Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jan. 31, 2020 | Mar. 01, 2020 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jan. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
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 | true | |
Entity Common Stock, Shares Outstanding | 62,375,558 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jan. 31, 2020 | Jul. 31, 2019 |
ASSETS | ||
Cash and cash equivalents | $ 30,197 | $ 32,548 |
Accounts receivable, trade, net of allowance for doubtful accounts of $334 and $1,804 at January 31, 2020 and July 31, 2019, respectively | 118,291 | 112,141 |
Inventories, net | 24,241 | 23,674 |
Funds held for clients | 15,977 | 13,516 |
Prepaid expenses and other current assets | 34,828 | 31,445 |
Total current assets | 223,534 | 213,324 |
Property and equipment, net | 90,088 | 91,268 |
Goodwill | 257,128 | 257,128 |
Other intangible assets, net | 148,334 | 162,518 |
Operating right-of-use assets | 61,650 | |
Other assets | 8,161 | 7,325 |
Total assets | 788,895 | 731,563 |
LIABILITIES, CONTINGENTLY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY | ||
Accounts payable | 86,148 | 85,898 |
Accrued expenses | 109,760 | 112,658 |
Funds held for clients | 15,977 | 13,516 |
Current portion of long-term debt | 5,734 | 5,732 |
Current lease obligations | 14,788 | 127 |
Other current liabilities | 35,706 | 38,919 |
Total current liabilities | 268,113 | 256,850 |
Convertible Note payable | 8,262 | 7,432 |
Long-term debt, excluding current portion | 365,638 | 368,505 |
Long-term lease obligations | 48,133 | |
Other long-term liabilities | 9,753 | 10,898 |
Total long-term liabilities | 431,786 | 386,835 |
Total liabilities | 699,899 | 643,685 |
Contingently redeemable preferred stock, $0.01 par value per share. 35,000 shares authorized, issued and outstanding at January 31, 2020 and July 31, 2019 | 35,181 | 35,186 |
Stockholders' equity: | ||
Preferred stock, $0.01 par value per share. 4,965,000 shares authorized at January 31, 2020 and July 31, 2019; zero shares issued and outstanding at January 31, 2020 and July 31, 2019 | 0 | 0 |
Common stock, $0.01 par value per share. Authorized 1,400,000,000 shares; 62,375,558 issued and outstanding shares at January 31, 2020; 61,805,856 issued and outstanding shares at July 31, 2019 | 624 | 618 |
Additional paid-in capital | 7,477,697 | 7,477,327 |
Accumulated deficit | (7,426,119) | (7,426,287) |
Accumulated other comprehensive income | 1,613 | 1,034 |
Total stockholders' equity | 53,815 | 52,692 |
Total liabilities, contingently redeemable preferred stock and stockholders' equity | $ 788,895 | $ 731,563 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jan. 31, 2020 | Jul. 31, 2019 |
Accounts receivable, trade, allowance for doubtful accounts | $ 334 | $ 1,804 |
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 4,965,000 | 4,965,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 1,400,000,000 | 1,400,000,000 |
Common stock, shares issued (in shares) | 62,375,558 | 61,805,856 |
Common stock, shares outstanding (in shares) | 62,375,558 | 61,805,856 |
Contingent Redeemable Preferred Stock | ||
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 35,000 | 35,000 |
Preferred stock, shares issued (in shares) | 35,000 | 35,000 |
Preferred stock, shares outstanding (in shares) | 35,000 | 35,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Condensed Income Statements, Captions [Line Items] | ||||
Net revenue: | $ 215,452 | $ 206,223 | $ 440,605 | $ 421,356 |
Cost of revenue | 170,203 | 168,680 | 351,110 | 345,613 |
Gross profit | 45,249 | 37,543 | 89,495 | 75,743 |
Operating expenses: | ||||
Selling, general and administrative | 31,165 | 27,626 | 53,392 | 54,191 |
Amortization of intangible assets | 6,911 | 7,791 | 14,188 | 15,890 |
Total operating expenses | 38,076 | 35,417 | 67,580 | 70,081 |
Operating income | 7,173 | 2,126 | 21,915 | 5,662 |
Other income (expense): | ||||
Interest income | 14 | 172 | 30 | 495 |
Interest expense | (8,733) | (10,984) | (17,902) | (22,041) |
Other losses, net | (823) | (1,662) | (265) | (718) |
Total other expense | (9,542) | (12,474) | (18,137) | (22,264) |
Income (loss) before income taxes | (2,369) | (10,348) | 3,778 | (16,602) |
Income tax expense | 1,188 | 1,405 | 2,543 | 2,536 |
Gains on investments in affiliates, net of tax | 0 | 0 | 0 | (20) |
Net income (loss) | (3,557) | (11,753) | 1,235 | (19,118) |
Less: Preferred dividends on redeemable preferred stock | (531) | (536) | (1,067) | (1,073) |
Net income (loss) attributable to common stockholders | $ (4,088) | $ (12,289) | $ 168 | $ (20,191) |
Basic net earnings (loss) per share attributable to common stockholders | $ (0.07) | $ (0.20) | $ 0 | $ (0.33) |
Diluted net earnings (loss) per share attributable to common stockholders | $ (0.07) | $ (0.20) | $ 0 | $ (0.33) |
Weighted average common shares used in: | ||||
Basic earnings (loss) per share | 61,538 | 60,935 | 61,469 | 60,974 |
Diluted earnings (loss) per share | 61,538 | 60,935 | 61,482 | 60,974 |
Services | ||||
Condensed Income Statements, Captions [Line Items] | ||||
Net revenue: | $ 92,335 | $ 87,776 | $ 184,485 | $ 174,815 |
Goods | ||||
Condensed Income Statements, Captions [Line Items] | ||||
Net revenue: | $ 123,117 | $ 118,447 | $ 256,120 | $ 246,541 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (3,557) | $ (11,753) | $ 1,235 | $ (19,118) |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | 664 | 1,952 | 677 | 332 |
Net unrealized holding loss on securities, net of tax | (96) | (74) | (96) | (89) |
Pension liability adjustments, net of tax | 0 | (469) | (2) | (64) |
Other comprehensive income (loss) | 568 | 1,409 | 579 | 179 |
Comprehensive income (loss) | $ (2,989) | $ (10,344) | $ 1,814 | $ (18,939) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income |
Beginning balance (in shares) at Jul. 31, 2018 | 60,742,859 | ||||
Beginning balance at Jul. 31, 2018 | $ 107,628 | $ 608 | $ 7,467,855 | $ (7,363,569) | $ 2,734 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (19,118) | (19,118) | |||
Effect of adoption of ASC 606 on August 1, 2018, net of taxes | 6,138 | ||||
Preferred dividends | (1,073) | (1,073) | |||
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises (in shares) | 9,405 | ||||
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises | 13 | 13 | |||
Restricted stock grants (in shares) | 1,045,543 | ||||
Restricted stock grants | $ 10 | (10) | |||
Share-based compensation | 770 | 770 | |||
Other comprehensive items | 179 | 179 | |||
Ending balance (in shares) at Jan. 31, 2019 | 61,797,807 | ||||
Ending balance at Jan. 31, 2019 | 94,537 | $ 618 | 7,468,628 | (7,377,622) | 2,913 |
Beginning balance (in shares) at Oct. 31, 2018 | 61,386,888 | ||||
Beginning balance at Oct. 31, 2018 | 105,433 | $ 614 | 7,468,647 | (7,365,332) | 1,504 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (11,753) | (11,753) | |||
Preferred dividends | (537) | ||||
Preferred dividends | (536) | ||||
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises (in shares) | 6,298 | ||||
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises | 7 | 7 | |||
Restricted stock grants (in shares) | 404,621 | ||||
Restricted stock grants | 0 | $ 4 | (4) | ||
Share-based compensation | (22) | (22) | |||
Other comprehensive items | 1,409 | 1,409 | |||
Ending balance (in shares) at Jan. 31, 2019 | 61,797,807 | ||||
Ending balance at Jan. 31, 2019 | $ 94,537 | $ 618 | 7,468,628 | (7,377,622) | 2,913 |
Beginning balance (in shares) at Jul. 31, 2019 | 61,805,856 | 61,805,856 | |||
Beginning balance at Jul. 31, 2019 | $ 52,692 | $ 618 | 7,477,327 | (7,426,287) | 1,034 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 1,235 | 1,235 | |||
Preferred dividends | (1,067) | (1,067) | |||
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises (in shares) | 9,179 | ||||
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises | 4 | 4 | |||
Restricted stock grants (in shares) | 560,523 | ||||
Restricted stock grants | $ 6 | (6) | |||
Share-based compensation | 372 | 372 | |||
Other comprehensive items | $ 579 | 579 | |||
Ending balance (in shares) at Jan. 31, 2020 | 62,375,558 | 62,375,558 | |||
Ending balance at Jan. 31, 2020 | $ 53,815 | $ 624 | 7,477,697 | (7,426,119) | 1,613 |
Beginning balance (in shares) at Oct. 31, 2019 | 61,810,253 | ||||
Beginning balance at Oct. 31, 2019 | 57,137 | $ 618 | 7,477,505 | (7,422,031) | 1,045 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (3,557) | (3,557) | |||
Preferred dividends | (531) | (531) | |||
Preferred dividends | (531) | ||||
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises (in shares) | 4,782 | ||||
Issuance of common stock pursuant to employee stock purchase plan and stock option exercises | 2 | 2 | |||
Restricted stock grants (in shares) | 560,523 | ||||
Restricted stock grants | $ 6 | (6) | |||
Share-based compensation | 196 | 196 | |||
Other comprehensive items | $ 568 | 568 | |||
Ending balance (in shares) at Jan. 31, 2020 | 62,375,558 | 62,375,558 | |||
Ending balance at Jan. 31, 2020 | $ 53,815 | $ 624 | $ 7,477,697 | $ (7,426,119) | $ 1,613 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jan. 31, 2020 | Jan. 31, 2019 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 1,235 | $ (19,118) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation | 11,374 | 10,451 |
Amortization of intangible assets | 14,188 | 15,890 |
Amortization of deferred financing costs | 146 | 511 |
Accretion of debt discount | 830 | 2,311 |
Impairment of long-lived assets | 0 | 432 |
Share-based compensation | 372 | 770 |
Other losses, net | 265 | 718 |
Gains on investments in affiliates | 0 | (20) |
Changes in operating assets and liabilities | ||
Accounts receivable, net | (6,157) | (4,618) |
Inventories, net | (606) | (2,961) |
Prepaid expenses and other current assets | (3,258) | 3,593 |
Accounts payable and accrued expenses | (2,712) | 8,129 |
Refundable and accrued income taxes, net | 55 | (1,833) |
Other assets and liabilities | (859) | 1,209 |
Net cash provided by operating activities | 14,873 | 15,464 |
Cash flows from investing activities: | ||
Additions to property and equipment | (10,370) | (8,953) |
Proceeds from the disposition of property and equipment | 23 | 14 |
Proceeds from the sale of available-for-sale securities | 163 | 0 |
Proceeds from investments in affiliates | 0 | 20 |
Net cash used in investing activities | (10,184) | (8,919) |
Cash flows from financing activities: | ||
Payment of long-term debt | (3,000) | (3,000) |
Payment of preferred dividends | (1,077) | (1,072) |
Payment of financing costs | (414) | 0 |
Purchase of the Company's Convertible Notes | 0 | (3,700) |
Repayments on capital lease obligations | (79) | (76) |
Proceeds from issuance of common stock | 12 | 13 |
Net cash used in financing activities | (4,558) | (7,835) |
Net effect of exchange rate changes on cash, cash equivalents and restricted cash | (21) | (329) |
Net increase (decrease) in cash, cash equivalents and restricted cash | 110 | (1,619) |
Cash, cash equivalents and restricted cash, beginning of period | 46,064 | 103,826 |
Cash, cash equivalents and restricted cash, end of period | 46,174 | 102,207 |
Cash and cash equivalents, end of period | 30,197 | 92,899 |
Funds held for clients, end of period | $ 15,977 | $ 9,308 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 6 Months Ended |
Jan. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS Steel Connect, Inc. (the "Company") together with its consolidated subsidiaries, operates through its wholly-owned subsidiaries, ModusLink Corporation ("ModusLink" or "Supply Chain") and IWCO Direct Holdings, Inc. ("IWCO Direct" or "IWCO"). 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. 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. Historically, the Company has financed its operations and met its capital requirements primarily through funds generated from operations, the sale of its 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 current cash and cash equivalents, ModusLink's credit agreement with MidCap Financial Trust, IWCO's revolving credit facility, and cash, if any, provided by operating activities. The Company's expectations regarding its ability to use its existing cash to continue funding its operations are based on assumptions that may prove to be inaccurate, and the Company may require capital resources sooner than currently expected. While the Company believes it will be able to access this additional liquidity based on existing information, the assumptions underlying this belief may also later prove to be inaccurate. As of January 31, 2020 and July 31, 2019 , the Company had cash and cash equivalents of $30.2 million and $32.5 million , respectively. As of January 31, 2020 , the Company had a working capital deficit of $44.6 million , which includes accrued pricing liabilities and certain tax related liabilities which the Company believes will not require a cash outlay in the next twelve months. As of January 31, 2020 , ModusLink had a readily available borrowing capacity under its revolving credit facility of $6.8 million . As of January 31, 2020 , IWCO Direct had a readily available borrowing capacity under its revolving facility of $19.0 million . The Company believes it will generate sufficient cash to meet its debt covenants under its credit facilities to which certain of its subsidiaries are a party and that it will be able to obtain cash through its current and future credit facilities, if needed. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Jan. 31, 2020 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | 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 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, 2019 , which are contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 15, 2019. The results for the three and six months ended January 31, 2020 are not necessarily indicative of the results to be expected for the full fiscal year. The year-end condensed consolidated 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 six months ended January 31, 2020 , the Company evaluated subsequent events for potential recognition and disclosure through the date these financial statements were filed. During the three months ended October 31, 2019, the Company recorded a $6.4 million adjustment to correct an out-of-period misstatement related to the Company's estimate for certain tax related liabilities. Had this correction been recorded for the fiscal year ended July 31, 2019 , the Company's selling, general and administrative expenses and net loss for that period would have been reduced to $137.7 million and $60.3 million , respectively. The Company's accrued expenses as of July 31, 2019 would have been reduced to $106.3 million . |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 6 Months Ended |
