserves determined by the Agent (including other reserves that the Agent may establish from time to time in its permitted discretion), all as specified in the Credit Agreement.

Generally, borrowings under the Credit Agreement bear interest at a rate per annum equal to, at the Borrowers’ option, either (a) LIBOR (adjusted to reflect any required bank reserves) for an interest period equal to one, two or three months (as selected by the Borrowers) plus a margin of 2.25% per annum or (b) a base rate determined by reference to the highest of (1) the base commercial lending rate publicly announced from time to time by PNC Bank, National Association, (2) the sum of the Federal Funds Open Rate in effect on such day plus one half of one percent (0.5%) per annum, or (3) the LIBOR rate (adjusted to reflect any required bank reserves) in effect on such day plus 1.00% per annum. In addition to paying interest on outstanding principal under the Credit Agreement, the Borrowers are required to pay a commitment fee, in respect of the unutilized commitments thereunder, of 0.25% per annum, paid quarterly in arrears. The Borrowers are also required to pay a customary letter of credit fee equal to the applicable margin on revolving credit LIBOR loans and fronting fees.

Obligations under the Credit Agreement are guaranteed by the Borrowers’ existing and future direct and indirect wholly-owned domestic subsidiaries, subject to certain limited exceptions; and the Credit Agreement is secured by security interests in substantially all the Borrowers’ assets and the assets of each subsidiary guarantor, whether owned as of the closing or thereafter acquired, including a pledge of 100.0% of the equity interests of each subsidiary guarantor that is a domestic entity (subject to certain limited exceptions) and 65.0% of the voting equity interests of any direct first tier foreign entity owned by either Borrower or by a subsidiary guarantor. The Company is not a borrower or a guarantor under the Credit Agreement.

The Credit Agreement contains certain customary negative covenants, which include limitations on mergers and acquisitions, the sale of assets, liens, guarantees, investments, loans, capital expenditures, dividends, indebtedness, changes in the nature of business, transactions with affiliates, the creation of subsidiaries, changes in fiscal year and accounting practices, changes to governing documents, compliance with certain statutes, and prepayments of certain indebtedness. The Credit Agreement also contains certain customary affirmative covenants (including periodic reporting obligations) and events of default, including upon a change of control. The Credit Agreement requires compliance with certain financial covenants providing for maintenance of specified liquidity, maintenance of a minimum fixed charge coverage ratio and/or maintenance of a maximum leverage ratio following the occurrence of certain events and/or prior to taking certain actions, all as more fully described in the Credit Agreement. The Company believes that the Credit Agreement provides greater financial flexibility to the Company and the Borrowers and may enhance their ability to consummate one or several larger and/or more attractive acquisitions and should provide our clients and/or potential clients with greater confidence in the Company’s and the Borrowers’ liquidity. At October 31, 2018, the Company had a readily available borrowing capacity under its PNC Bank Credit Facility of $9.0 million. During the three months ended October 31, 2017, the Company did not meet the criteria that would cause its financial covenants to be applicable. As of October 31, 2018 and July 31, 2018, the Company did not have any balance outstanding on the PNC Bank credit facility.

Cerberus Credit Facility

On December 15, 2017, MLGS, a wholly owned subsidiary of the Company, entered into a Financing Agreement the Financing Agreement, by and among the MLGS (as the initial borrower), Instant Web, LLC, a Delaware corporation and wholly owned subsidiary of IWCO (as “Borrower”), IWCO, and certain of IWCO’s subsidiaries (together with IWCO, the “Guarantors”), the lenders from time to time party thereto, and Cerberus Business Finance, LLC, as collateral agent and administrative agent for the lenders. MLGS was the initial borrower under the Financing Agreement, but immediately upon the consummation of the IWCO Acquisition, as described above, Borrower became the borrower under the Financing Agreement.

The Financing Agreement provides for $393.0 million term loan facility (the “Term Loan”) and a $25.0 million revolving credit facility (the “Revolving Facility”) (together, the “Cerberus Credit Facility”). Proceeds of the Cerberus Credit Facility were used (i) to finance a portion of the IWCO Acquisition, (ii) to repay certain existing indebtedness of the Borrower and its subsidiaries, (iii) for working capital and general corporate purposes and (iv) to pay fees and expenses related to the Financing Agreement and the IWCO Acquisition.

The Cerberus Credit Facility has a maturity of five years. Borrowings under the Cerberus Credit Facility bear interest, at the Borrower’s option, at a Reference Rate plus 3.75% or a LIBOR Rate plus 6.5%, each as defined the Financing Agreement. The initial interest rate under the Cerberus Credit Facility is at the LIBOR Rate option.

The Term Loan under the Cerberus Credit Facility is repayable in consecutive quarterly installments, each of which will be in an amount equal per quarter of $1.5 million and each such installment to be due and payable, in arrears, on the last day of each calendar quarter commencing on March 31, 2018 and ending on the earlier of (a) December 15, 2022 and (b) upon the payment in full of all obligations under the Financing Agreement and the termination of all commitments under the Financing Agreement. Further, the Term Loan would be permanently reduced pursuant to certain mandatory prepayment events including an annual “excess cash flow sweep” of 50% of the consolidated excess cash flow, with a step-down to 25% when the Leverage Ratio (as defined in the Financing Agreement) is below 3.50:1.00; provided that, in any calendar year, any voluntary prepayments of the Term Loan shall be credited against the Borrower’s “excess cash flow” prepayment obligations on a dollar-for-dollar basis for such calendar year.

Borrowings under the Financing Agreement are fully guaranteed by the Guarantors and are collateralized by substantially all the assets of the Borrower and the Guarantors and a pledge of all of the issued and outstanding equity interests of each of IWCO’s subsidiaries.

The Financing Agreement contains certain representations, warranties, events of default, mandatory prepayment requirements, as well as certain affirmative and negative covenants customary for financing agreements of this type. These covenants include restrictions on borrowings, investments and dispositions, as well as limitations on the ability of the Borrower and the Guarantors to make certain capital expenditures and pay dividends. Upon the occurrence and during the continuation of an event of default under the Financing Agreement, the lenders under the Financing Agreement may, among other things, terminate all commitments and declare all or a portion of the loans under the Financing Agreement immediately due and payable and increase the interest rate at which loans and obligations under the Financing Agreement bear interest.

At October 31, 2018, IWCO had a readily available borrowing capacity under its Revolving Facility of $25.0 million. As of October 31, 2018 and July 31, 2018, the Company did not have an outstanding balance on the Revolving Facility. As of October 31, 2018 and July 31, 2018, the principal amount outstanding on the Term Loan was $388.5 million and $390.0 million, respectively. As of October 31, 2018 and July 31, 2018, the current and long-term net carrying value of the Term Loan was $387.4 million and $388.8 million, respectively.


	October 31,			July 31,
	2018			2018
	(In thousands)
Principal amount outstanding on the Term Loan	$	388,500		$	390,000
Unamortized debt issuance costs		(1,094	)		(1,162	)

Net carrying value of the Term Loan	$	387,406		$	388,838

CONTINGENCIES

3 Months Ended

Oct. 31, 2018

CONTINGENCIES

(9) CONTINGENCIES

On April 13, 2018, a purported shareholder, Donald Reith, filed a verified complaint, Reith v. Lichtenstein, et al., 2018-0277 (Del. Ch.) in the Delaware Court of Chancery. The complaint alleges class and derivative claims for breach of fiduciary duty and/or aiding and abetting breach of fiduciary duty and unjust enrichment against the Company’s Board of Directors (the “Board”), Warren Lichtenstein, Glen Kassan, William T. Fejes, Jack L. Howard, Jeffrey J. Fenton, Philip E. Lengyel and Jeffrey S. Wald; and stockholders Steel Holdings, Steel Partners, L.P., SPHG Holdings, Handy & Harman Ltd. and WHX CS Corp. (collectively, “Steel Parties”) in connection with the acquisition of $35 million of the Series C Preferred Stock by SPHG Holdings and equity grants made to Lichtenstein, Howard and Fejes on December 15, 2017 (collectively, “Challenged Transactions”). The Company is named as a nominal defendant. The complaint alleges that although the Challenged Transactions were approved by a Special Committee consisting of the independent members of the Board (Messrs. Fenton, Lengyel and Wald), the Steel Parties dominated and controlled the Special Committee, who approved the Challenged Transactions in breach of their fiduciary duty. Plaintiff alleges that the Challenged Transactions unfairly diluted shareholders and therefore unjustly enriched Steel Holdings, SPHG Holdings and Messrs. Lichtenstein, Howard and Fejes. The complaint also alleges that the Board made misleading disclosures in the Company’s proxy statement for the 2017 meeting in connection with seeking approval to amend the 2010 Incentive Award Plan to authorize the issuance of additional shares to accommodate certain shares underlying the equity grants. Remedies requested include rescission of the Series C Convertible Preferred Stock and equity grants, disgorgement of any unjustly obtained property or compensation and monetary damages.

On June 8, 2018, defendants moved to dismiss the complaint for failure to plead demand futility and failure to state a claim. The motions are fully briefed, and argument is scheduled for March 5, 2019. Discovery is stayed pending a decision on the motions to dismiss. Because the litigation is at an early stage and motions to dismiss are pending, we are unable at this time to provide a calculation of potential damages or litigation loss that is probable or estimable. Although there can be no assurance as to the ultimate outcome, the Company believes it has meritorious defenses, will deny liability, and intends to defend this litigation vigorously.

STOCKHOLDERS' EQUITY

3 Months Ended

Oct. 31, 2018

STOCKHOLDERS' EQUITY

(10) STOCKHOLDERS’ EQUITY

Preferred Stock

The Company’s Board has the authority, subject to any limitations prescribed by Delaware law, to issue shares of preferred stock in one or more series and to fix and determine the designation, privileges, preferences and rights and the qualifications, limitations and restrictions of those shares, including dividend rights, conversion rights, voting rights, redemption rights, terms of sinking funds, liquidation preferences and the number of shares constituting any series or the designation of the series, without any further vote or action by the stockholders. Any shares of the Company’s preferred stock so issued may have priority over its common stock with respect to dividend, liquidation and other rights. The Company’s board of directors may authorize the issuance of preferred stock with voting rights or conversion features that could adversely affect the voting power or other rights of the holders of its common stock. Although the issuance of preferred stock could provide us with flexibility in connection with possible acquisitions and other corporate purposes, under some circumstances, it could have the effect of delaying, deferring or preventing a change of control.

On December 15, 2017, the Company entered into a Preferred Stock Purchase Agreement (the “Purchase Agreement”) with SPHG Holdings pursuant to which the Company issued 35,000 shares of the Company’s newly created Series C Convertible Preferred Stock, par value $0.01 per share (the “Preferred Stock”), to SPHG Holdings at a price of $1,000 per share, for an aggregate purchase consideration of $35.0 million (the “Preferred Stock Transaction”). The terms, rights, obligations and preferences of the Preferred Stock are set forth in a Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of the Company (the “Series C Certificate of Designations”), which has been filed with the Secretary of State of the State of Delaware.

