Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Apr. 30, 2016 | May. 23, 2016 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Apr. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Entity Current Reporting Status | Yes | |
Entity Registrant Name | KLX Inc. | |
Entity Central Index Key | 1,617,898 | |
Current Fiscal Year End Date | --01-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 52,707,434 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions | Apr. 30, 2016 | Jan. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 449 | $ 427.8 |
Accounts receivable–trade, less allowance for doubtful accounts ($11.0 at April 30, 2016 and $11.3 at January 31, 2016) | 267.8 | 259.6 |
Inventories, net | 1,284 | 1,295.3 |
Other current assets | 39.5 | 40.1 |
Total current assets | 2,040.3 | 2,022.8 |
Property and equipment, net of accumulated depreciation ($121.6 at April 30, 2016 and $109.3 at January 31, 2016) | 266.7 | 260.5 |
Goodwill | 968 | 954.9 |
Identifiable intangible assets, net | 263.3 | 262.7 |
Deferred income taxes | 159.6 | 163.4 |
Other assets | 22.8 | 26.7 |
Total assets | 3,720.7 | 3,691 |
Current liabilities: | ||
Accounts payable | 143.4 | 145.9 |
Accrued liabilities | 112.2 | 115.3 |
Total current liabilities | 255.6 | 261.2 |
Long-term debt | 1,180.1 | 1,179.5 |
Deferred income taxes | 15.6 | 16.2 |
Other non-current liabilities | $ 35.4 | $ 31.6 |
Commitments, contingencies and off-balance sheet arrangements (Note 9) | ||
Stockholders' equity: | ||
Preferred stock, $0.01 par value; 1.0 million shares authorized; no shares outstanding | ||
Common stock, $0.01 par value; 250.0 million shares authorized; 53.2 million shares issued as of April 30, 2016 and 53.3 million shares issued as of January 31, 2016 | $ 0.5 | $ 0.5 |
Additional paid-in capital | 2,667.3 | 2,662.4 |
Treasury stock: 0.5 shares at April 30, 2016 and 0.4 shares at January 31, 2016 | 12.8 | 12.5 |
Accumulated deficit | (367.8) | (373.7) |
Accumulated other comprehensive loss | (53.2) | (74.2) |
Total stockholders' equity | 2,234 | 2,202.5 |
Total liabilities and equity | $ 3,720.7 | $ 3,691 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Apr. 30, 2016 | Jan. 31, 2016 |
Condensed Consolidated Balance Sheets | ||
Accounts receivable - trade, allowance for doubtful accounts | $ 11 | $ 11.3 |
Property and equipment, accumulated depreciation | $ 121.6 | $ 109.3 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 53,200,000 | 53,300,000 |
Treasury stock | 500,000 | 400,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings and Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
Condensed Consolidated Statements of Earnings and Comprehensive Income | ||
Product revenues | $ 331.1 | $ 348 |
Service revenues | 37.1 | 83.5 |
Total revenues | 368.2 | 431.5 |
Cost of sales - products | 229.4 | 243.7 |
Cost of sales - services | 49.3 | 80.2 |
Total cost of sales | 278.7 | 323.9 |
Selling, general and administrative | 60.4 | 60.1 |
Operating earnings | 29.1 | 47.5 |
Interest expense | 18.9 | 18.6 |
Earnings before income taxes | 10.2 | 28.9 |
Income tax expense | 4 | 11 |
Net earnings | 6.2 | 17.9 |
Other comprehensive (loss) income: | ||
Foreign currency translation adjustment | 21 | (0.4) |
Comprehensive income | $ 27.2 | $ 17.5 |
Net earnings per share - basic | $ 0.12 | $ 0.34 |
Net earnings per share - diluted | $ 0.12 | $ 0.34 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net (loss) earnings | $ 6.2 | $ 17.9 |
Adjustments to reconcile net earnings to net cash flows provided by operating activities: | ||
Depreciation and amortization | 16.6 | 20.9 |
Deferred income taxes | 2.4 | 9.8 |
Non-cash compensation | 4.8 | 3.9 |
Amortization of deferred financing fees | 1.1 | 0.8 |
Excess tax benefit realized from prior exercises of restricted stock | (0.9) | |
Provision for doubtful accounts | (0.3) | 0.9 |
Loss on disposal of property and equipment | 1.5 | 0.5 |
Changes in operating assets and liabilities, net of effects from acquisitions: | ||
Accounts receivable | (6.5) | (2.3) |
Inventories | 12.4 | 7.9 |
Other current and non-current assets | 4.8 | (2.4) |
Accounts payable | (2.6) | 18.4 |
Other current and non-current liabilities | 1 | 31.2 |
Net cash flows provided by operating activities | 41.4 | 106.6 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Capital expenditures | (19.2) | (35.6) |
Acquisitions, net of cash acquired | 1 | |
Net cash flows used in investing activities | (19.2) | (34.6) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Purchase of treasury stock | (3.3) | (0.1) |
Excess tax benefit realized from prior exercises of restricted stock | 0.9 | |
Deferred acquisition payments | (91) | |
Net cash flows used in financing activities | (3.3) | (90.2) |
Effect of foreign exchange rate changes on cash and cash equivalents | 2.3 | 0.1 |
Net increase (decrease) in cash and cash equivalents | 21.2 | (18.1) |