Jan. 31, 2020 | |
Accounting Policies [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS Adoption of New Accounting Standards In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) , which supersedes the previous guidance for lease accounting, Leases (Topic 840) . ASC 842 requires lessees to recognize leases on their balance sheets (through right-of-use ("ROU") assets and lease liabilities). The Company adopted the provisions of ASC 842 on August 1, 2019, using the modified retrospective approach and the option presented under ASU 2018-11, Leases (Topic 842), to transition only active leases as of the August 1, 2019 adoption date, with a cumulative effect adjustment recorded as of that date. All comparative periods prior to August 1, 2019 retain the financial reporting and disclosure requirements of ASC 840. The Company elected to utilize the transition package of practical expedients permitted under ASC 842, which, among other things, allowed the Company to carry forward the historical lease classification. Additionally, the Company made an accounting policy election to exempt short-term leases (with an initial term of 12 months or less) from the provisions of ASC 842, which resulted in recognition of the related lease payments on a straight-line basis over the lease term, consistent with prior treatment under ASC 840. The Company did not elect the "hindsight" practical expedient when determining the lease terms under ASC 842. Adoption of ASC 842 resulted in the recording of ROU operating lease assets and corresponding operating lease liabilities of $51.1 million and $53.1 million , respectively, as of August 1, 2019. The difference between the ROU assets and the lease liabilities represents the existing deferred rent balance (under ASC 840), which was reduced to zero, net of prepaids, upon adoption of ASC 842 on August 1, 2019. The adoption of ASC 842 did not materially impact the Company's net earnings and had no impact on its cash flows. The Company's current lease arrangements expire through 2030 . In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . This new standard was created to simplify the accounting for share-based payments to nonemployees. This standard provides guidance on how to account for share-based payment transactions with nonemployees in which a grantor acquires goods or services to be used or consumed in the grantor's own operations by issuing share-based payment awards. The amendments in ASU 2018-07 are effective for the Company's 2020 fiscal year. The adoption of the accounting standard did not have a material impact on the Company's financial statements. Accounting Standards Issued and Not Yet Implemented In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Loses on Financial Instruments , an accounting standard update that requires measurement and recognition of expected credit losses for financial instruments, including trade receivables, based on historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal year 2024 on a modified retrospective basis which requires a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement . ASU 2018-13 modifies the disclosure requirements on fair value measurements. The amendments in ASU 2018-13 are effective for the Company's fiscal year 2021, except that the standard permits an entity to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until the effective date. The Company does not expect that the full adoption of this standard will have a material impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans . ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension and other post-retirement plans. The amendments in ASU 2018-14 are effective for the Company's fiscal year 2021. The Company does not expect that the adoption of this standard will have a material impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, (a consensus of the FASB Emerging Issues Task Force) to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments in ASU 2018-15 are effective for the Company's first quarter of fiscal year 2021. The Company is currently evaluating the potential impact of this new guidance. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which amends the existing guidance relating to the accounting for income taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of U.S. GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. The new guidance is effective for the Company's first quarter of fiscal year 2022. The Company does not expect that the adoption of this new guidance will have a material impact on its consolidated financial statements. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Jan. 31, 2020 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories, net consisted of the following: January 31, July 31, (In thousands) Raw materials $ 21,631 $ 21,322 Work-in-process 428 587 Finished goods 2,182 1,765 $ 24,241 $ 23,674 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 6 Months Ended |
Jan. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS The Company's goodwill of $257.1 million as of January 31, 2020 relates to the Company's Direct Marketing reporting unit, which is the only reporting unit in the Direct Marketing reportable segment. The Company has not previously recognized any impairment losses for this reporting unit. Other intangible assets, net, as of January 31, 2020 , include trademarks and tradenames, and customer relationships. The trademarks and tradenames intangible assets are being amortized on a straight-line basis and the customer relationship intangible assets are being amortized on a double-declining basis over their estimated useful lives. The table below presents information for the Company's intangible assets: January 31, 2020 July 31, 2019 Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in years) (In thousands) Customer relationships 15 $ 192,730 $ 50,381 $ 142,349 $ 192,730 $ 39,617 $ 153,113 Trademarks and trade names 3 20,520 14,535 5,985 20,520 11,115 9,405 Total $ 213,250 $ 64,916 $ 148,334 $ 213,250 $ 50,732 $ 162,518 The table below presents amortization expense recorded by the Company for other intangible assets: Three Months Ended Six Months Ended 2020 2019 2020 2019 (In thousands) Customer relationships $ 5,197 $ 5,996 $ 10,764 $ 12,420 Trademarks and trade names 1,714 1,795 3,424 3,470 Total $ 6,911 $ 7,791 $ 14,188 $ 15,890 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 6 Months Ended |
Jan. 31, 2020 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES The following tables reflect the components of "Accrued expenses" and "Other current liabilities": January 31, July 31, Accrued Expense (In thousands) Accrued taxes $ 55,217 $ 59,057 Accrued compensation 24,810 22,584 Accrued interest 467 467 Accrued audit, tax and legal 3,711 3,148 Accrued contract labor 1,444 1,650 Accrued worker's compensation 4,866 4,549 Accrued other 19,245 21,203 $ 109,760 $ 112,658 January 31, July 31, Other Current Liabilities (In thousands) Accrued pricing liabilities $ 14,309 $ 14,309 Customer postage deposits 8,890 11,816 Revolving credit facility 6,000 6,000 Other 6,507 6,794 $ 35,706 $ 38,919 As of January 31, 2020 and July 31, 2019 , the Company had accrued taxes of $55.2 million and $59.1 million , respectively, which reflected the Company's estimate for certain tax related liabilities. During the three months ended October 31, 2019, the Company recorded a $6.4 million adjustment to correct an out-of-period misstatement related to the Company's estimate for certain tax related liabilities. As of both January 31, 2020 and July 31, 2019 , the Company had accrued pricing liabilities of approximately $14.3 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, 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 or any 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 as of January 31, 2020 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. |
LEASES Leases
LEASES Leases | 6 Months Ended |
Jan. 31, 2020 | |
Leases [Abstract] | |
Leases | LEASES The Company has operating and finance leases for office space, office equipment, warehouse space and automobiles. The leases have remaining terms of up to 11 years, some of which include options to purchase, extend or terminate the leases, and management has assessed such terms when determining the lease term for accounting purposes. The Company's current lease arrangements expire through 2030 . The Company's leases do not include any residual value guarantees, and therefore none were considered in the calculation of the operating ROU and operating lease liability balances. The Company has leases that contain variable payments, most commonly in the form of common area maintenance charges, which are based on actual costs incurred. These variable payments were excluded from the calculation of the operating ROU asset and operating lease liability balances since they are not fixed or in-substance fixed payments. For leases with terms greater than 12 months, the Company records the related operating ROU assets and operating lease liabilities at the present value of lease payments over the lease terms. For leases with an initial term of 12 months or less (with purchase options or extension options that are not reasonably certain to be exercised), the Company does not record them on the balance sheet, but instead recognizes lease expense on a straight-line basis over the terms of the leases. Lease expense The components of the Company's lease expense are presented below: Three Months Ended January 31, 2020 Six Months Ended January 31, 2020 (In thousands) Operating lease cost $ 4,816 $ 9,632 Short-term lease expense 226 452 Variable lease cost 6 46 Amortization of finance lease assets 18 36 Interest on finance lease liabilities 4 8 $ 5,070 $ 10,174 Lease commitments The Company's future minimum lease payments required under operating and finance leases that have commenced as of January 31, 2020 were as follows: Operating Leases Finance Leases (In thousands) 2020 $ 10,527 $ 65 2021 15,941 76 2022 12,493 76 2023 7,597 38 2024 5,298 — Thereafter 23,261 — Total lease payments 75,117 255 Less: imputed interest 12,413 38 Present value of lease payments 62,704 217 Less: current maturities of lease obligations 14,717 71 Long-term lease obligations $ 47,987 $ 146 As of January 31, 2020 , the Company had additional operating leases primarily for office space, which have not yet commenced, with lease liabilities totaling $8.9 million . In order to calculate the operating ROU asset and operating lease liability for a lease, ASC 842 requires that a lessee apply a discount rate equal to the rate implicit in the lease whenever that rate is readily determinable. The Company's lease agreements do not provide a readily determinable implicit rate, nor is the rate available to the Company from its lessors. Therefore, we use an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value. Additional lease information Additional information related to the Company's leases as of January 31, 2020 was as follows: Weighted average remaining lease term: Operating leases 6.3 years Finance leases 2.8 years Weighted average discount rate: Operating leases 4.4% Finance leases 3.8% Supplemental cash flow information Supplemental cash flow information related to the Company's leases during the six months ended January 31, 2020 was as follows (in thousands): Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 8,769 Operating cash flows from finance leases $ 5 Financing cash flows from finance leases $ 74 |