Under the Series C Certificate of Designations, each share of Preferred Stock can be converted into shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at an initial conversion price equal to $1.96 per share, subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction. Holders of the Preferred Stock will also receive dividends at 6% per annum payable in cash or Common Stock. If at any time the closing bid price of the Company’s Common Stock exceeds 170% of the conversion price for at least five consecutive trading days (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction), the Company has the right to require each holder of Preferred Stock to convert all, or any whole number, of shares of the Preferred Stock into Common Stock.

Upon the occurrence of certain triggering events such as a liquidation, dissolution or winding up of the Company, either voluntary or involuntary, or the merger or consolidation of the Company or significant subsidiary, or the sale of substantially all of the assets or capital stock of the Company or a significant subsidiary, the holders of the Preferred Stock are entitled to receive, prior and in preference to any distribution of any of the assets or funds of the Company to the holders of other equity or equity equivalent securities of the Company other than the Preferred Stock by reason of their ownership thereof, an amount per share in cash equal to the sum of (i) one hundred percent (100%) of the stated value per share of Preferred Stock (initially $1,000 per share) then held by them (as adjusted for any stock split, stock dividend, stock combination or other similar transactions with respect to the Preferred Stock), plus (ii) 100% of all declared but unpaid dividends, and all accrued but unpaid dividends on each such share of Preferred Stock, in each case as the date of the triggering event. On or after December 15, 2022, each holder of Preferred Stock can also require the Company to redeem its Preferred Stock in cash at a price equal to the Liquidation Preference (as defined in Series C Certificate of Designations).

Each holder of Preferred Stock has a vote equal to the number of shares of Common Stock into which its Preferred Stock would be convertible as of the record date, provided that the number of shares voted is based upon a conversion price which is no less than the greater of the book or market value of the Common Stock on the closing date of the purchase of the Preferred Stock. In addition, for so long as the Preferred Stock remains outstanding, the Company will not, directly or indirectly, and including in each case with respect to any significant subsidiary, without the affirmative vote of the holders of a majority of the Preferred Stock (i) liquidate, dissolve or wind up the Company or any significant subsidiary; (ii) consummate any transaction that would constitute or result in a Liquidation Event (as defined in the Series C Certificate of Designations); (iii) effect or consummate any Prohibited Issuance (as defined in the Series C Certificate of Designations); or (iv) create, incur, assume or suffer to exist any Indebtedness (as defined in the Series C Certificate of Designations) of any kind, other than certain existing Indebtedness of the Company and any replacement financing thereto, unless any such replacement financing be on substantially similar terms as such existing Indebtedness.

The Purchase Agreement provides that the Company will use its commercially reasonable efforts to effect the piggyback registration of the Common Stock issuable on the conversion of the Preferred Stock and any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing, with the Securities and Exchange Commission in all states reasonably requested by the holder in accordance with certain enumerated conditions. The Purchase Agreement also contains other representations, warranties and covenants, customary for an issuance of Preferred Stock in a private placement of this nature.

The preferred stock transaction was approved and recommended to the Board by a special committee of the Board (the “Special Committee”) consisting of independent directors not affiliated with Steel Partners Holdings GP Inc. (“Steel Holdings GP”), which controls the power to vote and dispose of the securities held by SPHG Holdings and its affiliates.

Common Stock

Each holder of the Company’s Common Stock is entitled to:

•

one vote per share on all matters submitted to a vote of the stockholders, subject to the rights of any Preferred Stock that may be outstanding;

•

dividends as may be declared by the Company’s Board out of funds legally available for that purpose, subject to the rights of any Preferred Stock that may be outstanding; and

•

a pro rata share in any distribution of the Company’s assets after payment or providing for the payment of liabilities and the liquidation preference of any outstanding Preferred Stock in the event of liquidation.

Holders of the Company’s Common Stock have no cumulative voting rights, redemption rights or preemptive rights to purchase or subscribe for any shares of its Common Stock or other securities. All of the outstanding shares of Common Stock are fully paid and nonassessable. The rights, preferences and privileges of holders of its Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any existing series of Preferred Stock and any series of Preferred Stock that the Company may designate and issue in the future. There are no redemption or sinking fund provisions applicable to the Company’s Common Stock.

On March 12, 2013, stockholders of the Company approved the sale of 7,500,000 shares of newly issued Common Stock to Steel Partners Holdings L.P. (“Steel Holdings”), an affiliate of SPHG Holdings, at a price of $4.00 per share, resulting in aggregate proceeds of $30.0 million before transaction costs. The Company incurred $2.3 million of transaction costs, which consisted primarily of investment banking and legal fees, resulting in net proceeds from the sale of $27.7 million. In addition, as part of the transaction, the Company issued Steel Holdings a warrant to acquire an additional 2,000,000 shares at an exercise price of $5.00 per share (the “Warrant”). These warrants were to expire after a term of five years after issuance. On December 15, 2017, contemporaneously with the closing of the Preferred Stock Transaction, the Company entered into a Warrant Repurchase Agreement (the “Warrant Repurchase Agreement”) with Steel Holdings pursuant to which the Company repurchased the Warrant for $100. The Warrant was terminated by the Company upon repurchase.

OTHER GAINS (LOSSES), NET

3 Months Ended

Oct. 31, 2018

OTHER GAINS (LOSSES), NET

(11) OTHER GAINS (LOSSES), NET

The following table reflects the components of “Other gains (losses), net”:


	Three Months Ended
	October 31,
	2018		2017
	(In thousands)
Foreign currency exchange gains (losses)	$	916	$	(635	)
Gains, net on Trading Securities		—		1,876
Other, net		28		181

	$	944	$	1,422

The Company recorded foreign exchange gains of approximately $0.9 million during the three months ended October 31, 2018. For the three months ended October 31, 2018, the net gains primarily related to realized and unrealized gains (losses) from foreign currency exposures and settled transactions of approximately $0.4 million, $(1.0) million and $1.7 million in Asia, Europe, and Corporate, respectively. The Company recorded foreign exchange losses of approximately $(0.6) million during the three months ended October 31, 2017. For the three months ended October 31, 2017, the net losses primarily related to realized and unrealized losses from foreign currency exposures and settled transactions of approximately $(0.4) million and $(0.3) million in Asia and Europe, respectively.

During the three months ended October 31, 2017, the Company recognized $1.9 million in net gains associated with its trading securities.

INCOME TAXES

3 Months Ended

Oct. 31, 2018

INCOME TAXES

(12) INCOME TAXES

The Company operates in multiple taxing jurisdictions, both within and outside of the United States. For the three months ended October 31, 2018, the Company was profitable in certain jurisdictions, resulting in an income tax expense using enacted rates in those jurisdictions. As of October 31, 2018, the total amount of the liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $1.8 million. As of July 31, 2018, the total amount of the liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $1.6 million.

Uncertain Tax Positions

In accordance with the Company’s accounting policy, interest related to unrecognized tax benefits is included in the provision of income taxes line of the Condensed Consolidated Statements of Operations. As of October 31, 2018 and July 31, 2018, the liabilities for interest expense related to uncertain tax positions were $0.1 million. The Company has accrued $0.2 million for penalties related to income tax positions. The Company does not expect any unrecognized tax benefits to reverse in the next twelve months. The Company is subject to U.S. federal income tax and various state, local and international income taxes in numerous jurisdictions. The federal and state tax returns are generally subject to tax examinations for the tax years ended July 31, 2013 through July 31, 2018. To the extent the Company has tax attribute carryforwards, the tax year in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period. In addition, a number of tax years remain subject to examination by the appropriate government agencies for certain countries in the Europe and Asia regions. In Europe, the Company’s 2009 through 2017 tax years remain subject to examination in most locations, while the Company’s 2005 through 2017 tax years remain subject to examination in most Asia locations.

Net Operating Loss

The Company has certain deferred tax benefits, including those generated by net operating losses and certain other tax attributes (collectively, the “Tax Benefits”). The Company’s ability to use these Tax Benefits could be substantially limited if it were to experience an “ownership change,” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). In general, an ownership change would occur if there is a greater than 50-percentage point change in ownership of securities by stockholders owning (or deemed to own under Section 382 of the Code) five percent or more of a corporation’s securities over a rolling three-year period.

Tax Benefits Preservation Plan

On March 6, 2018, the Board, subject to approval by the Company’s stockholders, approved an amendment to the Company’s Restated Certificate of Incorporation designed to protect the tax benefits of the Company’s net operating loss carryforwards by preventing certain transfers of our securities that could result in an “ownership change” (as defined under Section 382 of the Code) (the “Protective Amendment”). The Protective Amendment was approved and adopted by the Company’s stockholders at the 2017 Meeting and was filed with the Secretary of State of the State of Delaware on April 12, 2018.

The Company had net operating loss carryforwards for federal and state tax purposes of approximately $2.1 billion and $150.6 million, respectively, as of October 31, 2018. The Company’s ability to use its Tax Benefits would be substantially limited if the Company undergoes an “ownership change” (within the meaning of Section 382 of the Internal Revenue Code). The Tax Plan is intended to prevent an “ownership change” of the Company that would impair the Company ability to utilize its Tax Benefits.

As part of the Tax Plan, the Board declared a dividend of one right (a “Right”) for each share of Common Stock then outstanding. The dividend was payable to holders of record as of the close of business on January 29, 2018. Any shares of Common Stock issued after January 29, 2018, will be issued together with the Rights. Each Right initially represents the right to purchase one one-thousandth of a share of newly created Series D Junior Participating Preferred Stock.

Initially, the Rights will be attached to all certificates representing shares of Common Stock then outstanding and no separate rights certificates will be distributed. In the case of book entry shares, the Rights will be evidenced by notations in the book entry accounts. Subject to certain exceptions specified in the Plan, the Rights will separate from the Common Stock and a distribution date (the “Distribution Date”) will occur upon the earlier of (i) ten (10) business days following a public announcement that a stockholder (or group) has become a beneficial owner of 4.99-percent or more of the shares of Common Stock then outstanding and (ii) ten (10) business days (or such later date as the Board determines) following the commencement of a tender offer or exchange offer that would result in a person or group becoming a 4.99-percent stockholder.

Pursuant to the Tax Plan and subject to certain exceptions, if a stockholder (or group) becomes a 4.99-percent stockholder after adoption of the Tax Plan, the Rights would generally become exercisable and entitle stockholders (other than the 4.99-percent stockholder or group) to purchase additional shares of the Company at a significant discount, resulting in substantial dilution in the economic interest and voting power of the 4.99-percent stockholder (or group). In addition, under certain circumstances in which the Company is acquired in a merger or other business combination after an non-exempt stockholder (or group) becomes a 4.99-percent stockholder, each holder of the Right (other than the 4.99-percent stockholder or group) would then be entitled to purchase shares of the acquiring company’s common stock at a discount.

The Rights are not exercisable until the Distribution Date and will expire at the earliest of (i) 11:59 p.m. on the date that the votes of the stockholders of the Company with respect to the Company’s next annual meeting or special meeting of stockholders are certified (which date will be no later than January 18, 2019), unless the continuation of the Tax Plan is approved by the affirmative vote of the majority of shares of Common Stock present at such meeting of stockholders (in which case clause (ii) will govern); (ii) 11:59 p.m., on January 18, 2021; (iii) the time at which the Rights are redeemed or exchanged as provided in the Tax Plan; and (iv) the time at which the Board determines that the Tax Plan is no longer necessary or desirable for the preservation of Tax Benefits.