Cash and cash equivalents, beginning of period | 427.8 | 447.2 |
Cash and cash equivalents, end of period | 449 | 429.1 |
Cash paid during period for: | ||
Income taxes paid, net of refunds | $ 1.6 | 3.6 |
Interest | $ 0.4 |
Description of Business and Bas
Description of Business and Basis of Presentation | 3 Months Ended |
Apr. 30, 2016 | |
Description of Business and Basis of Presentation | |
Description of Business and Basis of Presentation | Note 1. Description of Business and Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown are of a normal recurring nature and have been reflected in the condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or for any future period. The information included in these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the KLX Inc. (the “Company” or “KLX”) Annual Report on Form 10-K for the fiscal year ended January 31, 2016. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Apr. 30, 2016 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | Note 2. Recent Accounting Pronouncements In September 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-16, Business Combinations (Topic 805) (ASU 2015-16). ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Company adopted the provisions of ASU 2015-16 during the quarter ended April 30, 2016. The adoption of ASU 2015-16 did not have a material impact on the Company’s consolidated financial condition, results of operations, cash flows, or disclosures . In June 2014, the FASB issued ASU 2014-12, Compensation – Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, a consensus of the FASB Emerging Issue Task Force (ASU 2014-12). ASU 2014-12 brings consistency to the accounting for share-based payment awards that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards. The Company adopted the provisions of ASU 2014-12 prospectively to all awards granted or modified after the effective date during the quarter ended April 30, 2016. The adoption of ASU 2014-12 did not have a material impact on the Company’s consolidated financial condition, results of operations, cash flows, or disclosures . In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which amends ASC Topic 718, Compensation – Stock Compensation . The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those years. Earlier adoption is permitted. The Company is currently evaluating the effect this update will have on our consolidated financial statements. In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers , which updated the guidance in ASC Topic 606, Revenue Recognition . The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date . The amendments in this update deferred the effective date for implementation of ASU 2014-09 by one year and is now effective for annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period. In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , and in May 2016, ASU 2016-12, Revenues from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients both of which provide supplemental adoption guidance and clarification to ASU 2014-09. ASU 2016-10 and ASU 2016-12 must be adopted concurrently with the adoption of ASU 2014-09. The Company is currently evaluating the impact this guidance will have on its consolidated financial condition, results of operations, cash flows and disclosures and is currently unable to estimate the impact of adopting this guidance. |
Inventories
Inventories | 3 Months Ended |
Apr. 30, 2016 | |
Inventories | |
Inventories | Note 3. Inventories Inventories, made up of finished goods, consist primarily of aerospace fasteners and consumables. The Company values inventories at the lower of cost or market, using first ‑in, first ‑out or weighted average cost method. The Company regularly reviews inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on historical demand, estimated product demand to support contractual supply agreements with its customers and the age of the inventory, among other factors. Demand for the Company’s products can fluctuate from period to period depending on customer activity. In accordance with industry practice, inventories include amounts relating to long-term contracts with long production cycles, some of which are not expected to be realized within one year. Reserves for excess and obsolete inventory were approximately $42.7 and $40.4 as of April 30, 2016 and January 31, 2016, respectively. Substantially all of our inventory is comprised of aerospace grade fasteners, which support original equipment manufacturer (“OEM”) production and the aftermarket over the life of the airframe. Inventory with a limited shelf life is continually monitored and reserved for in advance of expiration. The annual provision for inventory with limited shelf life has historically been immaterial. |
Goodwill and Long-lived Assets
Goodwill and Long-lived Assets | 3 Months Ended |