Leases | LEASES The Company has operating and finance leases for office space, office equipment, warehouse space and automobiles. The leases have remaining terms of up to 11 years, some of which include options to purchase, extend or terminate the leases, and management has assessed such terms when determining the lease term for accounting purposes. The Company's current lease arrangements expire through 2030 . The Company's leases do not include any residual value guarantees, and therefore none were considered in the calculation of the operating ROU and operating lease liability balances. The Company has leases that contain variable payments, most commonly in the form of common area maintenance charges, which are based on actual costs incurred. These variable payments were excluded from the calculation of the operating ROU asset and operating lease liability balances since they are not fixed or in-substance fixed payments. For leases with terms greater than 12 months, the Company records the related operating ROU assets and operating lease liabilities at the present value of lease payments over the lease terms. For leases with an initial term of 12 months or less (with purchase options or extension options that are not reasonably certain to be exercised), the Company does not record them on the balance sheet, but instead recognizes lease expense on a straight-line basis over the terms of the leases. Lease expense The components of the Company's lease expense are presented below: Three Months Ended January 31, 2020 Six Months Ended January 31, 2020 (In thousands) Operating lease cost $ 4,816 $ 9,632 Short-term lease expense 226 452 Variable lease cost 6 46 Amortization of finance lease assets 18 36 Interest on finance lease liabilities 4 8 $ 5,070 $ 10,174 Lease commitments The Company's future minimum lease payments required under operating and finance leases that have commenced as of January 31, 2020 were as follows: Operating Leases Finance Leases (In thousands) 2020 $ 10,527 $ 65 2021 15,941 76 2022 12,493 76 2023 7,597 38 2024 5,298 — Thereafter 23,261 — Total lease payments 75,117 255 Less: imputed interest 12,413 38 Present value of lease payments 62,704 217 Less: current maturities of lease obligations 14,717 71 Long-term lease obligations $ 47,987 $ 146 As of January 31, 2020 , the Company had additional operating leases primarily for office space, which have not yet commenced, with lease liabilities totaling $8.9 million . In order to calculate the operating ROU asset and operating lease liability for a lease, ASC 842 requires that a lessee apply a discount rate equal to the rate implicit in the lease whenever that rate is readily determinable. The Company's lease agreements do not provide a readily determinable implicit rate, nor is the rate available to the Company from its lessors. Therefore, we use an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value. Additional lease information Additional information related to the Company's leases as of January 31, 2020 was as follows: Weighted average remaining lease term: Operating leases 6.3 years Finance leases 2.8 years Weighted average discount rate: Operating leases 4.4% Finance leases 3.8% Supplemental cash flow information Supplemental cash flow information related to the Company's leases during the six months ended January 31, 2020 was as follows (in thousands): Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 8,769 Operating cash flows from finance leases $ 5 Financing cash flows from finance leases $ 74 |
DEBT
DEBT | 6 Months Ended |
Jan. 31, 2020 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT The components of debt and a reconciliation to the carrying amount of long-term debt is presented in the table below: January 31, July 31, (In thousands) Cerberus term loan $ 372,125 $ 375,125 7.50% Convertible senior note 14,940 14,940 Principal amount of long-term debt 387,065 390,065 Unamortized debt discount (6,678 ) (7,508 ) Unamortized debt issuance costs (753 ) (888 ) Carrying amount of long-term debt $ 379,634 $ 381,669 PNC Bank Credit Facility On June 30, 2014, two direct and wholly-owned subsidiaries of the Company (the "Borrowers") and certain subsidiaries of the Borrowers acting as guarantors (the "Guarantors"), entered into a Revolving Credit and Security Agreement (the "Credit Agreement"), as borrowers and guarantors, with PNC Bank, as a lender and as agent for the lenders ("Agent"). The Credit Agreement had a five ( 5 ) year term which was to expire on June 30, 2019 . On April 30, 2019, the Borrowers and Guarantors entered into a Second Amendment to Revolving Credit and Security Agreement (the "Second Amendment") by and among the Borrowers, the Guarantors, the financial institutions named as parties thereto from time to time as lenders (collectively, the "Lenders") and PNC Bank as Agent. The Second Amendment amended the Credit Agreement in order to, among other things, (i) reduce the aggregate Revolving Commitment Amounts (as defined in the Credit Agreement) of the Lenders and the related Maximum Revolving Advance Amount (as defined in the Credit Agreement) available to Borrowers under the Credit Agreement, from $50.0 million to $25.0 million, and (ii) extend the maturity of the term under the Credit Agreement by six months from June 30, 2019 to December 31, 2019. On December 31, 2019, the Credit Agreement was terminated in accordance with the terms thereof, and all outstanding amounts thereunder were repaid. Cerberus Credit Facility On December 15, 2017, MLGS Merger Company, Inc. ("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 acquisition of IWCO Direct (the "IWCO Acquisition"), Borrower became the borrower under the Financing Agreement. The Financing Agreement provides for a $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, which commenced 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 January 31, 2020 , IWCO had a readily available borrowing capacity under its Revolving Facility of $19.0 million . As of January 31, 2020 and July 31, 2019 , the balance outstanding on the Revolving Facility was $6.0 million and $6.0 million , respectively. The following table reflects the components of the Term Loan: January 31, July 31, (In thousands) Principal amount outstanding on the Term Loan $ 372,125 $ 375,125 Unamortized debt issuance costs (753 ) (888 ) Net carrying value of the Term Loan $ 371,372 $ 374,237 7.50% Convertible Senior Note On February 28, 2019, the Company entered into that certain 7.50% Convertible Senior Note Due 2024 Purchase Agreement (the "SPHG Note Purchase Agreement") with SPH Group Holdings LLC ("SPHG Holdings"), whereby SPHG Holdings agreed to loan the Company $14.9 million in exchange for a 7.50% Convertible Senior Note due 2024 (the "SPHG Note") (the "SPHG Note Transaction"). The SPHG Note bears interest at the rate of 7.50% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2019. The SPHG Note will mature on March 1, 2024 (the "SPHG Note Maturity Date"), unless earlier repurchased by the Company or converted by the holder in accordance with its terms prior to such maturity date. The Company has the right to prepay the SPHG Note at any time, upon 10 days' prior written notice, in whole or in part, without penalty or premium, at a price equal to 100% of the then outstanding principal amount of the SPHG Note plus accrued and unpaid interest. The SPHG Note is an unsecured and unsubordinated obligation of the Company, and will rank equal in right of payment with the Company's other unsecured and unsubordinated indebtedness, but will be effectively subordinated in right of payment to any existing and future secured indebtedness and liabilities to the extent of the value of the collateral securing those obligations, and structurally subordinated to the indebtedness and other liabilities of the Company's subsidiaries. The SPHG Note contains other customary terms and conditions, including customary events of default. At its election, the Company may pay some or all of the interest due on each interest payment date by increasing the principal amount of the SPHG Note in the amount of such interest due or any portion thereof (such payment of interest by increasing the principal amount of the SPHG Note referred to as ("PIK Interest")), with the remaining portion of the interest due on such interest payment date (or, at the Company's election, the entire amount of interest then due) to be paid in cash by the Company. Following an increase in the principal amount of the SPHG Note as a result of a payment of PIK Interest, the SPHG Note will bear interest on such increased principal amount from and after the date of such payment of PIK Interest. SPHG Holdings has the right to require the Company to repurchase the SPHG Note upon the occurrence of certain fundamental changes, subject to certain conditions, at a repurchase price equal to 100% of the principal amount of the SPHG Note plus accrued and unpaid interest. The Company will have the right to elect to cause the mandatory conversion of the SPHG Note in whole, and not in part, at any time on or after March 6, 2022, subject to certain conditions including that the stock price of the Company exceeds a certain threshold. SPHG Holdings has the right, at its option, prior to the close of business on the business day immediately preceding the SPHG Note Maturity Date, to convert the SPHG Note or a portion thereof that is $1,000 or an integral multiple thereof, into shares of common stock (if the Company has not received a required stockholder approval) or cash, shares of common stock or a combination of cash and shares of common stock, as applicable (if the Company has received a required stockholder approval), at an initial conversion rate of 421.2655 shares of common stock, which is equivalent to an initial conversion price of approximately $2.37 per share (subject to adjustment as provided in the SPHG Note) per $1,000 principal amount of the SPHG Note (the "Conversion Rate"), subject to, and in accordance with, the settlement provisions of the SPHG Note. For any conversion of the SPHG Note, if the Company is required to obtain and has not received approval from its stockholders in accordance with NASDAQ Stock Market Rule 5635 to issue 20% or more of the total shares of common stock outstanding upon conversion (including upon any mandatory conversion) of the SPHG Note prior to the relevant conversion date (or, if earlier, the 45th scheduled trading day immediately preceding the SPHG Note Maturity Date), the Company shall deliver to the converting holder, in respect of each $1,000 principal amount of the SPHG Note being converted, a number of shares of common stock determined by reference to the Conversion Rate, together with a cash payment, if applicable, in lieu of delivering any fractional share of common stock based on the volume weighted average price (VWAP) of its common stock on the relevant conversion date, on the third business day immediately following the relevant conversion date. The Company's Board of Directors (the "Board") established a special committee (the "Special Committee"), consisting solely of independent directors not affiliated with SPHG Holdings, to review and consider a financing transaction, including a transaction with SPHG Holdings. The terms and conditions of the SPHG Note Transaction were determined by the Special Committee to be fair and in the best interests of the Company, and the Special Committee recommended that the Board approve the SPHG Note Transaction and the transactions contemplated thereby. The Board approved such transactions. Warren G. Lichtenstein, our Interim Chief Executive Officer and the Executive Chairman of our Board, is also the Executive Chairman of Steel Partners Holdings GP Inc. ("Steel Holdings GP"), the manager of SPHG Holdings. Jack L. Howard and William T. Fejes, Jr., directors of the Company, are also affiliated with Steel Holdings GP. Glen Kassan, a director and our Vice Chairman of the Board and former Chief Administrative Officer, is also affiliated with Steel Holdings GP. The Company assessed the features of the SPHG Note and determined that the conversion features should not be bifurcated as a derivative liability, but should be accounted for under the cash conversion subsections of ASC 470. The Company has valued the debt using similar nonconvertible debt as of the original issuance date of the SPHG Note and bifurcated the conversion option associated with the SPHG Note from the host debt instrument and recorded the conversion option of $8.2 million in stockholders' equity. The initial value of the equity component, which reflected the equity conversion feature, was equal to the initial debt discount. The resulting debt discount on the SPHG Note is being accreted to interest expense at the effective interest rate over the estimated life of the SPHG Note. The equity component is included in the additional paid-in capital portion of stockholders' equity on the Company's condensed consolidated balance sheets. The debt issuance costs were not material. As of January 31, 2020 , the if-converted value of the SPHG Note did not exceed the principal value of the SPHG Note. As of January 31, 2020 , the remaining period over which the unamortized discount will be amortized is 49 months . As of January 31, 2020 and July 31, 2019 , the net carrying value of the SPHG Note was $8.3 million and $7.4 million , respectively. January 31, July 31, (In thousands) Carrying amount of equity component $ 8,200 $ 8,200 Principal amount of note $ 14,940 $ 14,940 Unamortized debt discount (6,678 ) (7,508 ) Net carrying amount $ 8,262 $ 7,432 Three Months Ended January 31, 2020 Six Months Ended January 31, 2020 (In thousands) Interest expense related to contractual interest coupon $ 280 $ 560 Interest expense related to accretion of the discount 421 830 $ 701 $ 1,390 The effective interest rate on the SPHG Note, including accretion of the discount, is 18.47% . MidCap Credit Facility On December 31, 2019, ModusLink, as borrower, and certain of its subsidiaries as guarantors (the "MidCap