Protective Amendment

On March 6, 2018, the Board, subject to approval by the Company’s stockholders, approved the Protective Amendment to the Company’s Restated Certificate of Incorporation designed to protect the tax benefits of the Company’s net operating loss carryforwards by preventing certain transfers of our securities that could result in an “ownership change” (as defined under Section 382 of the Code). The Protective Amendment was approved and adopted by the Company’s stockholders at the 2017 meeting and was filed with the Secretary of State of the State of Delaware on April 12, 2018.

The Tax Cuts and Jobs Act

In December 2017, the Tax Cuts and Jobs Act, or the Tax Act (“TCJA”), was signed into law. Among other things, the Tax Act permanently lowers the corporate federal income tax rate to 21% from the existing maximum rate of 35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate federal income tax rate to 21%, U.S. GAAP requires companies to revalue their deferred tax assets and deferred tax liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment. This revaluation resulted in a provision of $280.4 million to income tax expense in continuing operations and a corresponding reduction in the valuation allowance. As a result, there was no impact to the Company’s income statement as a result of reduction in tax rates. The total provision of $280.4 million included a provision of $305.9 million to income tax expense for the Company and a benefit of $25.5 million to income tax expense for IWCO. As noted above, the net tax expense of $280.4 was offset completely by a corresponding reduction in the valuation allowance

Beginning on January 1, 2018, the TCJA also requires a minimum tax on certain future earnings generated by foreign subsidiaries while providing for future tax-free repatriation of such earnings through a 100% dividends-received deduction. In accordance with ASC Topic 740, Income Taxes, and SAB 118, the Company has estimated that no provisional charge will be recorded related to the TCJA based on its initial analysis using available information and estimates. Given the significant complexity of the TCJA, anticipated guidance from the U.S. Treasury Department about implementing the TCJA and the potential for additional guidance from the SEC or the FASB related to the TCJA or additional information becoming available, the Company’s provisional charge may be adjusted during 2018 and is expected to be finalized no later than December 31, 2018. Other provisions of the TCJA that impact future tax years are still being assessed.

The TCJA also requires a Transition Tax on any net accumulated earnings and profits as of the two required measurement dates, November 2, 2017 and December 31, 2017. As such, as of July 31, 2018, all of the Company’s accumulated earnings and profits are deemed repatriated. Therefore, there is no deferred tax liability for earnings oversees that have not been remitted. The Company will utilize NOLs to offset any Transition Tax assessed. The preliminary calculation of net accumulated earnings and profits resulted in break even, which would not result in a Transition Tax. The Company will finalize the Transition Tax calculation with the filing of the fiscal year 2018 tax return.

Our preliminary estimate of the TCJA and the remeasurement of our deferred tax assets and liabilities is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the TCJA, changes to certain estimates and the filing of our tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the TCJA may require further adjustments and changes in our estimates. The final determination of the TCJA and the remeasurement of our deferred assets and liabilities will be completed as additional information becomes available, but no later than one year from the enactment of the TCJA.

EARNINGS PER SHARE

3 Months Ended

Oct. 31, 2018

EARNINGS PER SHARE

(13) EARNINGS PER SHARE

The Company calculates earnings per share in accordance with ASC Topic 260, “Earnings per Share.” The following table reconciles earnings per share for the three months ended October 31, 2018 and 2017:


	Three Months Ended
	October 31,
	2018			2017
	(In thousands, except per share data)
Net loss	$	(7,365	)	$	(5,237	)
Less: Preferred dividends on redeemable preferred stock		(536	)		—

Net loss attributable to common stockholders	$	(7,901	)	$	(5,237	)

Weighted average common shares outstanding		60,712			55,260
Weighted average common equivalent shares arising from dilutive stock options, restricted stock, convertible notes and convertible preferred stock		—			—

Weighted average number of common and potential common shares		60,712			55,260

Basic and diluted net loss per share attributable to common stockholders:	$	(0.13	)	$	(0.09	)

Basic loss per common share is calculated using the weighted-average number of common shares outstanding during the period. Diluted loss per common share, if any, gives effect to diluted stock options (calculated based on the treasury stock method), non-vested restricted stock shares purchased under the employee stock purchase plan and shares issuable upon debt or preferred stock conversion (calculated using an as-if converted method).

For the three months ended October 31, 2018 and 2017, approximately 29.5 million and 14.1 million, respectively, common stock equivalent shares were excluded from the denominator in the calculation of diluted loss per share as their inclusion would have been antidilutive.

SHARE-BASED PAYMENTS

3 Months Ended

Oct. 31, 2018

SHARE-BASED PAYMENTS

(14) SHARE-BASED PAYMENTS

The following table summarizes share-based compensation expense related to employee stock options, employee stock purchases and non-vested shares for the three months ended October 31, 2018 and 2017, which was allocated as follows:


	Three Months Ended
	October 31,
	2018		2017
	(In thousands)
Cost of revenue	$	—	$	11
Selling, general and administrative		792		281

	$	792	$	292

At October 31, 2018, there was an immaterial amount of unrecognized compensation cost related to Stock Options issued under the Company’s plans. At October 31, 2018, there was approximately $0.2 million of total unrecognized compensation cost related to non-vested share-based compensation awards under the Company’s plans.

COMPREHENSIVE INCOME (LOSS)

3 Months Ended

Oct. 31, 2018

COMPREHENSIVE INCOME (LOSS)

(15) COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) combines net income (loss) and other comprehensive items. Other comprehensive items represent certain amounts that are reported as components of stockholder’s equity in the accompanying condensed consolidated balance sheets.

Accumulated other comprehensive items consist of the following:


	Foreign currency items			Pension items			Unrealized gains (losses) on securities			Total
	(In thousands)
Accumulated other comprehensive income (loss) at July 31, 2018	$	6,348		$	(3,795	)	$	181		$	2,734
Foreign currency translation adjustment		(1,622	)		—			—			(1,622	)
Net unrealized holding gain on securities		—			—			(15	)		(15	)
Pension liability adjustments		—			405			—			405

Net current-period other comprehensive income (loss)		(1,622	)		405			(15	)		(1,232	)

Accumulated other comprehensive income (loss) at October 31, 2018	$	4,726		$	(3,390	)	$	166		$	1,502

SEGMENT INFORMATION

3 Months Ended

Oct. 31, 2018

SEGMENT INFORMATION

(16) SEGMENT INFORMATION

The Company has five operating segments: Americas; Asia; Europe; Direct Marketing; and e-Business. Based on the information provided to the Company’s chief operating decision-maker for purposes of making decisions about allocating resources and assessing performance and quantitative thresholds, the Company has determined that it has five reportable segments: Americas, Asia, Europe, Direct Marketing and e-Business. The Company also has Corporate-level activity, which consists primarily of costs associated with certain corporate administrative functions such as legal, finance, share-based compensation and acquisition costs which are not allocated to the Company’s reportable segments. The Corporate-level balance sheet information includes cash and cash equivalents, Notes payables and other assets and liabilities which are not identifiable to the operations of the Company’s operating segments. All significant intra-segment amounts have been eliminated.

Management evaluates segment performance based on segment net revenue, operating income (loss) and “adjusted operating income (loss)”, which is defined as the operating income (loss) excluding net charges related to depreciation, amortization of intangible assets, long-lived asset impairment, share-based compensation and restructuring. These items are excluded because they may be considered to be of a non-operational or non-cash nature. Historically, the Company has recorded significant impairment and restructuring charges and therefore management uses adjusted operating income to assist in evaluating the performance of the Company’s core operations.

Summarized financial information of the Company’s continuing operations by operating segment is as follows:


	Three Months Ended
	October 31,
	2018			2017
	(In thousands)
Net revenue:
Americas	$	17,440		$	14,839
Asia		44,256			43,512
Europe		19,521			38,390
Direct Marketing		128,094			—
e-Business		5,822			5,781

	$	215,133		$	102,522

Operating income (loss):
Americas	$	(826	)	$	(2,199	)
Asia		5,128			4,169
Europe		(1,472	)		(2,860	)
Direct Marketing		4,767			—
e-Business		(1,148	)		(1,445	)

Total Segment operating income (loss)		6,449			(2,335	)
Corporate-level activity		(2,913	)		(1,495	)

Total operating income (loss)		3,536			(3,830	)

Total other expense		(9,790	)		(521	)

Loss before income taxes	$	(6,254	)	$	(4,351	)


	October 31,		July 31,
	2018		2018
	(In thousands)
Total assets:
Americas	$	22,494	$	22,820
Asia		50,359		44,322
Europe		39,723		37,223
Direct Marketing		630,414		642,820
e-Business		16,645		15,758

Sub-total - segment assets		759,635		762,943
Corporate		68,092		64,107

	$	827,727	$	827,050

Summarized financial information of the Company’s net revenue from external customers by group of services is as follows:


	Three Months Ended
	October 31,
	2018		2017
	(In thousands)
Supply chain services	$	81,217	$	96,741
e-Business services		5,822		5,781
Direct Marketing		128,094		—

	$	215,133	$	102,522

As of October 31, 2018 and July 31, 2018, approximately $99.6 million and $101.8 million of the Company’s long-lived assets, respectively, were located in the U.S.A.

For the three months ended October 31, 2018, the Company’s net revenues within U.S.A., China, Netherlands and Czech Republic were $146.2 million, $36.6 million, $14.9 million and $1.2 million, respectively. For the three months ended October 31, 2017, the Company’s net revenues within U.S.A., China, Netherlands and Czech Republic were $15.2 million, $34.8 million, $15.2 million and $21.7 million, respectively.

RELATED PARTY TRANSACTIONS

3 Months Ended

Oct. 31, 2018

RELATED PARTY TRANSACTIONS

(17) RELATED PARTY TRANSACTIONS

As of February 20, 2018, SPHG Holdings and its affiliates beneficially owned approximately 52% of our outstanding capital stock. As of October 31, 2018 and July 31, 2018, SPHG Holdings held $14.9 million principal amount of the Company’s 5.25% Convertible Senior Notes. SPHG Holdings has confirmed to the Company that it will not require a cash payment on the Notes when they mature and for a period greater than twelve months from the date of this filing.

Preferred Stock Transaction and Warrant Repurchase

On December 15, 2017, the Company entered into a Preferred Stock Purchase Agreement with SPHG Holdings, pursuant to which the Company issued 35,000 shares of the Company’s newly created Series C Convertible Preferred Stock, par value $0.01 per share, to SPHG Holdings at a price of $1,000 per share, for an aggregate purchase consideration of $35.0 million. The terms, rights, obligations and preferences of the Preferred Stock are set forth in a Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of the Company (the a Series C Certificate of Designations), which has been filed with the Secretary of State of the State of Delaware.