Apr. 30, 2016 | |
Goodwill and Long-lived Assets | |
Goodwill and Long-lived Assets | Note 4. Goodwill and Long-lived Assets The table below sets forth the intangible assets by major asset class, all of which were acquired through business purchase transactions: April 30, 2016 Useful Life Original Accumulated Net Book (Years) Cost Amortization Value Customer contracts and relationships 8 - 30 $ $ $ Covenants not to compete 4 - 5 Developed technologies 15 Trade names Indefinite - $ $ $ Substantially all of the unamortized long-lived assets and goodwill at April 30, 2016 relates to the Aerospace Solutions Group (“ASG”) segment. Amortization expense associated with identifiable intangible assets was approximately $4.7 and $6.6 for the three months ended April 30, 2016 and 2015, respectively, The Company currently expects to recognize amortization expense of approximately $15.0 in each of the next five fiscal years (primarily related to our ASG business). The future amortization amounts are estimates. Actual future amortization expense may be different due to future acquisitions, impairments, changes in amortization periods or other factors such as changes in exchange rates for assets acquired outside the United States. The Company expenses costs to renew or extend the term of a recognized intangible asset. Goodwill increased by $13.1 as compared to January 31, 2016 as a result of foreign currency translation adjustments offset by a purchase price allocation adjustment of $2.5 associated with a small acquisition made by the Energy Services Group (“ESG”). |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Apr. 30, 2016 | |
Related Party Transactions | |
Related Party Transactions | Note 5. Related Party Transactions On December 17, 2014, B/E Aerospace, Inc. (“Former Parent” or “B/E Aerospace”) created an independent public company through a spin-off of its ASG and ESG businesses to Former Parent’s stockholders (“Spin-Off”). Following the Spin-Off, we created in-house substantially all of the functions that were previously provided to us by B/E Aerospace. In addition, we have entered into certain agreements with B/E Aerospace relating to transition services and IT services for a transitional period of approximately 24 months following the Spin-Off. In addition, we entered into an employee matters agreement and a tax sharing and indemnification agreement with B/E Aerospace in connection with the Spin-Off. This transitional support enables KLX to establish its stand-alone processes for various activities that were previously provided by B/E Aerospace and does not constitute significant continuing support of KLX’s operations. Expenses incurred under those agreements totaled $2.7 and $2.4 for the three months ended April 30, 2016 and 2015, respectively. As of April 30, 2016, the Company has recorded a tax indemnity payable to B/E Aerospace totaling $4.7 , of which $0.1 is classified in other current liabilities and $4.6 is classified in other long term liabilities. Sales to B/E Aerospace for the three months ended April 30, 2016 and 2015 were $5.7 and $4.5 , respectively. |
Accrued Liabilities
Accrued Liabilities | 3 Months Ended |
Apr. 30, 2016 | |
Accrued Liabilities | |
Accrued Liabilities | Note 6. Accrued Liabilities Accrued liabilities consist of the following : April 30, 2016 January 31, 2016 Accrued salaries, vacation and related benefits $ $ Accrued commissions Income taxes payable Accrued interest Other accrued liabilities $ $ |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Apr. 30, 2016 | |
Long-Term Debt | |
Long-Term Debt | Note 7. Long-Term Debt As of April 30, 2016, long-term debt consisted of $1,200.0 aggregate principal amount of the Company’s 5.875% senior unsecured notes due 2022 (the “5.875% Notes”). On a net basis, after taking into consideration the debt issue costs for the Term Loan Facility, total debt was $1,180.1 . As of April 30, 2016, the Company also had a $750.0 secured revolving credit facility pursuant to a credit agreement dated as of December 16, 2014 and amended and restated on May 19, 2015 (the “Revolving Credit Facility”). Borrowings under the Revolving Credit Facility bear interest at an annual rate equal to the London interbank offered rate (“LIBOR”) (as defined in the Revolving Credit Facility) plus the applicable margin (as defined). No amounts were outstanding under the Revolving Credit Facility as of April 30, 2016. The Revolving Credit Facility is tied to a borrowing base formula and has no maintenance financial covenants. This Revolving Credit Facility matures in May 2020. Letters of credit outstanding under the Revolving Credit Facility aggregated $3.3 and $0.4 at April 30, 2016 and 2015, respectively. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Apr. 30, 2016 | |
Fair Value Measurements | |