Guarantors"), entered into a revolving credit and security agreement (the "MidCap Credit Agreement"), with MidCap Financial Trust, as lender and as agent ("MidCap"). The MidCap Credit Agreement, which has a three year term, provides for a maximum credit commitment of $12.5 million and a sublimit of $5.0 million for letters of credit. The actual maximum credit available under the MidCap 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 (a) eligible accounts receivable; plus (b) the least of (i) the orderly liquidation value of eligible inventory, (ii) the value of eligible inventory based on first-in-first-out cost or market cost and other adjustments, and (iii) $4.5 million ; minus (c) reserves; all as specified in the MidCap Credit Agreement. Amounts borrowed under the MidCap Credit Agreement are due and payable, together with all unpaid interest, fees and other obligations, on December 31, 2022 . Generally, borrowings under the MidCap Credit Agreement bear interest at a rate per annum equal to the LIBOR Rate (as defined in the MidCap Credit Agreement), which is subject to adjustment by MidCap, plus a margin of 4% per annum. In addition to paying interest on outstanding principal under the MidCap Credit Agreement, ModusLink is required to pay an unused line fee of 0.50% per annum. ModusLink is also required to pay a customary letter of credit fee equal to the applicable margin on loans bearing interest at the LIBOR Rate. Obligations under the MidCap Credit Agreement are guaranteed by the MidCap Guarantors, and the MidCap Credit Agreement is secured by security interests in substantially all of the assets of ModusLink and the MidCap Guarantors, including a pledge of all of the equity interests of each subsidiary of ModusLink that is a domestic entity (subject to certain limited exceptions). Steel Connect, Inc. is not a borrower or a guarantor under the MidCap Credit Agreement. The MidCap Credit Agreement includes certain representations and warranties of ModusLink, as well as events of default and certain affirmative and negative covenants that are customary for credit agreements of this type. These covenants include restrictions on borrowings, investments and dispositions by ModusLink, as well as limitations on ModusLink's ability to make certain distributions and to enter into transactions with affiliates. The MidCap Credit Agreement requires compliance with certain financial covenants providing for the maintenance of a minimum fixed charge coverage ratio, all as more fully described in the MidCap Credit Agreement. Upon the occurrence and during the continuation of an event of default under the MidCap Credit Agreement, MidCap may, among other things, declare all obligations under the MidCap Credit Agreement immediately due and payable and increase the interest rate at which loans and other obligations under the MidCap Credit Agreement bear interest. At January 31, 2020 , the Company had a readily available borrowing capacity under its MidCap Credit Facility of $6.8 million . As of January 31, 2020 , the Company did not have any balance outstanding on the MidCap Credit Facility. |
CONTINGENCIES
CONTINGENCIES | 6 Months Ended |
Jan. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | CONTINGENCIES On April 13, 2018, a purported shareholder, Donald Reith, filed a verified complaint, Reith v. Lichtenstein, et al., 2018-277 (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, Warren Lichtenstein, Glen Kassan, William T. Fejes, Jack L. Howard, Jeffrey J. Fenton, Philip E. Lengyel and Jeffrey S. Wald; and stockholders Steel Partners Holdings L.P. ("Steel Holdings"), Steel Partners, Ltd., SPHG Holdings, Handy & Harman Ltd. and WHX CS Corp. (collectively, the "Steel Parties") in connection with the acquisition of $35.0 million of the Series C Convertible Preferred Stock by SPHG Holdings and equity grants made to Lichtenstein, Howard and Fejes on December 15, 2017 (collectively, the "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 Annual Meeting of Stockholders 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. On June 28, 2019, the Court denied most of the motion to dismiss allowing the matter to proceed. Discovery is proceeding. Based on information currently available, the Company is unable to reasonably estimate a possible loss or range of possible losses, if any, with regard to the remaining lawsuit; therefore, no litigation reserve has been recorded in the Company's condensed consolidated balance sheets. Although there can be no assurance as to the ultimate outcome, the Company believes it has meritorious defenses, continues to deny liability and intends to defend this litigation vigorously. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jan. 31, 2020 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | 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 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 Board 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 ("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 ("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. 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 the Special Committee consisting of independent directors not affiliated with Steel Holdings GP, which controls the power to vote and dispose of the securities held by SPHG Holdings and its affiliates. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 6 Months Ended |
Jan. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | REVENUE RECOGNITION Disaggregation of Revenue The following table presents the Company's revenues from contracts with customers disaggregated by major good or service line and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable segments. Three Months Ended January 31, 2020 Three Months Ended January 31, 2019 Supply Chain Direct Marketing Consolidated Total Supply Chain Direct Marketing Consolidated Total (In thousands) (In thousands) Major Goods/Service Lines Supply chain management services $ 91,911 $ — $ 91,911 $ 87,166 $ — $ 87,166 Marketing solutions offerings — 123,117 123,117 — 118,447 118,447 Other 424 — 424 610 — 610 $ 92,335 $ 123,117 $ 215,452 $ 87,776 $ 118,447 $ 206,223 Timing of Revenue Recognition Goods transferred over time $ — $ 123,117 $ 123,117 $ — $ 118,447 $ 118,447 Services transferred over time 92,335 — 92,335 87,776 — 87,776 $ 92,335 $ 123,117 $ 215,452 $ 87,776 $ 118,447 $ 206,223 Six Months Ended January 31, 2020 Six Months Ended January 31, 2019 Supply Chain Direct Marketing Consolidated Total Supply Chain Direct Consolidated (In thousands) (In thousands) Major Goods/Service Lines Supply chain management services $ 183,616 $ — $ 183,616 $ 173,792 $ — $ 173,792 Marketing solutions offerings — 256,120 256,120 — 246,541 246,541 Other 869 — 869 1,023 — 1,023 $ 184,485 $ 256,120 $ 440,605 $ 174,815 $ 246,541 $ 421,356 Timing of Revenue Recognition Goods transferred over time $ — $ 256,120 $ 256,120 $ — $ 246,541 $ 246,541 Services transferred over time 184,485 — 184,485 174,815 — 174,815 $ 184,485 $ 256,120 $ 440,605 $ 174,815 $ 246,541 $ 421,356 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. 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. 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. 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 obligation. 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 Company's condensed consolidated balance sheets. The table below presents information for the Company's contract balances: January 31, July 31, (In thousands) Accounts receivable, trade, net $ 118,291 $ 112,141 Contract assets $ 23,546 $ 21,473 Deferred revenue - current $ 3,895 $ 2,967 Deferred revenue - long-term 98 62 Total deferred revenue $ 3,993 $ 3,029 Remaining Performance Obligations Remaining performance obligations are comprised of deferred revenue. Changes in deferred revenue during the six months ended January 31, 2020 , were as follows: Six Months Ended January 31, 2020 (In thousands) Balance at beginning of period $ 3,029 Deferral of revenue 2,669 Recognition of deferred amounts upon satisfaction of performance obligation (1,705 ) Balance at end of period $ 3,993 We expect to recognize approximately $3.9 million of the deferred revenue over the next twelve months and the remaining $0.1 million beyond that time period. 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. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jan. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company operates in multiple taxing jurisdictions, both within and outside of the United States. For the six months ended January 31, 2020 , the Company was profitable in certain jurisdictions, resulting in an income tax expense using enacted rates in those jurisdictions. As of January 31, 2020 , the total amount of the liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $2.1 million . As of July 31, 2019 , the total amount of the liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $2.4 million . Uncertain Tax Positions In accordance with the Company's accounting policy, interest related to unrecognized tax benefits is included in the income tax expense line of the condensed consolidated statements of operations. As of January 31, 2020 and July 31, 2019 , the liabilities for interest expense related to uncertain tax positions were $0.2 million and $0.2 million , respectively. 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, 2014 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 2013 through 2018 tax years remain subject to examination in most locations, while the Company's 2006 through 2018 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" or "Tax Plan"). 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 $160.0 million , respectively, as of July 31, 2019 . The federal net operating losses will expire from fiscal year 2022 through 2038 and the state net operating losses will expire from fiscal year 2019 through 2039. The Company's ability to use its Tax Benefits would be substantially limited if the Company undergoes an Ownership Change. The Tax Plan is intended to prevent an Ownership Change of the Company that would impair the Company's 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 Tax 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 or (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 January 18, 2021; (ii) the time at which the Rights are redeemed or exchanged as provided in the Tax Plan; and (iii) the time at which the Board determines that the Tax Plan is no longer necessary or desirable for the preservation of Tax Benefits. |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 6 Months Ended |
Jan. 31, 2020 | |
Earnings Per Share [Abstract] | |
EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE The following table reconciles earnings (loss) per share for the three and six months ended months ended January 31, 2020 and 2019 : Three Months Ended Six Months Ended 2020 2019 2020 2019 (In thousands, except per share data) Net income (loss) $ (3,557 ) $ (11,753 ) $ 1,235 $ (19,118 ) Less: Preferred dividends on redeemable preferred stock (531 ) (536 ) (1,067 ) (1,073 ) Net income (loss) attributable to common stockholders $ (4,088 ) $ (12,289 ) $ 168 $ (20,191 ) Weighted average common shares outstanding 61,538 60,935 61,469 60,974 Weighted average common equivalent shares arising from restricted stock — — 13 — Weighted average number of common and potential common shares 61,538 60,935 61,482 60,974 Basic net earnings (loss) per share attributable to common stockholders $ (0.07 ) $ (0.20 ) $ 0.00 $ (0.33 ) Diluted net earnings (loss) per share attributable to common stockholders $ (0.07 ) $ (0.20 ) $ 0.00 $ (0.33 ) Basic net earnings (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period. Diluted net earnings 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 January 31, 2020 and 2019 , approximately 24.5 million and 28.9 million , respectively, common stock equivalent shares were excluded from the denominator in the calculation of diluted net earnings per share as their inclusion would have been antidilutive. For the six months ended January 31, 2020 and 2019 , approximately 24.5 million and 28.9 million , respectively, common stock equivalent shares (including those related to convertible debt and preferred stock) were excluded from the denominator in the calculation of diluted net earnings per share as their inclusion would have been antidilutive. |
COMPREHENSIVE INCOME (LOSS)
COMPREHENSIVE INCOME (LOSS) | 6 Months Ended |
Jan. 31, 2020 | |
Equity [Abstract] | |
COMPREHENSIVE INCOME (LOSS) | 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 stockholders' 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, 2019 $ 5,017 $ (4,079 ) $ 96 $ 1,034 Foreign currency translation adjustment 677 — — 677 Net unrealized holding loss on securities — — (96 ) (96 ) Pension liability adjustments — (2 ) — (2 ) Net current-period other comprehensive income (loss) 677 (2 ) (96 ) 579 Accumulated other comprehensive income (loss) at January 31, 2020 $ 5,694 $ (4,081 ) $ — $ 1,613 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 332 — — 332 Net unrealized holding loss on securities — — (89 ) (89 ) Pension liability adjustments — (64 ) — (64 ) Net current-period other comprehensive income (loss) 332 (64 ) (89 ) 179 Accumulated other comprehensive income (loss) at January 31, 2019 $ 6,680 $ (3,859 ) $ 92 $ 2,913 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 6 Months Ended |