Under the Series C Certificate of Designations, each share of Preferred Stock can be converted into shares of the our Common Stock, at an initial conversion price equal to $1.96 per share, subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction. Holders of the Preferred Stock will also receive dividends at 6% per annum payable, at the Company’s option, in cash or Common Stock. If at any time the closing bid price of the Company’s Common Stock exceeds 170% of the conversion price for at least five consecutive trading days (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction), the Company has the right to require each holder of Preferred Stock to convert all, or any whole number, of shares of the Preferred Stock into Common Stock.

The Preferred Stock Transaction was approved and recommended to the Board by the Special Committee of the Board. Each member of the Special Committee was independent and not affiliated with Steel Holdings GP, which controls the power to vote and dispose of the securities held by SPHG Holdings and its affiliates.

On December 15, 2017, contemporaneously with the closing of the Preferred Stock Transaction, the Company entered into a Warrant Repurchase Agreement with Steel Holdings, an affiliate of SPHG Holdings, pursuant to which the Company repurchased for $100 the warrant to acquire 2,000,000 shares of the Common Stock that the Company had previously issued to Steel Holdings. The Warrant, which was to expire in 2018, was terminated by the Company upon repurchase.

Management Services Agreement

On December 24, 2014, the Company entered into a Management Services Agreement with SP Corporate Services LLC (“SP Corporate”), effective as of January 1, 2015 (as amended, the “Management Services Agreement”). SP Corporate is an indirect wholly owned subsidiary of Steel Holdings and is a related party. Pursuant to the Management Services Agreement, SP Corporate provided the Company and its subsidiaries with the services of certain employees, including certain executive officers, and other corporate services.

The Management Services Agreement had an initial term of six months. On June 30, 2015, the Company entered into an amendment that extended the term of the Management Services Agreement to December 31, 2015 and provided for automatic renewal for successive one year periods, unless and until terminated in accordance with the terms set forth therein, which include, under certain circumstances, the payment by the Company of certain termination fees to SP Corporate. On March 10, 2016, the Company entered into a Second Amendment to the Management Services Agreement with SPH Services, Inc. (“SPH Services”), the parent of SP Corporate and an affiliate of SPHG Holdings, pursuant to which SPH Services assumed rights and responsibilities of SP Corporate and the services provided by SPH Services to the Company were modified pursuant to the terms of the amendment. On March 10, 2016, the Company entered into a Transfer Agreement with SPH Services pursuant to which the parties agreed to transfer to the Company certain individuals who provide corporate services to the Company (the “Transfer Agreement”). SP Corporate and Steel Partners LLC merged with and into SPH Services, with SPH Services surviving. SPH Services has since changed its name to Steel Services Ltd. (“Steel Services”). On September 1, 2017, the Company entered into a Third Amendment to the Management Services Agreement, which reduced the fixed monthly fee paid by the Company to Steel Services under the Management Services Agreement from $175,000 per month to $95,641 per month. The monthly fee is subject to review and adjustment by agreement between the Company and Steel Services for periods commencing in fiscal 2016 and beyond. Additionally, the Company may be required to reimburse Steel Services and its affiliates for all reasonable and necessary business expenses incurred on our behalf in connection with the performance of the services under the Management Services Agreement, including travel expenses. The Management Services Agreement provides that, under certain circumstances, the Company may be required to indemnify and hold harmless Steel Services and its affiliates and employees from any claims or liabilities by a third party in connection with activities or the rendering of services under the Management Services Agreement. Total expenses incurred related to this agreement for the three months ended October 31, 2018 and 2017 were $0.3 million and $0.5 million, respectively. As of October 31, 2018 and July 31, 2018, amounts due to SP Corporate and Steel Services were $0.1 million and $0.2 million, respectively.

The Related Party Transactions Committee of the Board (the “Related Party Transactions Committee”) approved the entry into the Management Services Agreement (and the first two amendments thereto) and the Transfer Agreement. The Audit Committee of the Board of Directors (the “Audit Committee”) approved the third amendment to the Management Services Agreement. The Related Party Transactions Committee held the responsibility to review, approve and ratify related party transactions from November 20, 2014, until October 11, 2016. On October 11, 2016, the Board adopted a Related Person Transaction Policy that is administered by the Audit Committee and applies to all related party transactions. As of October 11, 2016, the Audit Committee reviews all related party transactions on an ongoing basis and all such transactions must be approved or ratified by the Audit Committee.

On December 15, 2017, the Board, upon the recommendation of the Special Committee and the Compensation Committee, approved restricted stock grants and market performance based restricted stock grants to non-employee directors Messrs. Howard, Fejes and Lichtenstein, the Executive Chairman of the Board, in each case effective upon the closing of the IWCO Acquisition (the “Grant Date”) and in consideration for current and future services to the Company. Messrs. Howard and Lichtenstein are affiliated with Steel Holdings GP, which is a wholly-owned subsidiary of Steel Holdings. Mr. Fejes is currently affiliated with Steel Services, an indirect wholly owned subsidiary of Steel Holdings. These awards were measured based on the fair market value on the Grant Date.

Mutual Securities, Inc. (“Mutual Securities”) serves as the broker and record-keeper for all the transactions associated with the Trading Securities. Mr. Howard, a director of the Company, is a registered principal of Mutual Securities. Commissions charged by Mutual Securities are generally commensurate with commissions charged by other institutional brokers, and the Company believes its use of Mutual Securities is consistent with its desire to obtain best price and execution. During the three months ended October 31, 2018 and 2017, Mutual Securities received an immaterial amount in commissions associated with these transactions.

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

3 Months Ended

Oct. 31, 2018

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

(18) FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

ASC Topic 820 provides that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. ASC Topic 820 requires the Company to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:


Level 1:		Observable inputs such as quoted prices for identical assets or liabilities in active markets

Level 2:		Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs

Level 3:		Unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants would price the assets or liabilities

The carrying value of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, current liabilities and the revolving line of credit approximate fair value because of the short maturity of these instruments. We believe that the carrying value of our long-term debt approximates fair value because the stated interest rates of this debt is consistent with current market rates. The carrying value of capital lease obligations approximates fair value, as estimated by using discounted future cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The defined benefit plans have 100% of their assets invested in bank-managed portfolios of debt securities and other assets. Conservation of capital with some conservative growth potential is the strategy for the plans. The Company’s pension plans are outside the United States, where asset allocation decisions are typically made by an independent board of trustees. Investment objectives are aligned to generate returns that will enable the plans to meet their future obligations. The Company acts in a consulting and governance role in reviewing investment strategy and providing a recommended list of investment managers for each plan, with final decisions on asset allocation and investment manager made by local trustees.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following tables present the Company’s financial assets measured at fair value on a recurring basis as of October 31, 2018 and July 31, 2018, classified by fair value hierarchy:


			Fair Value Measurements at Reporting Date Using
(In thousands)	October 31, 2018		Level 1		Level 2		Level 3
Assets:
Money market funds	$	29,494	$	29,494	$	—	$	—

			Fair Value Measurements at Reporting Date Using
(In thousands)	July 31, 2018		Level 1		Level 2		Level 3
Assets:
Money market funds	$	47,186	$	47,186	$	—	$	—

There were no transfers between Levels 1, 2 or 3 during any of the periods presented.

When available, quoted prices were used to determine fair value. When quoted prices in active markets were available, investments were classified within Level 1 of the fair value hierarchy. When quoted prices in active markets were not available, fair values were determined using pricing models, and the inputs to those pricing models were based on observable market inputs. The inputs to the pricing models were typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads and benchmark securities, among others.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

The Company reviews the carrying amounts of these assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognized when the carrying amount of the asset group or reporting unit is not recoverable and exceeds its fair value. The Company estimated the fair values of assets subject to impairment based on the Company’s own judgments about the assumptions that market participants would use in pricing the assets and on observable market data, when available.

Fair Value of Financial Instruments

The Company’s financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, customer deposits, accounts payable, restricted cash and debt, and are reflected in the financial statements at cost. With the exception of the Notes payable and long-term debt, cost approximates fair value for these items due to their short-term nature. We believe that the carrying value of our long-term debt approximates fair value because the stated interest rates of this debt is consistent with current market rates.

Included in cash and cash equivalents in the accompanying balance sheet are money market funds. These are valued at quoted market prices in active markets.

The following table presents the Company’s Notes payable not carried at fair value:


	October 31, 2018				July 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Hierarchy
	(In thousands)
Notes payable	$	62,085	$	63,975	$	64,530	$	66,658		Level 1

The fair value of the Company’s Notes payable represents the value at which its lenders could trade its debt within the financial markets, and does not represent the settlement value of these debt liabilities to us. The fair value of the Notes payable could vary each period based on fluctuations in market interest rates, as well as changes to our credit ratings. The Notes payable are traded and their fair values are based upon traded prices as of the reporting dates.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

REVENUE RECOGNITION (Tables)

3 Months Ended

Oct. 31, 2018

Summary of Reconciliation of the Disaggregated Revenue


	Three Months Ended October 31, 2018
	Americas		Asia		Europe		Direct Marketing		e-Business		Consolidated Total
	(In thousands)
Major Goods/Service Lines
Supply chain management services	$	17,440	$	44,256	$	19,521	$	—	$	5,409	$	86,626
Perpetual software licenses		—		—		—		—		—		—
Marketing solutions offerings		—		—		—		128,094		—		128,094
Other		—		—		—		—		413		413

		17,440		44,256		19,521		128,094		5,822		215,133
Timing of Revenue Recognition
Goods transferred over time		—		—		—		128,094		—		128,094
Services transferred over time		17,440		44,256		19,521		—		5,822		87,039

		17,440		44,256		19,521		128,094		5,822		215,133
Total Revenue
Revenue from contracts with customers		17,440		44,256		19,521		128,094		5,822		215,133

	$	17,440	$	44,256	$	19,521	$	128,094	$	5,822	$	215,133

Summary of Changes in Deferred Revenue

Changes in deferred revenue during the three months ended October 31, 2018, were as follows (in thousands):


Balance at beginning of period	$	3,858
Deferral of revenue		503
Recognition of deferred amounts upon satisfaction of performance obligation		(720	)

Balance at end of period	$	3,641

Cumulative Effect of the Changes to Consolidated Balance Sheet for the Adoption of Topic 606

The cumulative effect of the changes made to the Company’s consolidated August 1, 2018 balance sheet for the adoption of Topic 606 were as follows (in thousands):


	July 31,			Adjustments Due			August 1,
	2018			to ASU 2014-09			2018
Assets
Inventories, net	$	47,786		$	(21,233	)	$	26,553
Prepaid expenses and other current assets		13,415			24,041			37,456
Total current assets		264,281			2,808			267,089
Total assets	$	827,050		$	2,808		$	829,858

Liabilities
Other Current Liabilities	$	42,125		$	(3,330	)	$	38,795
Total current liabilities		276,356			(3,330	)		273,026
Total liabilities		684,230			(3,330	)		680,900
Stockholders’ equity
Accumulated deficit		(7,363,569	)		6,138			(7,357,431	)
Total stockholders’ equity		107,628			6,138			113,766
Total liabilities, contingently redeemable preferred stock and stockholders’ equity	$	827,050		$	2,808		$	829,858

Impact of the Adoption on Consolidated Balance Sheet and Statement of Operations

Balance Sheet:


	October 31, 2018
				Balances without			Effect of Change
	As Reported			Adoption of ASC 606			Higher/(Lower)
Assets
Inventories, net	$	29,969		$	51,392		$	(21,423	)
Prepaid expenses and other current assets		34,187			11,524			22,663
Total current assets		276,054			274,814			1,240
Total assets	$	827,727		$	826,487		$	1,240

Liabilities
Other Current Liabilities	$	38,408		$	44,041		$	(5,633	)
Total current liabilities		280,197			285,830			(5,633	)
Total liabilities		687,098			692,731			(5,633	)
Stockholders’ equity
Accumulated deficit		(7,365,332	)		(7,372,205	)		6,873
Total stockholders’ equity		105,431			98,558			6,873
Total liabilities, contingently redeemable preferred stock and stockholders’ equity	$	827,727		$	826,487		$	1,240

Statement of Operations:


	Three Months Ended October 31, 2018
				Balances without			Effect of Change
	As Reported			Adoption of ASC 606			Higher/(Lower)
Net revenue	$	215,133		$	214,208		$	925
Cost of revenue		176,933			176,743			190
Gross profit		38,200			37,465			735
Loss before income taxes		(6,254	)		(6,989	)		735
Net loss		(7,365	)		(8,100	)		735
Net loss attributable to common stockholders	$	(7,901	)	$	(8,636	)	$	735
Basic and diluted net loss per share attributable to common stockholders:	$	(0.13	)	$	(0.14	)	$	0.01

INVENTORIES (Tables)

3 Months Ended

Oct. 31, 2018

Components of Inventories

Inventories consisted of the following:


	October 31,		July 31,
	2018		2018
	(In thousands)
Raw materials	$	25,803	$	23,208
Work-in-process		1,291		16,147
Finished goods		2,875		8,431

	$	29,969	$	47,786

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

3 Months Ended

Oct. 31, 2018

Components of Accrued Expenses


	October 31,		July 31,
	2018		2018
	(In thousands)
Accrued sales taxes	$	21,418	$	21,390
Accrued other taxes		7,318		8,414
Accrued compensation		21,947		25,603
Accrued interest		450		1,437
Accrued audit, tax and legal		2,829		3,264
Accrued contract labor		3,773		1,932
Accrued worker’s compensation		6,148		6,126
Accrued other		21,046		20,164

	$	84,929	$	88,330

Components of Other Current Liabilities


	October 31,		July 31,
	2018		2018
	(In thousands)
Accrued pricing liabilities	$	18,882	$	18,882
Customer postage deposits		11,006		12,638
Other		8,520		10,605

	$	38,408	$	42,125

DEBT (Tables)

3 Months Ended

Oct. 31, 2018

Net Carrying Value of Term Loan


	October 31,			July 31,
	2018			2018
	(In thousands)
Carrying amount of equity component (net of allocated debt issuance costs)	$	26,961		$	26,961
Principal amount of Notes	$	63,925		$	67,625
Unamortized debt discount		(1,690	)		(2,843	)
Unamortized debt issuance costs		(150	)		(252	)

Net carrying amount	$	62,085		$	64,530

Summary of Interest Expense Related to Convertible Notes


	Three Months Ended
	October 31,
	2018		2017
	(In thousands)
Interest expense related to contractual interest coupon	$	790	$	914
Interest expense related to accretion of the discount		1,051		1,041
Interest expense related to debt issuance costs		93		92

	$	1,934	$	2,047

Term Loan

Net Carrying Value of Term Loan


	October 31,			July 31,
	2018			2018
	(In thousands)
Principal amount outstanding on the Term Loan	$	388,500		$	390,000
Unamortized debt issuance costs		(1,094	)		(1,162	)

Net carrying value of the Term Loan	$	387,406		$	388,838

OTHER GAINS (LOSSES), NET (Tables)

3 Months Ended

Oct. 31, 2018

Components of Other Gains (Losses), Net

The following table reflects the components of “Other gains (losses), net”:


	Three Months Ended
	October 31,
	2018		2017
	(In thousands)
Foreign currency exchange gains (losses)	$	916	$	(635	)
Gains, net on Trading Securities		—		1,876
Other, net		28		181

	$	944	$	1,422

EARNINGS PER SHARE (Tables)

3 Months Ended

Oct. 31, 2018

Reconciliation of Earnings Per Share

The following table reconciles earnings per share for the three months ended October 31, 2018 and 2017:


	Three Months Ended
	October 31,
	2018			2017
	(In thousands, except per share data)
Net loss	$	(7,365	)	$	(5,237	)
Less: Preferred dividends on redeemable preferred stock		(536	)		—

Net loss attributable to common stockholders	$	(7,901	)	$	(5,237	)

Weighted average common shares outstanding		60,712			55,260
Weighted average common equivalent shares arising from dilutive stock options, restricted stock, convertible notes and convertible preferred stock		—			—

Weighted average number of common and potential common shares		60,712			55,260

Basic and diluted net loss per share attributable to common stockholders:	$	(0.13	)	$	(0.09	)

SHARE-BASED PAYMENTS (Tables)

3 Months Ended

Oct. 31, 2018

Summary of Share Based Compensation Expense Related to Employee Stock Options, Employee Stock Purchases and Non-Vested Shares


	Three Months Ended
	October 31,
	2018		2017
	(In thousands)
Cost of revenue	$	—	$	11
Selling, general and administrative		792		281

	$	792	$	292

COMPREHENSIVE INCOME (LOSS) (Tables)

3 Months Ended

Oct. 31, 2018

Accumulated Other Comprehensive Items

Accumulated other comprehensive items consist of the following:


	Foreign currency items			Pension items			Unrealized gains (losses) on securities			Total
	(In thousands)
Accumulated other comprehensive income (loss) at July 31, 2018	$	6,348		$	(3,795	)	$	181		$	2,734
Foreign currency translation adjustment		(1,622	)		—			—			(1,622	)
Net unrealized holding gain on securities		—			—			(15	)		(15	)
Pension liability adjustments		—			405			—			405

Net current-period other comprehensive income (loss)		(1,622	)		405			(15	)		(1,232	)

Accumulated other comprehensive income (loss) at October 31, 2018	$	4,726		$	(3,390	)	$	166		$	1,502

SEGMENT INFORMATION (Tables)

3 Months Ended

Oct. 31, 2018

Summarized Financial Information of Continuing Operations by Operating Segment and Corporate-Level Activity

Summarized financial information of the Company’s continuing operations by operating segment is as follows:


	Three Months Ended
	October 31,
	2018			2017
	(In thousands)
Net revenue:
Americas	$	17,440		$	14,839
Asia		44,256			43,512
Europe		19,521			38,390
Direct Marketing		128,094			—
e-Business		5,822			5,781

	$	215,133		$	102,522

Operating income (loss):
Americas	$	(826	)	$	(2,199	)
Asia		5,128			4,169
Europe		(1,472	)		(2,860	)
Direct Marketing		4,767			—
e-Business		(1,148	)		(1,445	)

Total Segment operating income (loss)		6,449			(2,335	)
Corporate-level activity		(2,913	)		(1,495	)

Total operating income (loss)		3,536			(3,830	)

Total other expense		(9,790	)		(521	)

Loss before income taxes	$	(6,254	)	$	(4,351	)

Total Assets of Continuing Operations


	October 31,		July 31,
	2018		2018
	(In thousands)
Total assets:
Americas	$	22,494	$	22,820
Asia		50,359		44,322
Europe		39,723		37,223
Direct Marketing		630,414		642,820
e-Business		16,645		15,758

Sub-total - segment assets		759,635		762,943
Corporate		68,092		64,107

	$	827,727	$	827,050

Summarized Financial Information of Net Revenue from External Customers by Group of Services

Summarized financial information of the Company’s net revenue from external customers by group of services is as follows:


	Three Months Ended
	October 31,
	2018		2017
	(In thousands)
Supply chain services	$	81,217	$	96,741
e-Business services		5,822		5,781
Direct Marketing		128,094		—

	$	215,133	$	102,522

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES (Tables)

3 Months Ended

Oct. 31, 2018

Financial Assets Measured at Fair Value on Recurring Basis and Classified by Fair Value Hierarchy

The following tables present the Company’s financial assets measured at fair value on a recurring basis as of October 31, 2018 and July 31, 2018, classified by fair value hierarchy:


			Fair Value Measurements at Reporting Date Using
(In thousands)	October 31, 2018		Level 1		Level 2		Level 3
Assets:
Money market funds	$	29,494	$	29,494	$	—	$	—

			Fair Value Measurements at Reporting Date Using
(In thousands)	July 31, 2018		Level 1		Level 2		Level 3
Assets:
Money market funds	$	47,186	$	47,186	$	—	$	—

Notes Payable not Carried at Fair Value

The following table presents the Company’s Notes payable not carried at fair value:


	October 31, 2018				July 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Hierarchy
	(In thousands)
Notes payable	$	62,085	$	63,975	$	64,530	$	66,658		Level 1

Nature of Operations - Additional Information (Detail)		3 Months Ended
Nature of Operations - Additional Information (Detail)	Dec. 15, 2017 USD ($)	Oct. 31, 2018 USD ($) Site Language Facility	Jul. 31, 2018 USD ($)
Nature Of Operations [Line Items]
Cash and cash equivalents and Trading Securities		$ 83,400,000	$ 92,100,000
Principal amount of notes held		$ 63,925,000	$ 67,625,000
Steel Holdings \| 5.25% Convertible Senior Notes
Nature Of Operations [Line Items]
Debt instrument stated percentage		5.25%	5.25%
Principal amount of notes held		$ 14,900,000	$ 14,900,000
PNC Bank Credit Facility
Nature Of Operations [Line Items]
Credit facility, readily available borrowing capacity		9,000,000
Cerberus Credit Facility
Nature Of Operations [Line Items]
Credit facility, readily available borrowing capacity		$ 25,000,000
Revolving credit facility	$ 25,000,000
Moduslink
Nature Of Operations [Line Items]
Number of sites \| Site		20
Number of languages \| Language		21
IWCO \| Cerberus Credit Facility
Nature Of Operations [Line Items]
Revolving credit facility		$ 25,000,000
IWCO \| Cerberus Credit Facility \| Maximum
Nature Of Operations [Line Items]
Cash distributions		$ 5,000,000
IWCO \| Chanhassen MN
Nature Of Operations [Line Items]
Number of facilities \| Facility		3
IWCO \| Little Falls MN
Nature Of Operations [Line Items]
Number of facilities \| Facility		1
IWCO \| Warminster PA
Nature Of Operations [Line Items]
Number of facilities \| Facility		1
IWCO \| Hamburg PA
Nature Of Operations [Line Items]
Number of facilities \| Facility		2