Fair Value Measurements | Note 8. Fair Value Measurements All short-term financial instruments are generally carried at amounts that approximate estimated fair value. The fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. Assets measured at fair value are categorized based upon the lowest level of significant input to the valuations. Level 1 – quoted prices in active markets for identical assets and liabilities. Level 2 – quoted prices for identical assets and liabilities in markets that are not active, or observable inputs other than quoted prices in active markets for identical assets and liabilities. Level 3 – unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions. The carrying amounts of cash and cash equivalents (which the Company classifies as Level 1 assets), accounts receivable – trade and accounts payable represent their respective fair values due to their short- term nature. There was no debt outstanding under the Revolving Credit Facility as of April 30, 2016. The fair value of the Company’s 5.875% Notes, based on market prices for publicly-traded debt (which the Company classifies as Level 2 inputs), was $1,197.0 and $1,136.4 as of April 30, 2016 and January 31, 2016, respectively. |
Commitments, Contingencies and
Commitments, Contingencies and Off-Balance Sheet Arrangements | 3 Months Ended |
Apr. 30, 2016 | |
Commitments, Contingencies and Off-Balance Sheet Arrangements | |
Commitments, Contingencies and Off-Balance Sheet Arrangements | Note 9. Commitments, Contingencies and Off-Balance Sheet Arrangements Lease Commitments - The Company finances its use of certain facilities and equipment under committed lease arrangements provided by various institutions. Since the terms of these arrangements meet the accounting definition of operating lease arrangements, the aggregate sum of future minimum lease payments is not reflected on the condensed consolidated balance sheets. At April 30, 2016, future minimum lease payments under these arrangements approximated $91.1 , the majority of which related to long-term real estate leases. Litigation - The Company is a defendant in various legal actions arising in the normal course of business, the outcomes of which, in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect on the Company’s consolidated financial statements. Indemnities, Commitments and Guarantees - During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to other parties to certain acquisition agreements. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. Many of these indemnities, commitments and guarantees provide for limitations on the maximum potential future payments the Company could be obligated to make. However, the Company is unable to estimate the maximum amount of liability related to its indemnities, commitments and guarantees because such liabilities are contingent upon the occurrence of events that are not reasonably determinable. Management believes that any liability for these indemnities, commitments and guarantees would not be material to the accompanying consolidated financial statements. Accordingly, no significant amounts have been accrued for indemnities, commitments and guarantees. The Company has employment agreements with three year initial terms, which renew for one additional year on each anniversary date, with certain key members of management. The Company’s employment agreements generally provide for certain protections in the event of a change of control. These protections generally include the payment of severance and related benefits under certain circumstances in the event of a change of control. |
Accounting for Stock-Based Comp
Accounting for Stock-Based Compensation | 3 Months Ended |
Apr. 30, 2016 | |
Accounting for Stock-Based Compensation | |
Accounting for Stock-Based Compensation | Note 10. Accounting for Stock-Based Compensation The Company has a Long-Term Incentive Plan (“LTIP”) under which the Company’s Compensation Committee has the authority to grant stock options, stock appreciation rights, restricted stock, restricted stock units or other forms of equity-based or equity-related awards. The Company accounts for share-based compensation arrangements in accordance with the provisions of FASB ASC 718, Compensation—Stock Compensation , whereby share-based compensation cost is measured on the date of grant, based on the fair value of the award, and is recognized over the requisite service period. Compensation cost recognized during the three months ended April 30, 2016 and 2015 related to KLX restricted stock and stock options granted during 2015 was $4.6 and $3.8 , respectively. Unrecognized compensation expense related to these grants was $40.4 at April 30, 2016. KLX has established a qualified Employee Stock Purchase Plan, the terms of which allow for qualified employees (as defined in the Plan) to participate in the purchase of designated shares of KLX’s common stock at a price equal to 85% of the closing price on the last business day of each semi ‑ annual stock purchase period. The fair value of employee purchase rights represents the difference between the closing price of KLX’s shares on the date of purchase and the purchase price of the shares. Compensation cost for this plan was not material to any of the periods presented. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Apr. 30, 2016 | |