Jan. 31, 2020 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION The Company has two operating segments: Supply Chain and Direct Marketing. The Company determined that its two reportable segments are the same as its operating segments. 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, debt 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 and operating income (loss). Summarized financial information by operating segment is as follows: Three Months Ended Six Months Ended 2020 2019 2020 2019 (In thousands) Net revenue: Supply Chain $ 92,335 $ 87,776 $ 184,485 $ 174,815 Direct Marketing 123,117 118,447 256,120 246,541 $ 215,452 $ 206,223 $ 440,605 $ 421,356 Operating income (loss): Supply Chain $ 5,763 $ (141 ) $ 12,273 $ 1,541 Direct Marketing 4,217 6,695 15,420 11,462 Total segment operating income 9,980 6,554 27,693 13,003 Corporate-level activity (2,807 ) (4,428 ) (5,778 ) (7,341 ) Total operating income 7,173 2,126 21,915 5,662 Total other expense (9,542 ) (12,474 ) (18,137 ) (22,264 ) Income (loss) before income taxes $ (2,369 ) $ (10,348 ) $ 3,778 $ (16,602 ) January 31, July 31, (In thousands) Total assets: Supply Chain $ 141,053 $ 112,712 Direct Marketing 619,729 600,390 Sub-total—segment assets 760,782 713,102 Corporate 28,113 18,461 $ 788,895 $ 731,563 Summarized financial information of the Company's net revenue from external customers by group of services is as follows: Three Months Ended Six Months Ended 2020 2019 2020 2019 (In thousands) Services: Supply Chain $ 92,335 $ 87,776 $ 184,485 $ 174,815 Products: Direct Marketing 123,117 118,447 256,120 246,541 $ 215,452 $ 206,223 $ 440,605 $ 421,356 Summarized financial information of the Company's net revenue by geographic location is as follows: Three Months Ended Six Months Ended 2020 2019 2020 2019 (In thousands) United States $ 145,293 $ 136,347 $ 299,714 $ 282,411 China 32,569 37,910 72,026 74,521 Netherlands 11,071 14,403 21,719 29,347 Other 26,519 17,563 47,146 35,077 $ 215,452 $ 206,223 $ 440,605 $ 421,356 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jan. 31, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS As of January 31, 2020 , SPHG Holdings and its affiliates, including Steel Holdings, Handy & Harman Ltd., Steel Partners, Ltd., beneficially owned approximately 56.3% of our outstanding capital stock, including shares of Series C Convertible Preferred Stock, par value $0.01 per share that vote on an as-converted basis together with our Common Stock. Warren G. Lichtenstein, our Interim Chief Executive Officer and the Executive Chairman of our Board, is also the Executive Chairman of Steel Holdings GP. Glen Kassan, our Vice Chairman of the Board and former Chief Administrative Officer, is an employee of Steel Services Ltd. ("Steel Services"). Jack L. Howard, the President and a director of Steel Holdings GP, was appointed to the Board upon the closing of the Preferred Stock Transaction described below. William T. Fejes, Jr., the Chief Operating Officer of Steel Holdings, was also appointed to the Board upon the closing of the Preferred Stock Transaction described below. SPHG Note Transaction On February 28, 2019, the Company entered into that certain SPHG Note Purchase Agreement with SPHG Holdings, whereby SPHG Holdings agreed to loan the Company $14.9 million in exchange for a 7.50% Convertible Senior Note due 2024. As of January 31, 2020 and July 31, 2019 , SPHG Holdings held $14.9 million principal amount of the Company's 7.50% Convertible Senior Note. As of January 31, 2020 and July 31, 2019 , the net carrying value of the SPHG Note was $8.3 million and $7.4 million , respectively. Preferred Stock Transaction 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 Series C Preferred Stock are set forth in a Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of the Company, which has been filed with the Secretary of State of the State of Delaware. 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 (the "2015 Management Services Agreement"). SP Corporate, and its successor, is an indirect wholly-owned subsidiary of Steel Holdings and is a related party. Pursuant to this agreement, SP Corporate provided the Company and its subsidiaries with the services of certain employees, including certain executive officers and other corporate services. On June 14, 2019, the Company entered into a new agreement (the "2019 Management Services Agreement") with Steel Services, an indirect wholly-owned subsidiary of Steel Holdings. The 2019 Management Services Agreement was effective as of June 1, 2019. The 2019 Management Services Agreement supersedes all prior agreements between the Company and Steel Services, including the 2015 Management Services Agreement. Total expenses incurred related to the 2015 Management Services Agreement and the 2019 Management Services Agreement for the three months ended January 31, 2020 and 2019 were $0.9 million and $0.4 million , respectively. Total expenses incurred related to the 2015 Management Services Agreement and the 2019 Management Services Agreement for the six months ended January 31, 2020 and 2019 were $1.7 million and $0.7 million , respectively. As of January 31, 2020 and July 31, 2019 , amounts due to Steel Services were $0.3 million and $0.5 million , respectively. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jan. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS ASC 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 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 their assets invested in insurance contracts 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 January 31, 2020 and July 31, 2019 , classified by fair value hierarchy: Fair Value Measurements at Reporting Date Using (In thousands) January 31, 2020 Level 1 Level 2 Level 3 Assets: Money market funds $ 526 $ 526 $ — $ — Fair Value Measurements at Reporting Date Using (In thousands) July 31, 2019 Level 1 Level 2 Level 3 Assets: Money market funds $ 365 $ 365 $ — $ — There were no transfers between Levels 1, 2 or 3 during any of the periods presented. When available, quoted prices are used to determine fair value. When quoted prices in active markets are available, investments are classified within Level 1 of the fair value hierarchy. When quoted prices in active markets are not available, fair values are determined using pricing models, and the inputs to those pricing models are based on observable market inputs. The inputs to the pricing models are 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 estimates 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 carrying value. With the exception of the SPHG Note and long-term debt, carrying value approximates fair value for these items due to their short-term nature. We believe that the carrying value of the liability component of the SPHG Note and 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 condensed consolidated balance sheets are money market funds. These are valued at quoted market prices in active markets. |
RECENT ACCOUNTING PRONOUNCEME_2
RECENT ACCOUNTING PRONOUNCEMENTS (Policies) | 6 Months Ended |
Jan. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Accounting | 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 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, 2019 , which are contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 15, 2019. The results for the three and six months ended January 31, 2020 are not necessarily indicative of the results to be expected for the full fiscal year. The year-end condensed consolidated 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. |
Consolidation | All significant intercompany transactions and balances have been eliminated in consolidation. |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS Adoption of New Accounting Standards In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) , which supersedes the previous guidance for lease accounting, Leases (Topic 840) . ASC 842 requires lessees to recognize leases on their balance sheets (through right-of-use ("ROU") assets and lease liabilities). The Company adopted the provisions of ASC 842 on August 1, 2019, using the modified retrospective approach and the option presented under ASU 2018-11, Leases (Topic 842), to transition only active leases as of the August 1, 2019 adoption date, with a cumulative effect adjustment recorded as of that date. All comparative periods prior to August 1, 2019 retain the financial reporting and disclosure requirements of ASC 840. The Company elected to utilize the transition package of practical expedients permitted under ASC 842, which, among other things, allowed the Company to carry forward the historical lease classification. Additionally, the Company made an accounting policy election to exempt short-term leases (with an initial term of 12 months or less) from the provisions of ASC 842, which resulted in recognition of the related lease payments on a straight-line basis over the lease term, consistent with prior treatment under ASC 840. The Company did not elect the "hindsight" practical expedient when determining the lease terms under ASC 842. Adoption of ASC 842 resulted in the recording of ROU operating lease assets and corresponding operating lease liabilities of $51.1 million and $53.1 million , respectively, as of August 1, 2019. The difference between the ROU assets and the lease liabilities represents the existing deferred rent balance (under ASC 840), which was reduced to zero, net of prepaids, upon adoption of ASC 842 on August 1, 2019. The adoption of ASC 842 did not materially impact the Company's net earnings and had no impact on its cash flows. The Company's current lease arrangements expire through 2030 . In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . This new standard was created to simplify the accounting for share-based payments to nonemployees. This standard provides guidance on how to account for share-based payment transactions with nonemployees in which a grantor acquires goods or services to be used or consumed in the grantor's own operations by issuing share-based payment awards. The amendments in ASU 2018-07 are effective for the Company's 2020 fiscal year. The adoption of the accounting standard did not have a material impact on the Company's financial statements. Accounting Standards Issued and Not Yet Implemented In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Loses on Financial Instruments , an accounting standard update that requires measurement and recognition of expected credit losses for financial instruments, including trade receivables, based on historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal year 2024 on a modified retrospective basis which requires a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement . ASU 2018-13 modifies the disclosure requirements on fair value measurements. The amendments in ASU 2018-13 are effective for the Company's fiscal year 2021, except that the standard permits an entity to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until the effective date. The Company does not expect that the full adoption of this standard will have a material impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans . ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension and other post-retirement plans. The amendments in ASU 2018-14 are effective for the Company's fiscal year 2021. The Company does not expect that the adoption of this standard will have a material impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, (a consensus of the FASB Emerging Issues Task Force) to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments in ASU 2018-15 are effective for the Company's first quarter of fiscal year 2021. The Company is currently evaluating the potential impact of this new guidance. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which amends the existing guidance relating to the accounting for income taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of U.S. GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. The new guidance is effective for the Company's first quarter of fiscal year 2022. The Company does not expect that the adoption of this new guidance will have a material impact on its consolidated financial statements. |
Inventory Impairment | January 31, July 31, (In thousands) Raw materials $ 21,631 $ 21,322 Work-in-process 428 587 Finished goods 2,182 1,765 $ 24,241 $ 23,674 |
Fair Value of Financial Instruments | ASC 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 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 their assets invested in insurance contracts 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. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories, net | Inventories, net consisted of the following: January 31, July 31, (In thousands) Raw materials $ 21,631 $ 21,322 Work-in-process 428 587 Finished goods 2,182 1,765 $ 24,241 $ 23,674 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite Live Intangible Assets | The table below presents information for the Company's intangible assets: January 31, 2020 July 31, 2019 Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in years) (In thousands) Customer relationships 15 $ 192,730 $ 50,381 $ 142,349 $ 192,730 $ 39,617 $ 153,113 Trademarks and trade names 3 20,520 14,535 5,985 20,520 11,115 9,405 Total $ 213,250 $ 64,916 $ 148,334 $ 213,250 $ 50,732 $ 162,518 |