Summary of Reconciliation of the Disaggregated Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Other Revenues [Line Items]
Revenue from contracts with customers	$ 215,133
Total revenue	215,133	$ 102,522
Supply Chain Management Services
Other Revenues [Line Items]
Revenue from contracts with customers	86,626
Marketing Solutions Offerings
Other Revenues [Line Items]
Revenue from contracts with customers	128,094
Other
Other Revenues [Line Items]
Revenue from contracts with customers	413
Goods Transferred Over Time
Other Revenues [Line Items]
Revenue from contracts with customers	128,094
Services Transferred Over Time
Other Revenues [Line Items]
Revenue from contracts with customers	87,039
Direct Marketing
Other Revenues [Line Items]
Revenue from contracts with customers	128,094
Total revenue	128,094
Direct Marketing \| Marketing Solutions Offerings
Other Revenues [Line Items]
Revenue from contracts with customers	128,094
Direct Marketing \| Goods Transferred Over Time
Other Revenues [Line Items]
Revenue from contracts with customers	128,094
e-Business
Other Revenues [Line Items]
Revenue from contracts with customers	5,822
Total revenue	5,822
e-Business \| Supply Chain Management Services
Other Revenues [Line Items]
Revenue from contracts with customers	5,409
e-Business \| Other
Other Revenues [Line Items]
Revenue from contracts with customers	413
e-Business \| Services Transferred Over Time
Other Revenues [Line Items]
Revenue from contracts with customers	5,822
Americas
Other Revenues [Line Items]
Revenue from contracts with customers	17,440
Total revenue	17,440
Americas \| Supply Chain Management Services
Other Revenues [Line Items]
Revenue from contracts with customers	17,440
Americas \| Services Transferred Over Time
Other Revenues [Line Items]
Revenue from contracts with customers	17,440
Asia
Other Revenues [Line Items]
Revenue from contracts with customers	44,256
Total revenue	44,256
Asia \| Supply Chain Management Services
Other Revenues [Line Items]
Revenue from contracts with customers	44,256
Asia \| Services Transferred Over Time
Other Revenues [Line Items]
Revenue from contracts with customers	44,256
Europe
Other Revenues [Line Items]
Revenue from contracts with customers	19,521
Total revenue	19,521
Europe \| Supply Chain Management Services
Other Revenues [Line Items]
Revenue from contracts with customers	19,521
Europe \| Services Transferred Over Time
Other Revenues [Line Items]
Revenue from contracts with customers	$ 19,521

Revenue Recognition - Additional Information (Detail) - USD ($)	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Aug. 01, 2018	Jul. 31, 2018
Revenue From Contract With Customers [Line Items]
Contract assets	$ 22,700,000		$ 24,000,000
Deferred revenue current	184,000		3,700,000
Deferred revenue long-term	212,000		3,400,000
Unearned amount to recognize in 2019	3,400,000
Unearned amount to recognize in 2020	212,000
Accumulated deficit	(7,365,332,000)			$ (7,363,569,000)
Revenue	215,133,000	$ 102,522,000
Accounting Standards Update 2014-09
Revenue From Contract With Customers [Line Items]
Accumulated deficit			(7,357,431,000)
Accounting Standards Update 2014-09 \| Difference between Revenue Guidance in Effect before and after Topic 606
Revenue From Contract With Customers [Line Items]
Accumulated deficit	6,873,000		$ 6,138,000
Revenue	$ 925,000

Summary of Changes in Deferred Revenue (Detail) $ in Thousands	3 Months Ended
	Oct. 31, 2018 USD ($)
Deferred Revenue Arrangement [Line Items]
Balance at beginning of period	$ 3,858
Deferral of revenue	503
Recognition of deferred amounts upon satisfaction of performance obligation	(720)
Balance at end of period	$ 3,641

Cumulative Effect of the Changes to Consolidated Balance Sheet for the Adoption of Topic 606 (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Aug. 01, 2018	Jul. 31, 2018	Oct. 31, 2017	Jul. 31, 2017
ASSETS
Inventories, net	$ 29,969		$ 47,786
Prepaid expenses and other current assets	34,187		13,415
Total current assets	276,054		264,281
Total assets	827,727		827,050
Liabilities
Other current liabilities	38,408		42,125
Total current liabilities	280,197		276,356
Total liabilities	687,098		684,230
Stockholders' equity
Accumulated deficit	(7,365,332)		(7,363,569)
Total stockholders' equity	105,431		107,628	$ 58,314	$ 62,971
Total liabilities, contingently redeemable preferred stock and stockholders' equity	827,727		827,050
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
ASSETS
Inventories, net			47,786
Prepaid expenses and other current assets			13,415
Total current assets			264,281
Total assets			827,050
Liabilities
Other current liabilities			42,125
Total current liabilities			276,356
Total liabilities			684,230
Stockholders' equity
Accumulated deficit			(7,363,569)
Total stockholders' equity			107,628
Total liabilities, contingently redeemable preferred stock and stockholders' equity			$ 827,050
Accounting Standards Update 2014-09
ASSETS
Inventories, net		$ 26,553
Prepaid expenses and other current assets		37,456
Total current assets		267,089
Total assets		829,858
Liabilities
Other current liabilities		38,795
Total current liabilities		273,026
Total liabilities		680,900
Stockholders' equity
Accumulated deficit		(7,357,431)
Total stockholders' equity		113,766
Total liabilities, contingently redeemable preferred stock and stockholders' equity		829,858
Accounting Standards Update 2014-09 \| Calculated under Revenue Guidance in Effect before Topic 606 [Member]
ASSETS
Inventories, net	51,392
Prepaid expenses and other current assets	11,524
Total current assets	274,814
Total assets	826,487
Liabilities
Other current liabilities	44,041
Total current liabilities	285,830
Total liabilities	692,731
Stockholders' equity
Accumulated deficit	(7,372,205)
Total stockholders' equity	98,558
Total liabilities, contingently redeemable preferred stock and stockholders' equity	826,487
Accounting Standards Update 2014-09 \| Difference between Revenue Guidance in Effect before and after Topic 606
ASSETS
Inventories, net	(21,423)	(21,233)
Prepaid expenses and other current assets	22,663	24,041
Total current assets	1,240	2,808
Total assets	1,240	2,808
Liabilities
Other current liabilities	(5,633)	(3,330)
Total current liabilities	(5,633)	(3,330)
Total liabilities	(5,633)	(3,330)
Stockholders' equity
Accumulated deficit	6,873	6,138
Total stockholders' equity	6,873	6,138
Total liabilities, contingently redeemable preferred stock and stockholders' equity	$ 1,240	$ 2,808

Impact of the Adoption on Consolidated Balance Sheet (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Aug. 01, 2018	Jul. 31, 2018	Oct. 31, 2017	Jul. 31, 2017
ASSETS
Inventories, net	$ 29,969		$ 47,786
Prepaid expenses and other current assets	34,187		13,415
Total current assets	276,054		264,281
Total assets	827,727		827,050
Liabilities
Other current liabilities	38,408		42,125
Total current liabilities	280,197		276,356
Total liabilities	687,098		684,230
Stockholders' equity
Accumulated deficit	(7,365,332)		(7,363,569)
Total stockholders' equity	105,431		107,628	$ 58,314	$ 62,971
Total liabilities, contingently redeemable preferred stock and stockholders' equity	827,727		827,050
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
ASSETS
Inventories, net			47,786
Prepaid expenses and other current assets			13,415
Total current assets			264,281
Total assets			827,050
Liabilities
Other current liabilities			42,125
Total current liabilities			276,356
Total liabilities			684,230
Stockholders' equity
Accumulated deficit			(7,363,569)
Total stockholders' equity			107,628
Total liabilities, contingently redeemable preferred stock and stockholders' equity			$ 827,050
Accounting Standards Update 2014-09
ASSETS
Inventories, net		$ 26,553
Prepaid expenses and other current assets		37,456
Total current assets		267,089
Total assets		829,858
Liabilities
Other current liabilities		38,795
Total current liabilities		273,026
Total liabilities		680,900
Stockholders' equity
Accumulated deficit		(7,357,431)
Total stockholders' equity		113,766
Total liabilities, contingently redeemable preferred stock and stockholders' equity		829,858
Accounting Standards Update 2014-09 \| Calculated under Revenue Guidance in Effect before Topic 606 [Member]
ASSETS
Inventories, net	51,392
Prepaid expenses and other current assets	11,524
Total current assets	274,814
Total assets	826,487
Liabilities
Other current liabilities	44,041
Total current liabilities	285,830
Total liabilities	692,731
Stockholders' equity
Accumulated deficit	(7,372,205)
Total stockholders' equity	98,558
Total liabilities, contingently redeemable preferred stock and stockholders' equity	826,487
Accounting Standards Update 2014-09 \| Difference between Revenue Guidance in Effect before and after Topic 606
ASSETS
Inventories, net	(21,423)	(21,233)
Prepaid expenses and other current assets	22,663	24,041
Total current assets	1,240	2,808
Total assets	1,240	2,808
Liabilities
Other current liabilities	(5,633)	(3,330)
Total current liabilities	(5,633)	(3,330)
Total liabilities	(5,633)	(3,330)
Stockholders' equity
Accumulated deficit	6,873	6,138
Total stockholders' equity	6,873	6,138
Total liabilities, contingently redeemable preferred stock and stockholders' equity	$ 1,240	$ 2,808

Impact of the Adoption on Consolidated Statement of Operations (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net revenue	$ 215,133	$ 102,522
Cost of revenue	176,933	93,448
Gross profit	38,200	9,074
Loss before income taxes	(6,254)	(4,351)
Net loss	(7,365)	(5,237)
Net loss attributable to common stockholders	$ (7,901)	$ (5,237)
Basic and diluted net loss per share attributable to common stockholders:	$ (0.13)	$ (0.09)
Accounting Standards Update 2014-09 \| Calculated under Revenue Guidance in Effect before Topic 606 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net revenue	$ 214,208
Cost of revenue	176,743
Gross profit	37,465
Loss before income taxes	(6,989)
Net loss	(8,100)
Net loss attributable to common stockholders	$ (8,636)
Basic and diluted net loss per share attributable to common stockholders:	$ (0.14)
Accounting Standards Update 2014-09 \| Difference between Revenue Guidance in Effect before and after Topic 606
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net revenue	$ 925
Cost of revenue	190
Gross profit	735
Loss before income taxes	735
Net loss	735
Net loss attributable to common stockholders	$ 735
Basic and diluted net loss per share attributable to common stockholders:	$ 0.01

Components of Inventories (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Inventory [Line Items]
Raw materials	$ 25,803	$ 23,208
Work-in-process	1,291	16,147
Finished goods	2,875	8,431
Inventories, net	$ 29,969	$ 47,786

Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Goodwill [Line Items]
Goodwill	$ 254,352	$ 254,352
Direct Marketing
Goodwill [Line Items]
Goodwill	254,400
Customer Relationships
Goodwill [Line Items]
Intangible assets	$ 170,300
Estimated useful life	15 years
Trademarks and Trade Names
Goodwill [Line Items]
Intangible assets	$ 14,500
Estimated useful life	3 years

Components of Accrued Expenses (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Accrued Expenses [Line Items]
Accrued sales taxes	$ 21,418	$ 21,390
Accrued other taxes	7,318	8,414
Accrued compensation	21,947	25,603
Accrued interest	450	1,437
Accrued audit, tax and legal	2,829	3,264
Accrued contract labor	3,773	1,932
Accrued worker's compensation	6,148	6,126
Accrued other	21,046	20,164
Accrued expenses	$ 84,929	$ 88,330