Segment Reporting | |
Segment Reporting | Note 11. Segment Reporting The Company is organized based on the products and services it offers. As a result of the ESG acquisitions, the Company determined that ESG met the requirements of a reportable segment operating in a single line of business. The Company’s ASG reportable segment, which is also an operating segment, is comprised of consumables management and is in a single line of business. The segments regularly report their results of operations and makes requests for capital expenditures and acquisition funding to the Company’s chief operational decision-making group (“CODM”). This group is comprised of the Chairman and Chief Executive Officer and the President and Chief Operating Officer. As a result, the CODM has determined the Company has two reportable segments. The following table presents revenues and operating earnings (losses) by reportable segment: THREE MONTHS ENDED APRIL 30, APRIL 30, Revenues: 2016 2015 Aerospace Solutions Group $ $ Energy Services Group Total revenues Operating earnings (loss) (1) Aerospace Solutions Group Energy Services Group Total operating earnings Interest expense Earnings before income taxes $ $ (1) Operating earnings (loss) include an allocation of employee benefits and general and administrative costs based on the proportion of each segment’s number of employees for the three months ended April 30, 2016 and revenues for the three months ended April 30, 2015. The following table presents capital expenditures by reportable segment: THREE MONTHS ENDED APRIL 30, APRIL 30, 2016 2015 Aerospace Solutions Group $ $ Energy Services Group $ $ Corporate capital expenditures have been allocated to the above segments based on each segment’s percentage of total capital expenditures. The following table presents goodwill by reportable segment: April 30, January 31, 2016 2016 Aerospace Solutions Group $ $ Energy Services Group - $ $ The following table presents total assets by reportable segment: April 30, January 31, 2016 2016 Aerospace Solutions Group $ $ Energy Services Group $ $ Corporate assets (primarily cash and cash equivalents) of $592.7 and $559.5 at April 30, 2016 and January 31, 2016, respectively, have been allocated to the above segments based on each segment’s percentage of total assets. |
Net Earnings Per Common Share
Net Earnings Per Common Share | 3 Months Ended |
Apr. 30, 2016 | |
Net Earnings Per Common Share | |
Net Earnings Per Common Share | Note 12. Net Earnings Per Common Share Basic net earnings per common share is computed using the weighted average common shares outstanding during the period. Diluted net earnings per common share is computed by using the weighted average common shares outstanding including the dilutive effect of stock options, shares issued under the KLX LTIP and restricted shares based on an average share price during the period. For the three months ended April 30, 2016 and 2015, approximately 0.2 and 0.1 shares of the Company’s common stock, respectively, were excluded from the determination of diluted earnings per common share because their effect would have been anti-dilutive. The computations of basic and diluted earnings per share for the three months ended April 30, 2016 and 2015 are as follows: THREE MONTHS ENDED APRIL 30, APRIL 30, 2016 2015 Net earnings $ $ (Shares in millions) Basic weighted average common shares Effect of dilutive securities - Dilutive securities Diluted weighted average common shares Basic net earnings per common share $ $ Diluted net earnings per common share $ $ |
Accounting for Uncertainty in I
Accounting for Uncertainty in Income Taxes | 3 Months Ended |
Apr. 30, 2016 | |
Accounting for Uncertainty in Income Taxes | |
Accounting for Uncertainty in Income Taxes | Note 13. Accounting for Uncertainty in Income Taxes In accordance with FASB ASC 740, Income Taxes , the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. As of April 30, 2016 and 2015, the Company had $11.0 and $9.3 , respectively, of net unrecognized tax benefits. This liability, if recognized, would affect the Company’s effective tax rate. Pursuant to the terms of the Tax Sharing Agreement with our former parent, B/E Aerospace, the Company may be liable for income tax in certain foreign jurisdictions arising from the examination of tax years during which the Company was part of the B/E Group. The statute of limitations in these foreign jurisdictions is open for tax years 2007-2015. There are currently no material income tax audits in progress. The Company classifies interest and penalties related to income tax as income tax expense. The amount included in the Company’s liability for unrecognized tax benefits for interest and penalties was $1.5 and $1.0 at April 30, 2016 and 2015, respectively. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Apr. 30, 2016 | |