Finite-lived Intangible Assets Amortization Expense | The table below presents amortization expense recorded by the Company for other intangible assets: Three Months Ended Six Months Ended 2020 2019 2020 2019 (In thousands) Customer relationships $ 5,197 $ 5,996 $ 10,764 $ 12,420 Trademarks and trade names 1,714 1,795 3,424 3,470 Total $ 6,911 $ 7,791 $ 14,188 $ 15,890 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Payables and Accruals [Abstract] | |
Components of Accrued Expenses | The following tables reflect the components of "Accrued expenses" and "Other current liabilities": January 31, July 31, Accrued Expense (In thousands) Accrued taxes $ 55,217 $ 59,057 Accrued compensation 24,810 22,584 Accrued interest 467 467 Accrued audit, tax and legal 3,711 3,148 Accrued contract labor 1,444 1,650 Accrued worker's compensation 4,866 4,549 Accrued other 19,245 21,203 $ 109,760 $ 112,658 |
Components of Other Current Liabilities | January 31, July 31, Other Current Liabilities (In thousands) Accrued pricing liabilities $ 14,309 $ 14,309 Customer postage deposits 8,890 11,816 Revolving credit facility 6,000 6,000 Other 6,507 6,794 $ 35,706 $ 38,919 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Leases [Abstract] | |
Lease cost | Supplemental cash flow information related to the Company's leases during the six months ended January 31, 2020 was as follows (in thousands): Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 8,769 Operating cash flows from finance leases $ 5 Financing cash flows from finance leases $ 74 Lease expense The components of the Company's lease expense are presented below: Three Months Ended January 31, 2020 Six Months Ended January 31, 2020 (In thousands) Operating lease cost $ 4,816 $ 9,632 Short-term lease expense 226 452 Variable lease cost 6 46 Amortization of finance lease assets 18 36 Interest on finance lease liabilities 4 8 $ 5,070 $ 10,174 |
Future minimum lease payments under operating leases | The Company's future minimum lease payments required under operating and finance leases that have commenced as of January 31, 2020 were as follows: Operating Leases Finance Leases (In thousands) 2020 $ 10,527 $ 65 2021 15,941 76 2022 12,493 76 2023 7,597 38 2024 5,298 — Thereafter 23,261 — Total lease payments 75,117 255 Less: imputed interest 12,413 38 Present value of lease payments 62,704 217 Less: current maturities of lease obligations 14,717 71 Long-term lease obligations $ 47,987 $ 146 |
Future minimum lease payments under financing leases | The Company's future minimum lease payments required under operating and finance leases that have commenced as of January 31, 2020 were as follows: Operating Leases Finance Leases (In thousands) 2020 $ 10,527 $ 65 2021 15,941 76 2022 12,493 76 2023 7,597 38 2024 5,298 — Thereafter 23,261 — Total lease payments 75,117 255 Less: imputed interest 12,413 38 Present value of lease payments 62,704 217 Less: current maturities of lease obligations 14,717 71 Long-term lease obligations $ 47,987 $ 146 |
Additional lease information | Additional information related to the Company's leases as of January 31, 2020 was as follows: Weighted average remaining lease term: Operating leases 6.3 years Finance leases 2.8 years Weighted average discount rate: Operating leases 4.4% Finance leases 3.8% |
DEBT (Tables)
DEBT (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Debt Disclosure [Abstract] | |
Components of Debt and Reconciliation | The components of debt and a reconciliation to the carrying amount of long-term debt is presented in the table below: January 31, July 31, (In thousands) Cerberus term loan $ 372,125 $ 375,125 7.50% Convertible senior note 14,940 14,940 Principal amount of long-term debt 387,065 390,065 Unamortized debt discount (6,678 ) (7,508 ) Unamortized debt issuance costs (753 ) (888 ) Carrying amount of long-term debt $ 379,634 $ 381,669 |
Summary of Interest Expense | Three Months Ended January 31, 2020 Six Months Ended January 31, 2020 (In thousands) Interest expense related to contractual interest coupon $ 280 $ 560 Interest expense related to accretion of the discount 421 830 $ 701 $ 1,390 |
Schedule of Debt | The following table reflects the components of the Term Loan: January 31, July 31, (In thousands) Principal amount outstanding on the Term Loan $ 372,125 $ 375,125 Unamortized debt issuance costs (753 ) (888 ) Net carrying value of the Term Loan $ 371,372 $ 374,237 |
Net Carrying Value of SPG Note | As of January 31, 2020 and July 31, 2019 , the net carrying value of the SPHG Note was $8.3 million and $7.4 million , respectively. January 31, July 31, (In thousands) Carrying amount of equity component $ 8,200 $ 8,200 Principal amount of note $ 14,940 $ 14,940 Unamortized debt discount (6,678 ) (7,508 ) Net carrying amount $ 8,262 $ 7,432 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Summary of reconciliation of the disaggregated revenue | The following table presents the Company's revenues from contracts with customers disaggregated by major good or service line and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable segments. Three Months Ended January 31, 2020 Three Months Ended January 31, 2019 Supply Chain Direct Marketing Consolidated Total Supply Chain Direct Marketing Consolidated Total (In thousands) (In thousands) Major Goods/Service Lines Supply chain management services $ 91,911 $ — $ 91,911 $ 87,166 $ — $ 87,166 Marketing solutions offerings — 123,117 123,117 — 118,447 118,447 Other 424 — 424 610 — 610 $ 92,335 $ 123,117 $ 215,452 $ 87,776 $ 118,447 $ 206,223 Timing of Revenue Recognition Goods transferred over time $ — $ 123,117 $ 123,117 $ — $ 118,447 $ 118,447 Services transferred over time 92,335 — 92,335 87,776 — 87,776 $ 92,335 $ 123,117 $ 215,452 $ 87,776 $ 118,447 $ 206,223 Six Months Ended January 31, 2020 Six Months Ended January 31, 2019 Supply Chain Direct Marketing Consolidated Total Supply Chain Direct Consolidated (In thousands) (In thousands) Major Goods/Service Lines Supply chain management services $ 183,616 $ — $ 183,616 $ 173,792 $ — $ 173,792 Marketing solutions offerings — 256,120 256,120 — 246,541 246,541 Other 869 — 869 1,023 — 1,023 $ 184,485 $ 256,120 $ 440,605 $ 174,815 $ 246,541 $ 421,356 Timing of Revenue Recognition Goods transferred over time $ — $ 256,120 $ 256,120 $ — $ 246,541 $ 246,541 Services transferred over time 184,485 — 184,485 174,815 — 174,815 $ 184,485 $ 256,120 $ 440,605 $ 174,815 $ 246,541 $ 421,356 |
Summary of changes in deferred revenue | The table below presents information for the Company's contract balances: January 31, July 31, (In thousands) Accounts receivable, trade, net $ 118,291 $ 112,141 Contract assets $ 23,546 $ 21,473 Deferred revenue - current $ 3,895 $ 2,967 Deferred revenue - long-term 98 62 Total deferred revenue $ 3,993 $ 3,029 Remaining Performance Obligations Remaining performance obligations are comprised of deferred revenue. Changes in deferred revenue during the six months ended January 31, 2020 , were as follows: Six Months Ended January 31, 2020 (In thousands) Balance at beginning of period $ 3,029 Deferral of revenue 2,669 Recognition of deferred amounts upon satisfaction of performance obligation (1,705 ) Balance at end of period $ 3,993 |
EARNINGS (LOSS) PER SHARE (Tabl
EARNINGS (LOSS) PER SHARE (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Earnings Per Share [Abstract] | |
Reconciliation of earnings per share | The following table reconciles earnings (loss) per share for the three and six months ended months ended January 31, 2020 and 2019 : Three Months Ended Six Months Ended 2020 2019 2020 2019 (In thousands, except per share data) Net income (loss) $ (3,557 ) $ (11,753 ) $ 1,235 $ (19,118 ) Less: Preferred dividends on redeemable preferred stock (531 ) (536 ) (1,067 ) (1,073 ) Net income (loss) attributable to common stockholders $ (4,088 ) $ (12,289 ) $ 168 $ (20,191 ) Weighted average common shares outstanding 61,538 60,935 61,469 60,974 Weighted average common equivalent shares arising from restricted stock — — 13 — Weighted average number of common and potential common shares 61,538 60,935 61,482 60,974 Basic net earnings (loss) per share attributable to common stockholders $ (0.07 ) $ (0.20 ) $ 0.00 $ (0.33 ) Diluted net earnings (loss) per share attributable to common stockholders $ (0.07 ) $ (0.20 ) $ 0.00 $ (0.33 ) |
COMPREHENSIVE INCOME (LOSS) (Ta
COMPREHENSIVE INCOME (LOSS) (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Equity [Abstract] | |
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, 2019 $ 5,017 $ (4,079 ) $ 96 $ 1,034 Foreign currency translation adjustment 677 — — 677 Net unrealized holding loss on securities — — (96 ) (96 ) Pension liability adjustments — (2 ) — (2 ) Net current-period other comprehensive income (loss) 677 (2 ) (96 ) 579 Accumulated other comprehensive income (loss) at January 31, 2020 $ 5,694 $ (4,081 ) $ — $ 1,613 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 332 — — 332 Net unrealized holding loss on securities — — (89 ) (89 ) Pension liability adjustments — (64 ) — (64 ) Net current-period other comprehensive income (loss) 332 (64 ) (89 ) 179 Accumulated other comprehensive income (loss) at January 31, 2019 $ 6,680 $ (3,859 ) $ 92 $ 2,913 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Segment Reporting [Abstract] | |
Summarized Financial Information of Continuing Operations | Summarized financial information by operating segment is as follows: Three Months Ended Six Months Ended 2020 2019 2020 2019 (In thousands) Net revenue: Supply Chain $ 92,335 $ 87,776 $ 184,485 $ 174,815 Direct Marketing 123,117 118,447 256,120 246,541 $ 215,452 $ 206,223 $ 440,605 $ 421,356 Operating income (loss): Supply Chain $ 5,763 $ (141 ) $ 12,273 $ 1,541 Direct Marketing 4,217 6,695 15,420 11,462 Total segment operating income 9,980 6,554 27,693 13,003 Corporate-level activity (2,807 ) (4,428 ) (5,778 ) (7,341 ) Total operating income 7,173 2,126 21,915 5,662 Total other expense (9,542 ) (12,474 ) (18,137 ) (22,264 ) Income (loss) before income taxes $ (2,369 ) $ (10,348 ) $ 3,778 $ (16,602 ) |
Total Assets of Continuing Operations | January 31, July 31, (In thousands) Total assets: Supply Chain $ 141,053 $ 112,712 Direct Marketing 619,729 600,390 Sub-total—segment assets 760,782 713,102 Corporate 28,113 18,461 $ 788,895 $ 731,563 |
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 Six Months Ended 2020 2019 2020 2019 (In thousands) Services: Supply Chain $ 92,335 $ 87,776 $ 184,485 $ 174,815 Products: Direct Marketing 123,117 118,447 256,120 246,541 $ 215,452 $ 206,223 $ 440,605 $ 421,356 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Jan. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
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 January 31, 2020 and July 31, 2019 , classified by fair value hierarchy: Fair Value Measurements at Reporting Date Using (In thousands) January 31, 2020 Level 1 Level 2 Level 3 Assets: Money market funds $ 526 $ 526 $ — $ — Fair Value Measurements at Reporting Date Using (In thousands) July 31, 2019 Level 1 Level 2 Level 3 Assets: Money market funds $ 365 $ 365 $ — $ — |
NATURE OF OPERATIONS - Nature o
NATURE OF OPERATIONS - Nature of Operations (Detail) - USD ($) $ in Millions | Jan. 31, 2020 | Jul. 31, 2019 |
Nature Of Operations [Line Items] | ||
Cash and cash equivalents | $ 30.2 | $ 32.5 |
Working capital | (44.6) | |
PNC Bank Credit Facility | ||
Nature Of Operations [Line Items] | ||
Credit facility, readily available borrowing capacity | 6.8 | |
Cerberus Credit Facility | ||
Nature Of Operations [Line Items] | ||
Credit facility, readily available borrowing capacity | $ 19 |
BASIS OF PRESENTATION Error Cor
BASIS OF PRESENTATION Error Corrections and Prior Period Adjustments (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jan. 31, 2020 | Oct. 31, 2019 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | Jul. 31, 2019 | |
Quantifying Misstatement in Current Year Financial Statements [Line Items] | ||||||
Operating expenses | $ 38,076 | $ 35,417 | $ 67,580 | $ 70,081 | ||
Net loss | $ (3,557) | $ (11,753) | 1,235 | $ (19,118) | ||
Restatement Adjustment | ||||||
Quantifying Misstatement in Current Year Financial Statements [Line Items] | ||||||
Accrued expenses | $ 106,300 | |||||
Adjustment of Tax Related Liabilities | ||||||
Quantifying Misstatement in Current Year Financial Statements [Line Items] | ||||||
Adjustments of tax related liabilities | $ 6,400 | |||||
Operating Expense | Restatement Adjustment | Adjustment of Tax Related Liabilities | ||||||
Quantifying Misstatement in Current Year Financial Statements [Line Items] | ||||||
Operating expenses | 137,700 | |||||
Net loss | Restatement Adjustment | ||||||
Quantifying Misstatement in Current Year Financial Statements [Line Items] | ||||||
Net loss | $ (60,300) |
RECENT ACCOUNTING PRONOUNCEME_3
RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 31, 2020 | Aug. 01, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right of use assets | $ 61,650 | |
Operating lease liability | $ 62,704 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right of use assets | $ 51,100 | |
Operating lease liability | $ 53,100 |
INVENTORIES - Components of Inv
INVENTORIES - Components of Inventories (Detail) - USD ($) $ in Thousands | Jan. 31, 2020 | Jul. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 21,631 | $ 21,322 |
Work-in-process | 428 | 587 |
Finished goods | 2,182 | 1,765 |
Inventories, net | $ 24,241 | $ 23,674 |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS - Additional Information (Detail) - USD ($) $ in Thousands | 6 Months Ended | |