Components of Other Current Liabilities (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Other Current Liabilities [Line Items]
Accrued pricing liabilities	$ 18,882	$ 18,882
Customer postage deposits	11,006	12,638
Other	8,520	10,605
Other current liabilities	$ 38,408	$ 42,125

Accrued Expenses and Other Current Liabilities - Additional Information (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Accrued Expenses and Other Current Liabilities [Line Items]
Accrued pricing liabilities	$ 18,882	$ 18,882

Debt - Additional Information (Detail)				3 Months Ended		12 Months Ended
Debt - Additional Information (Detail)	Dec. 15, 2017 USD ($)	Jun. 30, 2014 USD ($)	Mar. 18, 2014 USD ($)	Oct. 31, 2018 USD ($) d $ / shares	Oct. 31, 2017 USD ($)	Jul. 31, 2018 USD ($)
Debt Instrument [Line Items]
Debt instrument issued				$ 63,925,000		$ 67,625,000
Debt instrument issuance costs				150,000		252,000
Purchase of the Company's Convertible Notes				3,700,000
Notes payable, Fair Value				63,975,000		66,658,000
Debt instrument, carrying amount				$ 62,085,000		$ 64,530,000
Convertible debt, remaining discount amortization period				4 months
Debt instrument, interest expense				$ 1,051,000	$ 1,041,000
PNC Bank Credit Facility
Debt Instrument [Line Items]
Line of credit facility, term		5 years
Line of credit facility, maximum credit commitment		$ 50,000,000
Credit facility expiry date						Jun. 30, 2019
Line of credit facility, unutilized commitment fee percentage		0.25%
Outstanding indebtedness under the Credit Facility				0		$ 0
Available borrowing capacity under Credit Facility				9,000,000
Cerberus Credit Facility
Debt Instrument [Line Items]
Line of credit facility, term	5 years
Outstanding indebtedness under the Credit Facility				0		$ 0
Available borrowing capacity under Credit Facility				25,000,000
Term loan facility	$ 393,000,000
Revolving credit facility	$ 25,000,000
Line of credit facility, interest rate description	Borrowings under the Cerberus Credit Facility bear interest, at the Borrower's option, at a Reference Rate plus 3.75% or a LIBOR Rate plus 6.5%, each as defined the Financing Agreement.
Aggregate amount of each consecutive quarterly scheduled principal installment				$ 1,500,000
Excess cash flow payment percentage				25.00%		50.00%
Leverage ratio				3.50%
London Interbank Offered Rate (LIBOR) \| Cerberus Credit Facility
Debt Instrument [Line Items]
Debt instrument, percentage points added to the reference rate	6.50%
Base Rate \| Cerberus Credit Facility
Debt Instrument [Line Items]
Debt instrument, percentage points added to the reference rate	3.75%
Domestic Subsidiaries
Debt Instrument [Line Items]
Percentage of equity interests pledged						100.00%
Foreign Subsidiaries
Debt Instrument [Line Items]
Percentage of equity interests pledged						65.00%
SPHG Holdings
Debt Instrument [Line Items]
Debt instrument, principal amount				$ 14,900,000		$ 14,900,000
Letter of Credit Sublimit \| PNC Bank Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum credit commitment		$ 5,000,000
Uncommitted Accordion Feature \| PNC Bank Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum credit commitment		$ 20,000,000
Scenario 1 \| London Interbank Offered Rate (LIBOR) \| PNC Bank Credit Facility
Debt Instrument [Line Items]
Debt instrument, percentage points added to the reference rate		2.25%
Scenario 2 \| London Interbank Offered Rate (LIBOR) \| PNC Bank Credit Facility
Debt Instrument [Line Items]
Debt instrument, percentage points added to the reference rate		1.00%
Scenario 2 \| Federal Funds Open Rate \| PNC Bank Credit Facility
Debt Instrument [Line Items]
Debt instrument, percentage points added to the reference rate		0.50%
5.25% Convertible Senior Notes Due 2019
Debt Instrument [Line Items]
Debt instrument issued			$ 100,000,000
Debt instrument, stated interest rate			5.25%	0.50%
Debt instrument, convertible, conversion ratio				166.2593
Initial Conversion price \| $ / shares				$ 6.01
Debt instrument, redemption price percentage			100.00%
Debt instrument, convertible, earliest date				Mar. 06, 2017
Debt instrument, convertible, threshold percentage of stock price trigger				130.00%
Debt instrument, convertible, threshold trading days \| d				20
Debt instrument, convertible, threshold consecutive trading days \| d				30
Additional interest paid				$ 200,000
Debt instrument conversion option				28,100,000
Debt instrument issuance costs				3,400,000
Deferred debt instrument issuance costs				2,500,000
Debt instrument, interest expense				$ 1,934,000	$ 2,047,000
Debt instrument, interest rate, effective percentage				13.90%
Notes Payable One
Debt Instrument [Line Items]
Face amount of purchased Notes				$ 3,700,000
Purchase of the Company's Convertible Notes				3,700,000
Loss on purchase of Notes				(100,000)
Term Loan \| Cerberus Credit Facility
Debt Instrument [Line Items]
Debt instrument issued				388,500,000		390,000,000
Current and long-term net				$ 387,406,000		$ 388,838,000

Net Carrying Value of the Notes (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Debt Instrument [Line Items]
Carrying amount of equity component (net of allocated debt issuance costs)	$ 26,961	$ 26,961
Principal amount of Notes	63,925	67,625
Unamortized debt discount	(1,690)	(2,843)
Unamortized debt issuance costs	(150)	(252)
Net carrying amount	$ 62,085	$ 64,530

Summary of Interest Expense Related to Convertible Notes (Detail) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Interest Expense, Debt [Line Items]
Debt instrument, interest expense	$ 1,051	$ 1,041
5.25% Convertible Senior Notes Due 2019
Interest Expense, Debt [Line Items]
Debt instrument, interest expense	1,934	2,047
5.25% Convertible Senior Notes Due 2019 \| Coupon Interest
Interest Expense, Debt [Line Items]
Debt instrument, interest expense	790	914
5.25% Convertible Senior Notes Due 2019 \| Accretion of Debt Discount
Interest Expense, Debt [Line Items]
Debt instrument, interest expense	1,051	1,041
5.25% Convertible Senior Notes Due 2019 \| Amortization of Debt Issue Cost
Interest Expense, Debt [Line Items]
Debt instrument, interest expense	$ 93	$ 92

Net Carrying Value of Term Loan (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Debt Instrument [Line Items]
Principal amount outstanding on the Term Loan	$ 63,925	$ 67,625
Term Loan \| Cerberus Credit Facility
Debt Instrument [Line Items]
Principal amount outstanding on the Term Loan	388,500	390,000
Unamortized debt issuance costs	(1,094)	(1,162)
Net carrying value of the Term Loan	$ 387,406	$ 388,838

Contingencies - Additional Information (Detail) $ in Millions	Dec. 15, 2017 USD ($)
Purchase Agreement \| SPHG Holdings \| Series C Convertible Preferred Stock
Commitments and Contingencies [Line Items]
Proceeds from issuance of preferred stock	$ 35.0

Stockholders' Equity - Additional Information (Detail) $ / shares in Units, $ in Thousands			3 Months Ended
	Dec. 15, 2017 USD ($) TradingDay $ / shares shares	Mar. 12, 2013 USD ($) $ / shares shares	Oct. 31, 2018 USD ($) $ / shares shares	Oct. 31, 2017 USD ($)	Jul. 31, 2018 $ / shares shares
Equity [Line Items]
Preferred stock, shares issued \| shares			4,965,000		4,965,000
Preferred stock, par value			$ 0.01		$ 0.01
Price per share		$ 4.00
Common stock par value			$ 0.01		$ 0.01
Issuance of common stock \| shares		7,500,000
Proceeds from issuance of common stock, gross \| $		$ 30,000
Common stock issuance, transaction cost \| $		2,300
Net proceeds from issuance of common stock \| $		$ 27,700	$ 6	$ 3
Issuance of warrants to acquire additional shares, shares \| shares	2,000,000	2,000,000
Issuance of warrants to acquire additional shares, exercise price		$ 5.00
Warrants expiration term		5 years
Series C Convertible Preferred Stock
Equity [Line Items]
Common stock par value	$ 0.01
Convertible preferred stock conversion price per share	$ 1.96
Preferred stock, dividend rate, percentage	6.00%
Percentage threshold closing sale price of common stock higher than conversion price	170.00%
Series C Convertible Preferred Stock \| Minimum
Equity [Line Items]
Trading days \| TradingDay	5
Liquidation Basis of Accounting [Member] \| Series C Convertible Preferred Stock
Equity [Line Items]
Preferred stock liquidation preference percentage per share	The holders of the Preferred Stock are entitled to receive, prior and in preference to any distribution of any of the assets or funds of the company to the holders of other equity or equity equivalent securities of the Company other than the Preferred Stock by reason of their ownership thereof, an amount per share in cash equal to the sum of (i) one hundred percent (100%) of the stated value per share of Preferred Stock (initially $1,000 per share) then held by them (as adjusted for any stock split, stock dividend, stock combination or other similar transactions with respect to the Preferred Stock), plus (ii) 100% of all declared but unpaid dividends, and all accrued but unpaid dividends on each such share of Preferred Stock, in each case as the date of the triggering event.
Repurchase Agreements \| Warrant \| Steel Holdings
Equity [Line Items]
Repurchase price of warrant	$ 100
Purchase Agreement \| SPHG Holdings \| Series C Convertible Preferred Stock
Equity [Line Items]
Preferred stock, shares issued \| shares	35,000
Preferred stock, par value	$ 0.01
Price per share	$ 1,000
Proceeds from issuance of preferred stock \| $	$ 35,000

Components of Other Gains (Losses), Net (Detail) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Component Of Other Expense Income Nonoperating [Line Items]
Foreign currency exchange gains (losses)	$ 916	$ (635)
Gains, net on Trading Securities		1,876
Other, net	28	181
Other gains (losses), net	$ 944	$ 1,422

Other Gains (Losses), Net - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Component Of Other Expense Income Nonoperating [Line Items]
Foreign currency exchange gains (losses)	$ 916	$ (635)
Gains (losses) on Trading Securities		1,876
Asia
Component Of Other Expense Income Nonoperating [Line Items]
Realized and unrealized gains (losses) from foreign currency exposures and settled transactions	400	(400)
Europe
Component Of Other Expense Income Nonoperating [Line Items]
Realized and unrealized gains (losses) from foreign currency exposures and settled transactions	(1,000)	$ (300)
Corporate
Component Of Other Expense Income Nonoperating [Line Items]
Realized and unrealized gains (losses) from foreign currency exposures and settled transactions	$ 1,700