Subsequent Events | |
Subsequent Events | Note 14. Subsequent Events On May 17, 2016, the Company acquired Herndon Aerospace & Defense LLC, an aftermarket aerospace supply chain management and consumables hardware distributor servicing principally aftermarket military depots as well as the commercial aerospace aftermarket for approximately $210.0 in cash plus a standard working capital adjustment. The valuation of the acquired assets and liabilities is not yet complete, and as such the Company has not yet finalized its allocation of the purchase price for the acquisition. |
Description of Business and Sum
Description of Business and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Apr. 30, 2016 | |
Description of Business and Summary of Significant Accounting Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In September 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-16, Business Combinations (Topic 805) (ASU 2015-16). ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Company adopted the provisions of ASU 2015-16 during the quarter ended April 30, 2016. The adoption of ASU 2015-16 did not have a material impact on the Company’s consolidated financial condition, results of operations, cash flows, or disclosures . In June 2014, the FASB issued ASU 2014-12, Compensation – Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, a consensus of the FASB Emerging Issue Task Force (ASU 2014-12). ASU 2014-12 brings consistency to the accounting for share-based payment awards that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards. The Company adopted the provisions of ASU 2014-12 prospectively to all awards granted or modified after the effective date during the quarter ended April 30, 2016. The adoption of ASU 2014-12 did not have a material impact on the Company’s consolidated financial condition, results of operations, cash flows, or disclosures . In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which amends ASC Topic 718, Compensation – Stock Compensation . The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those years. Earlier adoption is permitted. The Company is currently evaluating the effect this update will have on our consolidated financial statements. In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers , which updated the guidance in ASC Topic 606, Revenue Recognition . The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date . The amendments in this update deferred the effective date for implementation of ASU 2014-09 by one year and is now effective for annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period. In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , and in May 2016, ASU 2016-12, Revenues from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients both of which provide supplemental adoption guidance and clarification to ASU 2014-09. ASU 2016-10 and ASU 2016-12 must be adopted concurrently with the adoption of ASU 2014-09. The Company is currently evaluating the impact this guidance will have on its consolidated financial condition, results of operations, cash flows and disclosures and is currently unable to estimate the impact of adopting this guidance. |
Goodwill and Long-lived Assets
Goodwill and Long-lived Assets (Tables) | 3 Months Ended |
Apr. 30, 2016 | |
Goodwill and Long-lived Assets | |
Intangible Assets by Major Asset Class | April 30, 2016 Useful Life Original Accumulated Net Book (Years) Cost Amortization Value Customer contracts and relationships 8 - 30 $ $ $ Covenants not to compete 4 - 5 Developed technologies 15 Trade names Indefinite - $ $ $ |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 3 Months Ended |
Apr. 30, 2016 | |
Accrued Liabilities | |
Accrued Liabilities | April 30, 2016 January 31, 2016 Accrued salaries, vacation and related benefits $ $ Accrued commissions Income taxes payable Accrued interest Other accrued liabilities $ $ |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Apr. 30, 2016 | |
Segment Reporting | |
Revenues and Operating Earnings (Losses) by Reportable Segment | THREE MONTHS ENDED APRIL 30, APRIL 30, Revenues: 2016 2015 Aerospace Solutions Group $ $ Energy Services Group Total revenues Operating earnings (loss) (1) Aerospace Solutions Group Energy Services Group Total operating earnings Interest expense Earnings before income taxes $ $ (1) Operating earnings (loss) include an allocation of employee benefits and general and administrative costs based on the proportion of each segment’s number of employees for the three months ended April 30, 2016 and revenues for the three months ended April 30, 2015. |
