ModusLink Unveils Comprehensive Plan To Restore Profitability And Drive Shareholder Value

WALTHAM, Mass., June 20, 2016

Over the past few years, ModusLink has significantly expanded its global service capabilities and market reach.  As the global markets have continued to come under pressure and some of the Company's clients have experienced downturns in their respective businesses, ModusLink revenues and margins have declined, resulting in operating and net losses.  ModusLink today disclosed its plans to re-invest in its business, with lean principles serving as the foundation of change, in a concerted effort to restore profitability and enhance its global offerings and services capabilities.

As part of the plan, the Board of Directors has appointed Warren Lichtenstein, Executive Chairman of the Company. Jim Henderson, who was appointed in May as Chief Executive Officer of ModusLink Corporation, will now also serve as CEO of the Company.  The Company also announced that Louis J. Belardi, previously Chief Financial Officer of SL Industries Inc. and a 40-year accounting and financial veteran, has been appointed CFO of the Company and ModusLink Corporation. Additionally, Joseph Sherk, who previously served as Principal Financial Officer, Principal Accounting Officer and Corporate Controller of the Company, has stepped down from those positions, and Alan Cormier, the Company's Senior Vice President and General Counsel, will be leaving the organization.

Jim Henderson, ModusLink's newly appointed CEO commented, "It is with great excitement that I take on this role and look forward to working with our team to drive meaningful enhancements on behalf of our global clients and partners.  The value we provide and our ability to become extensions of our client's supply chain, logistics and e-commerce platforms has never been in question, and today we represent industry Fortune 500 leaders and emerging growth companies in their respective fields.  At issue have been our cost structure and the manner in which we have aligned internally.  After a thorough analysis of our geographic footprint, service capabilities and client requirements, we are ready to spring into action and implement a plan to bring ModusLink back to profitability."

The Company intends to invest approximately $20.0 million over the coming year in specific actions that are expected to improve annualized EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) by approximately $32.0 million.  Many of the investments the Company will be making are process, people and systems oriented, and are part of an organizational redesign that aligns resources behind client needs, rather than by department and geography. 

The programs unveiled will be funded through cash on hand, anticipated proceeds from the sale of ModusLink Corporation owned real estate, and existing bank facilities.  Cost savings and gross margin enhancements are expected to be realized by realigning site management to client requirements, improving operational efficiencies, the closure of the Company's Taiwan facility, and by downsizing the square footage used in three locations based on under-utilization.  Additionally, through investments in automation, by eliminating geographic management oversight, and moving SG&A (Selling, General & Administrative) requirements to lower cost hubs, the Company believes it will generate annualized cost savings of approximately $12.0 million and an improvement in its cost of goods sold of approximately $20.0 million.  As the new structure is implemented and process efficiencies are realized, the Company expects it will be in position to reduce its employee count by 17% over the coming year. 

As many of the Company's clients are global and programs are split between geographic sites, this shift in structure will enable the Company to remove redundancies in its cost to serve, while freeing up resources to invest in automation, new service offerings and more effective client management tools. Between actions in Fiscal 2016 and Fiscal 2017, the Company expects it will reduce its square footage by approximately 17%, without impacting client programs, while maintaining a global footprint of over two million square feet and 24 geographic facilities.  The Company anticipates that as a result of these cumulative actions, ModusLink Corporation, which comprises its supply chain business, will be generating positive EBITDA in the fourth quarter of Fiscal 2017.