Income Taxes - Additional Information (Detail)	3 Months Ended	12 Months Ended
Income Taxes - Additional Information (Detail)	Oct. 31, 2018 USD ($) d	Jul. 31, 2018 USD ($)
Income Taxes [Line Items]
Unrecognized tax benefits related to federal, state and foreign taxes	$ 1,800,000	$ 1,600,000
Expected any unrecognized tax benefits to reverse in the next twelve months	0
Interest expense related to uncertain tax positions	$ 100,000	$ 200,000
Stockholder owning ownership on corporation's securities percentage	5.00%
Stockholder owning ownership on corporation's securities rolling period	3 years
Net operating loss carryforwards for federal tax	$ 2,100,000,000
Net operating loss carryforwards for state tax	$ 150,600,000
Business days \| d	10
Statutory federal income tax rate	21.00%	35.00%
Provision for income tax expense (benefit)		$ 280,400,000
Accumulated foreign earnings provisional income tax expense		0
Reduction in the valuation allowance		280,400,000
Deferred tax liability for earnings oversees	$ 0
Minimum
Income Taxes [Line Items]
Percentage of ownership require to obtain approval from board of directors to acquiring shares of the company's securities	4.99%
Parent Company
Income Taxes [Line Items]
Provision for income tax expense (benefit)		305,900,000
IWCO
Income Taxes [Line Items]
Provision for income tax expense (benefit)		$ (25,500,000)
Federal \| Internal Revenue Service (IRS) \| Earliest Tax Year
Income Taxes [Line Items]
Tax examinations tax period	2013
Federal \| Internal Revenue Service (IRS) \| Latest Tax Year
Income Taxes [Line Items]
Tax examinations tax period	2018
State \| Earliest Tax Year
Income Taxes [Line Items]
Tax examinations tax period	2013
State \| Latest Tax Year
Income Taxes [Line Items]
Tax examinations tax period	2018
Foreign \| Europe Income Tax Authority \| Earliest Tax Year
Income Taxes [Line Items]
Tax examinations tax period	2009
Foreign \| Europe Income Tax Authority \| Latest Tax Year
Income Taxes [Line Items]
Tax examinations tax period	2017
Foreign \| Asia Income Tax Authority \| Earliest Tax Year
Income Taxes [Line Items]
Tax examinations tax period	2005
Foreign \| Asia Income Tax Authority \| Latest Tax Year
Income Taxes [Line Items]
Tax examinations tax period	2017

Reconciliation of Earnings (Loss) Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Net income (loss)	$ (7,365)	$ (5,237)
Less: Preferred dividends on redeemable preferred stock	(536)
Net income (loss) attributable to common stockholders	$ (7,901)	$ (5,237)
Weighted average common shares outstanding	60,712	55,260
Weighted average common equivalent shares arising from dilutive stock options, restricted stock, convertible notes and convertible preferred stock	0	0
Weighted average number of common and potential common shares	60,712	55,260
Basic and diluted net loss per share attributable to common stockholders:	$ (0.13)	$ (0.09)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Earnings Per Share - Additional Information (Detail) - shares shares in Millions	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Computation of Earnings Per Share [Line Items]
Common stock equivalent shares excluded from the denominator in the calculation of diluted loss per share	29.5	14.1

Summary of Share Based Compensation Expense Related to Employee Stock Options, Employee Stock Purchases and Non-Vested Shares (Detail) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation expense	$ 792	$ 292
Cost of revenue
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation expense		11
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation expense	$ 792	$ 281

Share-Based Payments - Additional Information (Detail) $ in Millions	Oct. 31, 2018 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to non-vested shares	$ 0.2

Accumulated Other Comprehensive Income Items (Detail) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	$ 107,628	$ 62,971
Foreign currency translation adjustment	(1,622)	272
Net unrealized holding gain on securities	(15)	(13)
Pension liability adjustments	405	26
Other comprehensive income (loss)	(1,232)	285
Balance	105,431	58,314
Foreign currency items
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	6,348
Foreign currency translation adjustment	(1,622)
Other comprehensive income (loss)	(1,622)
Balance	4,726
Pension items
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	(3,795)
Pension liability adjustments	405
Other comprehensive income (loss)	405
Balance	(3,390)
Unrealized gains (losses) on Securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	181
Net unrealized holding gain on securities	(15)
Other comprehensive income (loss)	(15)
Balance	166
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance	2,734	4,313
Other comprehensive income (loss)	(1,232)	285
Balance	$ 1,502	$ 4,598

Segment Information - Additional Information (Detail) $ in Thousands	3 Months Ended
	Oct. 31, 2018 USD ($) Segment	Oct. 31, 2017 USD ($)	Jul. 31, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments \| Segment	5
Number of reportable segments \| Segment	5
Total assets	$ 827,727		$ 827,050
Net revenue	215,133	$ 102,522
United States
Segment Reporting Information [Line Items]
Total assets	99,600		$ 101,800
Net revenue	146,200	15,200
China
Segment Reporting Information [Line Items]
Net revenue	36,600	34,800
Netherlands
Segment Reporting Information [Line Items]
Net revenue	14,900	15,200
Czech Republic
Segment Reporting Information [Line Items]
Net revenue	$ 1,200	$ 21,700

Summarized Financial Information of Continuing Operations by Operating Segment and Corporate-Level Activity (Detail) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Segment Reporting Information [Line Items]
Revenues	$ 215,133	$ 102,522
Operating income (loss)	3,536	(3,830)
Total other income (expense)	(9,790)	(521)
Loss before income taxes	(6,254)	(4,351)
Direct Marketing
Segment Reporting Information [Line Items]
Revenues	128,094
e-Business
Segment Reporting Information [Line Items]
Revenues	5,822
Operating Segments
Segment Reporting Information [Line Items]
Operating income (loss)	6,449	(2,335)
Operating Segments \| Americas
Segment Reporting Information [Line Items]
Revenues	17,440	14,839
Operating income (loss)	(826)	(2,199)
Operating Segments \| Asia
Segment Reporting Information [Line Items]
Revenues	44,256	43,512
Operating income (loss)	5,128	4,169
Operating Segments \| Europe
Segment Reporting Information [Line Items]
Revenues	19,521	38,390
Operating income (loss)	(1,472)	(2,860)
Operating Segments \| Direct Marketing
Segment Reporting Information [Line Items]
Revenues	128,094
Operating income (loss)	4,767
Operating Segments \| e-Business
Segment Reporting Information [Line Items]
Revenues	5,822	5,781
Operating income (loss)	(1,148)	(1,445)
Corporate-level activity
Segment Reporting Information [Line Items]
Operating income (loss)	$ (2,913)	$ (1,495)

Total Assets of Continuing Operations (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Segment Reporting Information [Line Items]
Total assets	$ 827,727	$ 827,050
Operating Segments
Segment Reporting Information [Line Items]
Total assets	759,635	762,943
Operating Segments \| Americas
Segment Reporting Information [Line Items]
Total assets	22,494	22,820
Operating Segments \| Asia
Segment Reporting Information [Line Items]
Total assets	50,359	44,322
Operating Segments \| Europe
Segment Reporting Information [Line Items]
Total assets	39,723	37,223
Operating Segments \| Direct Marketing
Segment Reporting Information [Line Items]
Total assets	630,414	642,820
Operating Segments \| e-Business
Segment Reporting Information [Line Items]
Total assets	16,645	15,758
Corporate-level activity
Segment Reporting Information [Line Items]
Total assets	$ 68,092	$ 64,107

Summarized Financial Information of Net Revenue from External Customers by Group of Services (Detail) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	$ 215,133	$ 102,522
Supply Chain Services
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	81,217	96,741
e-Business
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	5,822	$ 5,781
Direct Marketing
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	$ 128,094

Related Party Transactions - Additional Information (Detail)						3 Months Ended		12 Months Ended
	Dec. 15, 2017 USD ($) TradingDay $ / shares shares	Sep. 01, 2017 USD ($)	Jun. 30, 2015	Dec. 24, 2014	Mar. 12, 2013 $ / shares shares	Oct. 31, 2018 USD ($) $ / shares shares	Oct. 31, 2017 USD ($)	Jul. 31, 2017 USD ($)	Jul. 31, 2018 USD ($) $ / shares shares	Feb. 20, 2018
Related Party Transaction [Line Items]
Principal amount convertible senior notes held of \| $						$ 63,925,000			$ 67,625,000
Preferred stock, shares issued \| shares						4,965,000			4,965,000
Preferred stock, par value \| $ / shares						$ 0.01			$ 0.01
Price per share \| $ / shares					$ 4.00
Issuance of warrants to acquire additional shares, shares \| shares	2,000,000				2,000,000
Series C Convertible Preferred Stock
Related Party Transaction [Line Items]
Convertible preferred stock conversion price per share \| $ / shares	$ 1.96
Preferred stock, dividend rate, percentage	6.00%
Percentage threshold closing sale price of common stock higher than conversion price	170.00%
Series C Convertible Preferred Stock \| Minimum
Related Party Transaction [Line Items]
Trading days \| TradingDay	5
Steel Holdings \| 5.25% Convertible Senior Notes
Related Party Transaction [Line Items]
Ownership percentage in capital stock										52.00%
Debt instrument stated percentage						5.25%			5.25%
Principal amount convertible senior notes held of \| $						$ 14,900,000			$ 14,900,000
Steel Holdings \| Repurchase Agreements \| Warrant
Related Party Transaction [Line Items]
Repurchase price of warrant \| $ / shares	$ 100
Purchase Agreement \| SPHG Holdings \| Series C Convertible Preferred Stock
Related Party Transaction [Line Items]
Preferred stock, shares issued \| shares	35,000
Preferred stock, par value \| $ / shares	$ 0.01
Price per share \| $ / shares	$ 1,000
Proceeds from issuance of preferred stock \| $	$ 35,000,000
Steel Services Ltd. \| Management Services Agreement
Related Party Transaction [Line Items]
Fixed monthly fee to be paid in consideration of services \| $		$ 95,641						$ 175,000
Total expenses incurred related to Management Services Agreement and Transfer Agreement \| $						300,000	$ 500,000
SP Corporate Services Llc and Steel Services Limited \| Management Services Agreement
Related Party Transaction [Line Items]
Amount due to related parties \| $						$ 100,000			$ 200,000
SP Corporate and Steel Services \| Management Services Agreement
Related Party Transaction [Line Items]
Management services agreement, effective date of agreement				Jan. 01, 2015
Management services agreement, amended expiration date of agreement			Dec. 31, 2015
Management services agreement, renew period			1 year
Management services agreement term						6 months

Fair Value Measurement of Assets and Liabilities - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Oct. 31, 2018	Jul. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Defined benefit plans assets percentage invested in bank-managed portfolios	100.00%
Fair value, assets, Level 1 to Level 2 transfers, amount	$ 0	$ 0
Fair value, assets, Level 2 to Level 1 transfers, amount	0	0
Fair value, assets, transfers into Level 3	0	0
Fair value, assets, transfers out of Level 3	$ 0	$ 0

Financial Assets Measured at Fair Value on Recurring Basis and Classified by Fair Value Hierarchy (Detail) - Fair Value, Measurements, Recurring - Money market funds - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure, recurring	$ 29,494	$ 47,186
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure, recurring	$ 29,494	$ 47,186

Notes Payable not Carried at Fair Value (Detail) - USD ($) $ in Thousands	Oct. 31, 2018	Jul. 31, 2018
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes payable	$ 62,085	$ 64,530
Notes payable, Fair Value	$ 63,975	$ 66,658