Jan. 31, 2020 | Jul. 31, 2019 | |
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 257,128 | $ 257,128 |
Gross carrying amount | 213,250 | 213,250 |
Accumulated amortization | 64,916 | 50,732 |
Intangible assets | $ 148,334 | 162,518 |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 15 years | |
Gross carrying amount | $ 192,730 | 192,730 |
Accumulated amortization | 50,381 | 39,617 |
Intangible assets | $ 142,349 | 153,113 |
Trademarks and Trade Names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 3 years | |
Gross carrying amount | $ 20,520 | 20,520 |
Accumulated amortization | 14,535 | 11,115 |
Intangible assets | 5,985 | $ 9,405 |
Direct Marketing | ||
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 257,100 |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS Schedule of amortization expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of intangible assets | $ 6,911 | $ 7,791 | $ 14,188 | $ 15,890 |
Customer Relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of intangible assets | 5,197 | 5,996 | 10,764 | 12,420 |
Trademarks and Trade Names | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of intangible assets | $ 1,714 | $ 1,795 | $ 3,424 | $ 3,470 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - Components of Accrued Expenses (Detail) - USD ($) $ in Thousands | Jan. 31, 2020 | Jul. 31, 2019 |
Payables and Accruals [Abstract] | ||
Accrued taxes | $ 55,217 | $ 59,057 |
Accrued compensation | 24,810 | 22,584 |
Accrued interest | 467 | 467 |
Accrued audit, tax and legal | 3,711 | 3,148 |
Accrued contract labor | 1,444 | 1,650 |
Accrued worker's compensation | 4,866 | 4,549 |
Accrued other | 19,245 | 21,203 |
Accrued expenses | $ 109,760 | $ 112,658 |
ACCRUED EXPENSES AND OTHER CU_4
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - Components of Other Current Liabilities (Detail) - USD ($) $ in Thousands | Jan. 31, 2020 | Jul. 31, 2019 |
Payables and Accruals [Abstract] | ||
Accrued pricing liabilities | $ 14,309 | $ 14,309 |
Customer postage deposits | 8,890 | 11,816 |
Revolving credit facility | 6,000 | 6,000 |
Other | 6,507 | 6,794 |
Other current liabilities | $ 35,706 | $ 38,919 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) | 6 Months Ended |
Jan. 31, 2020 | |
Leases [Abstract] | |
Remaining lease term | 11 years |
LEASES - Lease Costs (Details)
LEASES - Lease Costs (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jan. 31, 2020 | Jan. 31, 2019 | |
Lease, Cost [Abstract] | ||
Operating lease cost | $ 4,816 | $ 9,632 |
Short-term lease expense | 226 | 452 |
Variable lease cost | 6 | 46 |
Amortization of finance lease assets | 18 | 36 |
Interest on finance lease liabilities | 4 | 8 |
Total lease cost | $ 5,070 | $ 10,174 |
LEASES - Lease Commitments (Det
LEASES - Lease Commitments (Details) $ in Thousands | Jan. 31, 2020USD ($) |
Operating Leases | |
2020 | $ 10,527 |
2021 | 15,941 |
2022 | 12,493 |
2023 | 7,597 |
2024 | 5,298 |
Thereafter | 23,261 |
Total lease payments | 75,117 |
Less: imputed interest | 12,413 |
Present value of lease payments | 62,704 |
Less: current maturities of lease obligations | 14,717 |
Long-term lease obligations | 47,987 |
Finance Leases | |
2020 | 65 |
2021 | 76 |
2022 | 76 |
2023 | 38 |
2024 | 0 |
Thereafter | 0 |
Total lease payments | 255 |
Less: imputed interest | 38 |
Present value of lease payments | 217 |
Less: current maturities of lease obligations | 71 |
Long-term lease obligations | 146 |
Operating lease not yet commenced, liability | $ 8,900 |
LEASES - Lease Information (Det
LEASES - Lease Information (Details) | Jan. 31, 2020 |
Weighted average remaining lease term: | |
Operating leases | 6 years 4 months |
Finance leases | 2 years 9 months 12 days |
Weighted average discount rate: | |
Operating leases | 4.40% |
Finance leases | 3.80% |
LEASES - Supplemental Cash Flow
LEASES - Supplemental Cash Flow Information (Details) $ in Thousands | 6 Months Ended |
Jan. 31, 2020USD ($) | |
Cash paid for amounts included in measurement of lease liabilities: | |
Operating cash flows from operating leases | $ 8,769 |
Operating cash flows from finance leases | 5 |
Financing cash flows from finance leases | $ 74 |
DEBT Component of Debt and Reco
DEBT Component of Debt and Reconciliation (Details) - USD ($) $ in Thousands | Jan. 31, 2020 | Jul. 31, 2019 |
Term Loan | ||
Line of Credit Facility [Line Items] | ||
Principal amount of long-term debt | $ 387,065 | $ 390,065 |
Unamortized debt discount | (6,678) | (7,508) |
Unamortized debt issuance costs | (753) | (888) |
Net carrying value of the term loan | 379,634 | 381,669 |
Convertible Senior Note | ||
Line of Credit Facility [Line Items] | ||
Principal amount of long-term debt | 14,940 | 14,940 |
Convertible Senior Note | SPHG Holdings | ||
Line of Credit Facility [Line Items] | ||
Unamortized debt discount | (6,678) | (7,508) |
Net carrying value of the term loan | 8,262 | 7,432 |
Cerberus Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Principal amount of long-term debt | 372,125 | 375,125 |
Cerberus Credit Facility | Term Loan | ||
Line of Credit Facility [Line Items] | ||
Principal amount of long-term debt | 372,125 | 375,125 |
Unamortized debt issuance costs | (753) | (888) |
Net carrying value of the term loan | $ 371,372 | $ 374,237 |
DEBT - Summary of Interest Expe
DEBT - Summary of Interest Expense (Detail) - SPHG Holdings - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jan. 31, 2020 | Jan. 31, 2020 | |
Interest Expense, Debt [Line Items] | ||
Debt instrument, interest expense | $ 701 | $ 1,390 |
Coupon Interest | ||
Interest Expense, Debt [Line Items] | ||
Debt instrument, interest expense | 280 | 560 |
Accretion | ||
Interest Expense, Debt [Line Items] | ||
Debt instrument, interest expense | $ 421 | $ 830 |
DEBT - Additional Information (
DEBT - Additional Information (Detail) | Feb. 28, 2019USD ($)$ / shares | Dec. 15, 2017 | Dec. 15, 2017USD ($) | Jun. 30, 2014USD ($) | Jan. 31, 2020USD ($) | Mar. 31, 2018USD ($) | Jan. 31, 2020USD ($) | Dec. 31, 2019 | Jul. 31, 2019USD ($) | Jun. 29, 2014USD ($) |
Debt Instrument [Line Items] | ||||||||||
Number of direct and wholly-owned subsidiaries | 2 | |||||||||
Debt instrument, interest rate, effective percentage | 18.47% | 18.47% | ||||||||
Excess cash flow payments | $ 0 | |||||||||
Line of credit, current | $ 6,000,000 | 6,000,000 | $ 6,000,000 | |||||||
Redemption price percentage | 100.00% | |||||||||
Carrying amount of equity component | $ 8,200,000 | $ 8,200,000 | 8,200,000 | |||||||
PNC Bank Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Line of credit facility, term | 5 years | 6 months | ||||||||
Line of credit facility, maximum credit commitment | $ 25,000,000 | $ 50,000,000 | ||||||||
Cerberus Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Line of credit facility, term | 5 years | |||||||||
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 | |||||||||
Leverage ratio | 350.00% | 350.00% | ||||||||
Principal amount outstanding | $ 372,125,000 | $ 372,125,000 | 375,125,000 | |||||||
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% | |||||||||
Scenario 1 | Cerberus Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Excess cash flow payment percentage | 50.00% | |||||||||
Scenario 2 | Cerberus Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Excess cash flow payment percentage | 25.00% | |||||||||
Convertible Senior Note | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Principal amount outstanding | 14,940,000 | 14,940,000 | 14,940,000 | |||||||
Term Loan | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Long-term debt | 379,634,000 | 379,634,000 | 381,669,000 | |||||||
Principal amount outstanding | 387,065,000 | 387,065,000 | 390,065,000 | |||||||
Term Loan | Cerberus Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Long-term debt | 371,372,000 | 371,372,000 | 374,237,000 | |||||||
Principal amount outstanding | 372,125,000 | 372,125,000 | 375,125,000 | |||||||
Line of Credit | Cerberus Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Line of credit facility, maximum credit commitment | 19,000,000 | 19,000,000 | ||||||||
Line of credit, current | 6,000,000 | 6,000,000 | 6,000,000 | |||||||
SPHG Holdings | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, interest expense | 701,000 | 1,390,000 | ||||||||
Conversion to common stock | $ 1,000 | |||||||||
Debt conversion ratio | 421.2655 | |||||||||
Debt conversion price (in usd per share) | $ / shares | $ 2.37 | |||||||||
SPHG Holdings | 7.50% Convertible Senior Debt | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Principal amount | $ 14,940,000 | 14,940,000 | 14,940,000 | 14,940,000 | ||||||
Debt instrument, stated interest rate | 7.50% | |||||||||
SPHG Holdings | Convertible Senior Note | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Long-term debt | $ 8,262,000 | $ 8,262,000 | $ 7,432,000 | |||||||
Debt instrument amortization period | 49 months |
DEBT - Net Carrying Value of th
DEBT - Net Carrying Value of the Notes (Detail) - USD ($) | Dec. 15, 2017 | Jan. 31, 2020 | Jan. 31, 2020 | Jul. 31, 2019 | Feb. 28, 2019 |
Interest Expense, Debt [Line Items] | |||||
Line of credit, current | $ 6,000,000 | $ 6,000,000 | $ 6,000,000 | ||
Carrying amount of equity component | $ 8,200,000 | $ 8,200,000 | 8,200,000 | ||
Debt instrument, interest rate, effective percentage | 18.47% | 18.47% | |||
Unused line of credit fee | 0.50% | 0.50% | |||
Term Loan | |||||
Interest Expense, Debt [Line Items] | |||||
Principal amount outstanding | $ 387,065,000 | $ 387,065,000 | 390,065,000 | ||
Unamortized debt discount | (753,000) | (753,000) | (888,000) | ||
Net carrying value of the term loan | 379,634,000 | 379,634,000 | 381,669,000 | ||
Convertible Senior Note | |||||
Interest Expense, Debt [Line Items] | |||||
Principal amount outstanding | 14,940,000 | 14,940,000 | 14,940,000 | ||
SPHG Holdings | |||||
Interest Expense, Debt [Line Items] | |||||
Debt instrument, interest expense | 701,000 | 1,390,000 | |||
SPHG Holdings | Coupon Interest | |||||
Interest Expense, Debt [Line Items] | |||||
Debt instrument, interest expense | 280,000 | 560,000 | |||
SPHG Holdings | Accretion | |||||
Interest Expense, Debt [Line Items] | |||||
Debt instrument, interest expense | 421,000 | 830,000 | |||
SPHG Holdings | Convertible Senior Note | |||||
Interest Expense, Debt [Line Items] | |||||
Net carrying value of the term loan | 8,262,000 | 8,262,000 | 7,432,000 | ||
SPHG Holdings | 7.50% Convertible Senior Debt | |||||
Interest Expense, Debt [Line Items] | |||||
Principal amount | 14,940,000 | 14,940,000 | 14,940,000 | $ 14,940,000 | |
Cerberus Credit Facility | |||||
Interest Expense, Debt [Line Items] | |||||
Principal amount outstanding | 372,125,000 | 372,125,000 | 375,125,000 | ||
Line of credit facility, term | 5 years | ||||
Credit facility, readily available borrowing capacity | 19,000,000 | 19,000,000 | |||
Cerberus Credit Facility | Line of Credit | |||||
Interest Expense, Debt [Line Items] | |||||
Line of credit, current | 6,000,000 | 6,000,000 | 6,000,000 | ||
Line of credit facility, maximum credit commitment | 19,000,000 | 19,000,000 | |||
Cerberus Credit Facility | Term Loan | |||||
Interest Expense, Debt [Line Items] | |||||
Principal amount outstanding | 372,125,000 | 372,125,000 | 375,125,000 | ||
Unamortized debt discount | (753,000) | (753,000) | (888,000) | ||
Net carrying value of the term loan | $ 371,372,000 | 371,372,000 | $ 374,237,000 | ||
MidCap Credit Facility | |||||
Interest Expense, Debt [Line Items] | |||||
Debt instrument, percentage points added to the reference rate | 4.00% | ||||
Line of credit facility, term | 3 years | ||||
Line of credit facility, maximum credit commitment | $ 12,500,000 | 12,500,000 | |||
Credit facility, readily available borrowing capacity | 6,817,000 | 6,817,000 | |||
MidCap Credit Facility | Letter Of Credit Sublimit | |||||
Interest Expense, Debt [Line Items] | |||||
Line of credit facility, maximum credit commitment | 5,000,000 | 5,000,000 | |||
MidCap Credit Facility | Inventory Sublimit | |||||
Interest Expense, Debt [Line Items] | |||||
Line of credit facility, maximum credit commitment | $ 4,500,000 | $ 4,500,000 |
CONTINGENCIES - Additional Info
CONTINGENCIES - Additional Information (Detail) $ in Millions | Dec. 15, 2017USD ($) |
Purchase Agreement | SPHG Holdings | Series C Convertible Preferred Stock | |
Contingencies [Line Items] | |
Proceeds from issuance of preferred stock | $ 35 |
STOCKHOLDERS' EQUITY - Addition
STOCKHOLDERS' EQUITY - Additional Information (Detail) $ / shares in Units, $ in Millions | Dec. 15, 2017USD ($)day$ / sharesshares | Jan. 31, 2020$ / sharesshares | Jul. 31, 2019$ / sharesshares |
Equity [Line Items] | |||
Preferred stock, shares issued (in shares) | shares | 0 | 0 | |
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 | |
Common stock, par value (in usd per share) | $ 0.01 | $ 0.01 | |
Series C Convertible Preferred Stock | |||
Equity [Line Items] | |||
Common stock, par value (in usd per share) | $ 0.01 | ||
Convertible preferred stock conversion price per share (in usd 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 | day | 5 | ||
Purchase Agreement | SPHG Holdings | Series C Convertible Preferred Stock | |||
Equity [Line Items] | |||
Preferred stock, shares issued (in shares) | shares | 35,000 | ||
Preferred stock, par value (in usd per share) | $ 0.01 | ||
Price per share (in usd per share) | $ 1,000 | ||
Proceeds from issuance of preferred stock | $ | $ 35 | ||