Capital Expenditures by Reportable Segment | THREE MONTHS ENDED APRIL 30, APRIL 30, 2016 2015 Aerospace Solutions Group $ $ Energy Services Group $ $ |
Goodwill by Reportable Segment | April 30, January 31, 2016 2016 Aerospace Solutions Group $ $ Energy Services Group - $ $ |
Total Assets by Reportable Segment | April 30, January 31, 2016 2016 Aerospace Solutions Group $ $ Energy Services Group $ $ |
Net Earnings Per Common Share (
Net Earnings Per Common Share (Tables) | 3 Months Ended |
Apr. 30, 2016 | |
Net Earnings Per Common Share | |
Computation of Basic and Diluted Net Earnings Per Share | THREE MONTHS ENDED APRIL 30, APRIL 30, 2016 2015 Net earnings $ $ (Shares in millions) Basic weighted average common shares Effect of dilutive securities - Dilutive securities Diluted weighted average common shares Basic net earnings per common share $ $ Diluted net earnings per common share $ $ |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Apr. 30, 2016 | Jan. 31, 2016 |
Inventories | ||
Inventory reserves | $ 42.7 | $ 40.4 |
Goodwill and Long-lived Asset26
Goodwill and Long-lived Assets (Major Asset Classes) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Jan. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Original Cost | $ 382.9 | |
Accumulated Amortization | 119.6 | |
Net Book Value | 263.3 | $ 262.7 |
Indefinite Life Trade Name [Member] | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Net Book Value | 17.9 | |
Customer contracts and relationships | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Original Cost | 359.2 | |
Accumulated Amortization | 116.3 | |
Net Book Value | $ 242.9 | |
Customer contracts and relationships | Minimum | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Useful Life (years) | 8 years | |
Customer contracts and relationships | Maximum | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Useful Life (years) | 30 years | |
Covenants not to compete | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Original Cost | $ 3.3 | |
Accumulated Amortization | 3.2 | |
Net Book Value | $ 0.1 | |
Covenants not to compete | Minimum | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Useful Life (years) | 4 years | |
Covenants not to compete | Maximum | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Useful Life (years) | 5 years | |
Developed Technologies | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Original Cost | $ 2.5 | |
Accumulated Amortization | 0.1 | |
Net Book Value | $ 2.4 | |
Developed Technologies | Minimum | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Useful Life (years) | 15 years | |
Developed Technologies | Maximum | ||
Goodwill and Intangible Assets Disclosure [Line Items] | ||
Useful Life (years) | 15 years |
Goodwill and Long-lived Asset27
Goodwill and Long-lived Assets (Goodwill and Amortization Expenses) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
Amortization expense of intangible assets | $ 4.7 | $ 6.6 |
Expected amortization expenses in year one | 15 | |
Expected amortization expenses in year two | 15 | |
Expected amortization expenses in year three | 15 | |
Expected amortization expenses in year four | 15 | |
Expected amortization expenses in year five | 15 | |
Energy Services Group | ||
Goodwill increase during period, foreign currency translation | 13.1 | |
Goodwill, purchase price adjustment | $ 2.5 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
Transitional period | 24 months | |
Former parent | ||
Cost incurred pursuant to arrangements | $ 2.7 | $ 2.4 |
Sales | 5.7 | $ 4.5 |
Former parent | Tax Indemnification | ||
Due to related party | 4.7 | |
Former parent | Other Current Liabilities | Tax Indemnification | ||
Due to related party | 0.1 | |
Former parent | Other Long-term Liabilities | Tax Indemnification | ||
Due to related party | $ 4.6 |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) $ in Millions | Apr. 30, 2016 | Jan. 31, 2016 |
Accrued Liabilities | ||
Accrued salaries, vacation and related benefits | $ 24.3 | $ 28.7 |
Accrued commissions | 4.7 | 6.2 |
Income taxes payable | 10.1 | 11.4 |
Accrued interest | 29.4 | 11.7 |
Other accrued liabilities | 43.7 | 57.3 |
Total accrued liabilities | $ 112.2 | $ 115.3 |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Jan. 31, 2016 | |
Debt Instrument [Line Items] | ||
Long-term debt | $ 1,180.1 | $ 1,179.5 |
Outstanding letter of credit amount | 3.3 | $ 0.4 |
Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Amount outstanding | 0 | |
Revolving credit facility | 750 | |
Senior Unsecured Notes 5.875 Percent Due 2022 | ||
Debt Instrument [Line Items] | ||
Senior unsecured notes | $ 1,200 | |
Debt, interest rate | 5.875% | |
Long-term debt | $ 1,180.1 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Jan. 31, 2016 | |
