MODUSLINK GLOBAL SOLUTIONS INC. is a leader in global supply chain business process management. They provide organizations in the high technology communications and medical industries with a broad and integrated portfolio of business process outsourcing and technology solutions delivered across four core competencies: Supply Chain e-Business Aftermarket and Entitlement Management. ModusLink Global Solutions Inc has a market cap of $105.8 million; its shares were traded at around $2.32 with and P/S ratio of 0.1.
Highlight of Business Operations:We also invest in emerging, innovative and promising technologies and industries through our venture capital business, @Ventures. During the six months ended January 31, 2009, approximately $7.5 million was invested by @Ventures and $1.3 million of proceeds were received from the acquisition by third parties of certain @Ventures portfolio companies.
During the second fiscal quarter of 2009 ended January 31, 2009, the Company continued to see a weakening in the business environment and global economy. Management believes that the declines in revenue compared with the second quarter of fiscal 2008 are in large part due to the ongoing global economic crisis. In the second quarter of fiscal 2009, ModusLink continued the restructuring efforts that it began in the first fiscal quarter of 2009 to better position the Company for the long-term, given the ongoing challenging economic environment. In October 2008 the management of the Company approved a plan and in December 2008 the Company announced that it was taking certain cost cutting actions as a result of the general economic decline. These actions included the elimination of approximately 500 jobs, and may include the closing of certain facilities. For the three and six months ended January 31, 2009, the Company recorded a restructuring charge of $0.7 million and $7.1 million for severance-related expenses. The Company expects to take additional restructuring actions in the remainder of fiscal year 2009 which may result in future restructuring charges in the range of approximately $10.0 million to $12.0 million.
For the three months ended January 31, 2009, the Company reported net revenue of $260.5 million, an operating loss of $160.5 million, loss from continuing operations before income taxes of $165.4 million, a net loss of $168.8 million and a gross margin percentage of 12.4%. For the six months ended January 31, 2009, the Company reported net revenue of $551.9 million, an operating loss of $171.3 million, loss from continuing operations before income taxes of $180.1 million, a net loss of $187.4 million and a gross margin percentage of 10.9%. Operating results for the three and six months ended January 31, 2009 reflect the impact of a non-cash goodwill impairment charge of $164.7 million in the quarter ended January 31, 2009. Net income for the three and six months ended January 31, 2009 reflect in addition to the $164.7 million non-cash goodwill impairment charge, a non-cash impairment charge of $13.4 million recorded on certain investments included in the @Ventures portfolio of companies. We currently conduct business in The Netherlands, Hungary, France, Ireland, the Czech Republic, Singapore, Taiwan, China, Malaysia, Japan, Australia and Mexico in addition to our U.S. operations. At January 31, 2009, we had cash and cash equivalents, available-for-sale securities and short-term investments of $135.7 million, and working capital of $217.4 million.
During the three months ended January 31, 2009, net revenue in the Americas region decreased by $0.6 million which resulted primarily from the decline in client order volumes of approximately $17.9 million, offset by the inclusion of revenue from OCS and PTS of $14.8 million and $2.5 million of revenue recognized that was previously deferred. Within the Asia region, the net revenue decrease of approximately $10.0 million resulted primarily from a $14.8 million decrease in order volumes from the base business, offset by an increase of $5.1 million of revenue due to incremental revenues from new customers. Within the Europe region, revenue decreased by approximately $6.9 million primarily due to the $6.9 million negative impact of foreign currency translation.
For the three months ended January 31, 2009, the Companys gross margin percentages within the Americas, Asia and Europe regions were 6.4%, 22.2% and 10.4%, as compared to 13.0%, 23.1% and 7.3%, respectively, for the same period of the prior year. The 660 basis-point decline in gross margin within the Americas region reflected an adverse customer mix-shift and reduced volumes as a result of the global economic recession, partially offset by the recognition of $2.5 million of revenue which had been deferred in an earlier period. Within the Asia region, the 90 basis-point decline in gross margin is primarily attributed to lower volumes from the base business, lower margins yielded from new business coming on board, and $0.4 million of deferred revenue in the quarter. Within the Europe region, the 310 basis-point increase in gross margin was primarily due to a favorable impact of foreign currency translation due to the strengthening of the U.S. dollar, in conjunction with a mix-shift to lower cost solution centers and efficiency gains, partially offset by a $0.6 million deferral of revenue in the second fiscal quarter.
effect to an appropriate control premium. The Company applied a control premium of approximately 35%. As a result of the step one test, the Company concluded that, as of January 31, 2009, the fair value of three of its five reporting units was below their respective carrying values, including goodwill. The three reporting units that showed potential impairment were Americas, Asia and Europe. As such, step two of the impairment test was initiated in accordance with SFAS No. 142. The step-two analysis has been completed and in connection with the preparation of its quarterly financial statements for the quarter ended January 31, 2009 the Company concluded that its goodwill was impaired and recorded a $164.7 million non-cash goodwill impairment charge at January 31, 2009 consisting of $74.6 million for the Americas, $73.9 million for Asia and $16.1 million for Europe.
Read the The complete ReportMLNK is in the portfolios of Arnold Schneider of Schneider Capital Management.