Preferred stock preference, percentage of stated value | 100.00% | ||
Preferred stock preference, percentage of declared but unpaid dividends | 100.00% |
REVENUE RECOGNITION - Disaggreg
REVENUE RECOGNITION - Disaggregated Revenue (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | $ 215,452 | $ 206,223 | $ 440,605 | $ 421,356 |
Supply chain management services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 91,911 | 87,166 | 183,616 | 173,792 |
Marketing solutions offerings | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 424 | 610 | 869 | 1,023 |
Goods | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Goods | Transferred over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 92,335 | 87,776 | 184,485 | 174,815 |
Services | Transferred over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 92,335 | 87,776 | 184,485 | 174,815 |
Supply Chain | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 92,335 | 87,776 | 184,485 | 174,815 |
Supply Chain | Supply chain management services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 91,911 | 87,166 | 183,616 | 173,792 |
Supply Chain | Marketing solutions offerings | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 0 | 0 | 0 | 0 |
Supply Chain | Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 424 | 610 | 869 | 1,023 |
Supply Chain | Goods | Transferred over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 0 | 0 | 0 | 0 |
Supply Chain | Services | Transferred over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 92,335 | 87,776 | 184,485 | 174,815 |
Direct Marketing | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Direct Marketing | Supply chain management services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 0 | 0 | 0 | 0 |
Direct Marketing | Marketing solutions offerings | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Direct Marketing | Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 0 | 0 | 0 | 0 |
Direct Marketing | Goods | Transferred over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Direct Marketing | Services | Transferred over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | $ 0 | $ 0 | $ 0 | $ 0 |
REVENUE RECOGNITION - Additiona
REVENUE RECOGNITION - Additional Information (Detail) - USD ($) $ in Thousands | Jan. 31, 2020 | Jul. 31, 2019 |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Contract assets | $ 23,546 | $ 21,473 |
Deferred revenue current | 3,895 | 2,967 |
Deferred revenue long-term | 98 | 62 |
Deferred revenue | 3,993 | 3,029 |
Contract with Customer, Asset, Gross, Current | 3,993 | 3,029 |
Trade Accounts Receivable | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Accounts receivable, trade | $ 118,291 | $ 112,141 |
REVENUE RECOGNITION - Summary o
REVENUE RECOGNITION - Summary of Changes in Deferred Revenue (Detail) $ in Thousands | 6 Months Ended |
Jan. 31, 2020USD ($) | |
Change in Deferred Revenue | |
Balance at beginning of period | $ 3,029 |
Deferral of revenue | 2,669 |
Recognition of deferred amounts upon satisfaction of performance obligation | (1,705) |
Balance at end of period | $ 3,993 |
REVENUE RECOGNITION - Performan
REVENUE RECOGNITION - Performance Obligations (Details) $ in Millions | Jan. 31, 2020USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-11-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Unearned revenue | $ 3.9 |
Unearned revenue, timing of satisfaction | 12 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-08-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Unearned revenue | $ 0.1 |
Unearned revenue, timing of satisfaction |
INCOME TAXES - Additional Infor
INCOME TAXES - Additional Information (Detail) | 6 Months Ended | |
Jan. 31, 2020USD ($)day | Jul. 31, 2019USD ($) | |
Income Taxes [Line Items] | ||
Unrecognized tax benefits related to federal, state and foreign taxes | $ 2,100,000 | $ 2,400,000 |
Liabilities for interest expense related to uncertain tax positions | 200,000 | $ 200,000 |
Income tax penalties accrued | 200,000 | |
Expected any unrecognized tax benefits to reverse in the next twelve months | $ 0 | |
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 | $ 160,000,000 | |
Number of business days | day | 10 | |
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% |
EARNINGS (LOSS) PER SHARE - Rec
EARNINGS (LOSS) PER SHARE - Reconciliation of Earnings (Loss) Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Earnings Per Share [Abstract] | ||||
Net income (loss) | $ (3,557) | $ (11,753) | $ 1,235 | $ (19,118) |
Less: Preferred dividends on redeemable preferred stock | (531) | (536) | (1,067) | (1,073) |
Net income (loss) attributable to common stockholders | $ (4,088) | $ (12,289) | $ 168 | $ (20,191) |
Weighted average common shares outstanding (in shares) | 61,538 | 60,935 | 61,469 | 60,974 |
Weighted average common equivalent shares arising from restricted stock | 0 | 0 | 13 | 0 |
Weighted average number of common and potential common shares (in shares) | $ 61,538,000 | $ 60,935,000 | $ 61,482,000 | $ 60,974,000 |
Basic net earnings (loss) per share attributable to common stockholders | (0.07) | (0.20) | 0 | (0.33) |
Diluted net earnings (loss) per share attributable to common stockholders | $ (0.07) | $ (0.20) | $ 0 | $ (0.33) |
EARNINGS (LOSS) PER SHARE - Add
EARNINGS (LOSS) PER SHARE - Additional Information (Detail) - shares shares in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Earnings Per Share [Abstract] | ||||
Common stock equivalent shares excluded from the denominator in the calculation of diluted loss per share | 24.5 | 28.9 | 24.5 | 28.9 |
COMPREHENSIVE INCOME (LOSS) - A
COMPREHENSIVE INCOME (LOSS) - Accumulated Other Comprehensive Income Items (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | $ 57,137 | $ 105,433 | $ 52,692 | $ 107,628 |
Foreign currency translation adjustment | 664 | 1,952 | 677 | 332 |
Net unrealized holding loss on securities | (96) | (89) | ||
Pension liability adjustments | 0 | (469) | (2) | (64) |
Other comprehensive income (loss) | 568 | 1,409 | 579 | 179 |
Ending balance | 53,815 | 94,537 | 53,815 | 94,537 |
Foreign Currency Items | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 5,017 | 6,348 | ||
Foreign currency translation adjustment | 677 | 332 | ||
Net unrealized holding loss on securities | 0 | 0 | ||
Pension liability adjustments | 0 | 0 | ||
Other comprehensive income (loss) | 677 | 332 | ||
Ending balance | 5,694 | 6,680 | 5,694 | 6,680 |
Pension Items | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | (4,079) | (3,795) | ||
Foreign currency translation adjustment | 0 | 0 | ||
Net unrealized holding loss on securities | 0 | 0 | ||
Pension liability adjustments | (2) | (64) | ||
Other comprehensive income (loss) | (2) | (64) | ||
Ending balance | (4,081) | (3,859) | (4,081) | (3,859) |
Unrealized Gains (Losses) on Securities | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 96 | 181 | ||
Foreign currency translation adjustment | 0 | 0 | ||
Net unrealized holding loss on securities | (96) | (89) | ||
Pension liability adjustments | 0 | 0 | ||
Other comprehensive income (loss) | (96) | (89) | ||
Ending balance | 0 | 92 | 0 | 92 |
Accumulated Other Comprehensive Income | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 1,045 | 1,504 | 1,034 | 2,734 |
Other comprehensive income (loss) | 568 | 1,409 | 579 | 179 |
Ending balance | $ 1,613 | $ 2,913 | $ 1,613 | $ 2,913 |
SEGMENT INFORMATION - Additiona
SEGMENT INFORMATION - Additional Information (Detail) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jan. 31, 2020USD ($) | Jan. 31, 2019USD ($) | Jan. 31, 2020USD ($)segment | Jan. 31, 2019USD ($) | Jul. 31, 2019USD ($) | |
Segment Reporting Information [Line Items] | |||||
Number of operating segments | segment | 2 | ||||
Number of reportable segments | segment | 2 | ||||
Total assets | $ 788,895 | $ 788,895 | $ 731,563 | ||
Net revenue: | 215,452 | $ 206,223 | 440,605 | $ 421,356 | |
United States | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue: | 145,293 | 136,347 | 299,714 | 282,411 | |
China | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue: | 32,569 | 37,910 | 72,026 | 74,521 | |
Netherlands | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue: | 11,071 | 14,403 | 21,719 | 29,347 | |
Other | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue: | $ 26,519 | $ 17,563 | $ 47,146 | $ 35,077 |
SEGMENT INFORMATION - Summarize
SEGMENT INFORMATION - Summarized Financial Information of Continuing Operations (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Segment Reporting Information [Line Items] | ||||
Revenue from contracts with customers | $ 215,452 | $ 206,223 | $ 440,605 | $ 421,356 |
Operating income (loss) | 7,173 | 2,126 | 21,915 | 5,662 |
Total other income (expense) | (9,542) | (12,474) | (18,137) | (22,264) |
Income (loss) before income taxes | (2,369) | (10,348) | 3,778 | (16,602) |
Supply Chain | ||||
Segment Reporting Information [Line Items] | ||||
Revenue from contracts with customers | 92,335 | 87,776 | 184,485 | 174,815 |
Direct Marketing | ||||
Segment Reporting Information [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Operating income (loss) | 9,980 | 6,554 | 27,693 | 13,003 |
Operating Segments | Supply Chain | ||||
Segment Reporting Information [Line Items] | ||||
Revenue from contracts with customers | 92,335 | 87,776 | 184,485 | 174,815 |
Operating income (loss) | 5,763 | (141) | 12,273 | 1,541 |
Operating Segments | Direct Marketing | ||||
Segment Reporting Information [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Operating income (loss) | 4,217 | 6,695 | 15,420 | 11,462 |
Corporate-level activity | ||||
Segment Reporting Information [Line Items] | ||||
Operating income (loss) | $ (2,807) | $ (4,428) | $ (5,778) | $ (7,341) |
SEGMENT INFORMATION - Total Ass
SEGMENT INFORMATION - Total Assets of Continuing Operations (Detail) - USD ($) $ in Thousands | Jan. 31, 2020 | Jul. 31, 2019 |
Segment Reporting Information [Line Items] | ||
Total assets | $ 788,895 | $ 731,563 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total assets | 760,782 | 713,102 |
Operating Segments | Supply Chain | ||
Segment Reporting Information [Line Items] | ||
Total assets | 141,053 | 112,712 |
Operating Segments | Direct Marketing | ||
Segment Reporting Information [Line Items] | ||
Total assets | 619,729 | 600,390 |
Corporate-level activity | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ 28,113 | $ 18,461 |
SEGMENT INFORMATION - Summari_2
SEGMENT INFORMATION - Summarized Financial Information of Net Revenue from External Customers by Group of Services (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenue from contracts with customers | $ 215,452 | $ 206,223 | $ 440,605 | $ 421,356 |
Supply Chain | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenue from contracts with customers | 92,335 | 87,776 | 184,485 | 174,815 |
Direct Marketing | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenue from contracts with customers | 123,117 | 118,447 | 256,120 | 246,541 |
Supply Chain | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenue from contracts with customers | 92,335 | 87,776 | 184,485 | 174,815 |
Direct Marketing | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenue from contracts with customers | $ 123,117 | $ 118,447 | $ 256,120 | $ 246,541 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Detail) - USD ($) $ / shares in Units, $ in Millions | Dec. 15, 2017 | Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | Jul. 31, 2019 | Feb. 28, 2019 |
Related Party Transaction [Line Items] | |||||||
Preferred stock, shares issued (in shares) | 0 | 0 | 0 | ||||
Preferred stock, par value (in usd per share) | $ 0.01 | $ 0.01 | $ 0.01 | ||||
Steel Holdings | 5.25% Convertible Senior Notes | |||||||
Related Party Transaction [Line Items] | |||||||
Principal amount convertible senior notes held of | $ 14.9 | $ 14.9 | |||||
Debt instrument, stated interest rate | 5.25% | 5.25% | 7.50% | ||||
SPHG Holdings | Purchase Agreement | Series C Convertible Preferred Stock | |||||||
Related Party Transaction [Line Items] | |||||||
Preferred stock, shares issued (in shares) | 35,000 | ||||||
Preferred stock, par value (in usd per share) | $ 0.01 | ||||||
Price per share (in usd per share) | $ 1,000 | ||||||
Proceeds from issuance of preferred stock | $ 35 | ||||||
Steel Services Ltd. | Management Services Agreement | |||||||
Related Party Transaction [Line Items] | |||||||
Total expenses incurred related to Management Services Agreement and Transfer Agreement | $ 0.9 | $ 0.4 | $ 1.7 | $ 0.7 | |||
SP Corporate Services Llc and Steel Services Limited | Management Services Agreement | |||||||
Related Party Transaction [Line Items] | |||||||
Amount due to related parties | $ 0.3 | $ 0.3 | $ 0.5 | ||||
Steel Connect, Inc. | SPHG Holdings | |||||||
Related Party Transaction [Line Items] | |||||||
Ownership percentage in capital stock | 56.30% | 56.30% |
FAIR VALUE MEASUREMENTS - Finan
FAIR VALUE MEASUREMENTS - 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 | Jan. 31, 2020 | Jul. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, fair value disclosure, recurring | $ 526 | $ 365 |
Fair Value, Inputs, Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, fair value disclosure, recurring | 526 | 365 |
Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, fair value disclosure, recurring | 0 | 0 |
Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, fair value disclosure, recurring | $ 0 | $ 0 |