Senior Unsecured Notes 5.875 Percent Due 2022 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Debt, interest rate | 5.875% | |
Senior unsecured notes, fair value | $ 1,197 | $ 1,136.4 |
Revolving Credit Facility | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Amount outstanding | $ 0 |
Commitments, Contingencies an32
Commitments, Contingencies and Off-Balance Sheet Arrangements (Details) $ in Millions | 3 Months Ended |
Apr. 30, 2016USD ($) | |
Commitments, Contingencies and Off-Balance Sheet Arrangements | |
Future minimum lease payments | $ 91.1 |
Initial term of employment agreements | 3 years |
Number of additional years for which employment agreements may renew. | 1 year |
Accounting for Stock-Based Co33
Accounting for Stock-Based Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
Accounting for Stock-Based Compensation | ||
Share based compensation | $ 4.6 | $ 3.8 |
Unrecognized compensation cost | $ 40.4 | |
Qualified employees purchase of stock at a price equal to percentage of closing price | 85.00% |
Segment Reporting (Revenues and
Segment Reporting (Revenues and Operating Earnings (Losses) by Reportable Segment) (Details) $ in Millions | 3 Months Ended | |
Apr. 30, 2016USD ($)segment | Apr. 30, 2015USD ($) | |
Reportable Segments [Abstract] | ||
Number of reportable segments | segment | 2 | |
Revenues [Abstract] | ||
Revenues | $ 368.2 | $ 431.5 |
Operating Income (Loss) [Abstract] | ||
Operating earnings | 29.1 | 47.5 |
Interest expense | 18.9 | 18.6 |
Earnings before income taxes | 10.2 | 28.9 |
Aerospace Solutions Group | ||
Revenues [Abstract] | ||
Revenues | 331.1 | 348 |
Operating Income (Loss) [Abstract] | ||
Operating earnings | 59.9 | 60.8 |
Energy Services Group | ||
Revenues [Abstract] | ||
Revenues | 37.1 | 83.5 |
Operating Income (Loss) [Abstract] | ||
Operating earnings | $ (30.8) | $ (13.3) |
Segment Reporting (Capital Expe
Segment Reporting (Capital Expenditures by Reportable Segment) (Details2) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
Property, Plant and Equipment [Line Items] | ||
Capital expenditures | $ 19.2 | $ 35.6 |
Aerospace Solutions Group | ||
Property, Plant and Equipment [Line Items] | ||
Capital expenditures | 2.8 | 5.4 |
Energy Services Group | ||
Property, Plant and Equipment [Line Items] | ||
Capital expenditures | $ 16.4 | $ 30.2 |
Segment Reporting (Goodwill by
Segment Reporting (Goodwill by Reportable Segment) (Details3) - USD ($) $ in Millions | Apr. 30, 2016 | Jan. 31, 2016 |
Goodwill [Line Items] | ||
Goodwill | $ 968 | $ 954.9 |
Aerospace Solutions Group | ||
Goodwill [Line Items] | ||
Goodwill | $ 968 | 952.4 |
Energy Services Group | ||
Goodwill [Line Items] | ||
Goodwill | $ 2.5 |
Segment Reporting (Total Assets
Segment Reporting (Total Assets by Reportable Segment) (Details 4) - USD ($) $ in Millions | Apr. 30, 2016 | Jan. 31, 2016 |
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 3,720.7 | $ 3,691 |
Aerospace Solutions Group | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | 3,464.4 | 3,422.8 |
Energy Services Group | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 256.3 | $ 268.2 |
Segment Reporting (Corporate As
Segment Reporting (Corporate Assets by Reportable Segment) (Details) - USD ($) $ in Millions | Apr. 30, 2016 | Jan. 31, 2016 |
Segment Reporting Information [Line Items] | ||
Total assets | $ 3,720.7 | $ 3,691 |
Corporate, Non-Segment | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ 592.7 | $ 559.5 |
Net Earnings Per Common Share39
Net Earnings Per Common Share (Details) - shares shares in Millions | 3 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
Net Earnings Per Common Share | ||
Anti-dilutive securities excluded from determination of diluted earnings per common share | 0.2 | 0.1 |
Net Earnings Per Common Share40
Net Earnings Per Common Share (Computations of Basic and Diluted Earnings Per Share) (Details 2) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Apr. 30, 2016 | Apr. 30, 2015 | |
Net Earnings Per Common Share | ||
Net earnings (loss) | $ 6.2 | $ 17.9 |
Weighted average common shares - basic | 52 | 52.2 |
Effect of restricted shares issued | 0.2 | 0.1 |
Weighted average common shares - diluted | 52.2 | 52.3 |
Net earnings per share - basic | $ 0.12 | $ 0.34 |
Net earnings per share - diluted | $ 0.12 | $ 0.34 |
Accounting for Uncertainty in41
Accounting for Uncertainty in Income Taxes (Details) - USD ($) $ in Millions | Apr. 30, 2016 | Apr. 30, 2015 |
Accounting for Uncertainty in Income Taxes | ||
Net unrecognized tax benefits that would affect effective tax rate, if recognized | $ 11 | $ 9.3 |
Liability for unrecognized tax benefits for interest and penalties | $ 1.5 | $ 1 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | May. 17, 2016USD ($) |
Subsequent Event | Herndon Aerospace & Defense LLC | |
Subsequent Event [Line Items] | |
Acquisition price | $ 210 |