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KLX Inc. Reports Second Fiscal Quarter Ended July 31, 2015 Financial Results

WELLINGTON, Fla., Aug. 25, 2015 (GLOBE NEWSWIRE) -- KLX Inc. ("the Company") (NASDAQ:KLXI), the world's leading distributor and value added service provider of aerospace fasteners and consumables, and a provider of services and products to the oil and gas industry, today announced its second fiscal quarter 2015 financial results.

For comparative purposes, the second quarter and six month 2015 results are adjusted to exclude certain costs related to the spin-off from the Company's former parent, B/E Aerospace, Inc., on December 16, 2014. As previously reported, we expect to incur approximately $25 million of one-time costs related to branding, new IT system alignments and other related new public company expenses. Additionally, we now expect to incur approximately $15 million in start-up expenses during 2015 in connection with our Energy Services Group geographical and service offering expansion activities. The aforementioned spin-off related costs together with these start-up costs are collectively referred to as "costs as defined." See "Reconciliation of Non-GAAP Financial Measures."

As a result of the change in our year end from December 31 to a January 31 year end, we have presented our second fiscal quarter and six month period ended July 31, 2015, as compared with the three month and six month periods ended June 30, 2014.

SECOND QUARTER ENDED JULY 31, 2015 HIGHLIGHTS COMPARED WITH THE SECOND QUARTER ENDED JUNE 30, 2014

  • Consolidated Revenues of $412.7 million declined 4.2 percent
  • ASG constant currency revenues increased 5.7 percent, offset by 32.5 percent decline in ESG revenues
  • Adjusted operating earnings were $46.9 million 1
  • Adjusted EBITDA was $72.1 million 1
  • Adjusted EPS was $0.62 1
  • Aerospace Solutions Group ("ASG") reported record revenues of $351.7 million, an increase of 5.7 percent on a constant currency basis. Including foreign currency headwinds, sales increased by 3.3 percent
  • Energy Services Group ("ESG") revenues of $61.0 million declined 32.5 percent on the 60 percent decline in oil and gas prices, the nearly 60 percent decline in drilling rigs and the precipitous decline in demand for drilling support services

1 Adjustments include primarily branding, IT implementation costs, spin-off related costs and start-up costs associated with ESG expansion initiatives, and certain tax related adjustments with respect to adjusted EPS. See "Reconciliations of Non-GAAP Financial Measures."

Amin Khoury, KLX's Chairman and Chief Executive Officer, stated, "Our second quarter results reflect strong performance from our Aerospace Solutions Group (ASG), offset by weakness in our Energy Services Group (ESG). ASG delivered record results driven by an increase in activity among our commercial aerospace manufacturing customers. Our ESG business is being negatively impacted by the precipitous decline in the North American onshore oil and gas services industry. We continue to act on compelling opportunities to build our ESG business through the identification and hiring of leading experts and the acquisition of discounted assets made available by these extraordinary industry conditions. We are greatly encouraged by our recent additions to KLX's ESG platform."

Certain financial information in the narrative of this press release has been presented exclusive of non-recurring costs and expenses incurred in 2015 following the spin-off from our former parent, B/E Aerospace, Inc. Costs as defined are more fully described in "Reconciliation of Non-GAAP Financial Measures" accompanying this press release. We have also presented adjusted earnings and adjusted earnings per diluted share to reflect net earnings before costs as defined, amortization, non-cash compensation expense, and to include the tax benefit from the amortization of tax deductible goodwill. In addition, for comparison purposes, we have presented interest expense for the 2014 period based on the current KLX capital structure and have utilized the current estimated 2015 effective tax rate for the second quarter of 2014. See "Reconciliation of Non-GAAP Financial Measures."

SECOND QUARTER CONSOLIDATED RESULTS

Second quarter 2015 revenues of $412.7 million declined 4.2 percent as compared to the three-month period ended June 30, 2014. On a constant currency basis, ASG revenues increased 5.7 percent. Including the negative effects of foreign exchange, KLX revenues declined 4.2 percent, reflecting a 3.3 percent increase in ASG revenues, offset by an approximate 32.5 percent decrease in ESG revenues.

Adjusted operating earnings, excluding costs as defined, were $46.9 million, and adjusted operating margin was 11.4 percent. On a GAAP basis, operating earnings were $32.8 million. Adjusted EBITDA, excluding costs as defined and non-cash compensation expense, was $72.1 million and adjusted EBITDA margin was 17.5 percent. EBITDA, on an unadjusted basis, was $54.5 million or 13.2 percent of sales.

Adjusted second quarter 2015 net earnings and adjusted earnings per diluted share, excluding costs as defined, amortization and non-cash compensation expense, and including the tax benefit from the amortization of tax deductible goodwill ("adjusted net earnings" and "adjusted net earnings per diluted share"), were $32.3 million and $0.62 per diluted share, respectively. On a GAAP basis, net earnings and earnings per diluted share were $7.4 million and $0.14 per share, respectively.

SECOND QUARTER 2015 SEGMENT RESULTS

The following is a tabular summary and commentary of revenues, adjusted operating earnings and adjusted EBITDA by segment for the three months ended July 31, 2015, as compared with the three months ended June 30, 2014. 2015 results include operating expenses associated with stand-alone public company costs, which are expected to total approximately $25 million for the year ending January 31, 2016 ($ in millions):

REVENUES
Segment July 31, 2015 June 30, 2014 % Change
Aerospace Solutions Group $ 351.7 $ 340.5 3.3%
Energy Services Group 61.0 90.4 -32.5%
Total $ 412.7 $ 430.9 -4.2%
ADJUSTED OPERATING EARNINGS
Segment July 31, 2015 June 30, 2014 % Change
Aerospace Solutions Group $ 66.1 $ 63.9 3.4%
Energy Services Group (19.2) 14.4 (233.3%)
Total $ 46.9 $ 78.3 (40.1%)
ADJUSTED EBITDA
Segment July 31, 2015 June 30, 2014 % Change
Aerospace Solutions Group $ 76.2 $ 71.3 6.9%
Energy Services Group (4.1) 24.2 (116.9%)
Total $ 72.1 $ 95.5 (24.5%)

Second quarter 2015 ASG revenues of $351.7 million increased 5.7 percent on a constant currency basis as compared to the three-month period ended June 30, 2014. Including the negative effects of foreign exchange, ASG revenues increased 3.3 percent. ASG second quarter 2015 operating earnings and operating margin, adjusted for $7.0 million of costs as defined, were $66.1 million and 18.8 percent, respectively. ASG's second quarter EBITDA, adjusted for $7.0 million of costs as defined and $3.0 million of non-cash compensation expense, was $76.2 million, or 21.7 percent of revenues. On a GAAP basis, ASG operating earnings and operating margin were $59.1 million and 16.8 percent, respectively. On a pro forma basis, to include ongoing public company costs in both periods as if the spin-off had occurred on January 1, 2014, adjusted operating margin in the 2015 period increased by 190 basis points. Mr. Khoury commented, "Second quarter 2015 revenues for our ASG business represent an all-time quarterly record for revenues. ASG's strong second quarter performance was driven by growing demand from a broad range of commercial aerospace manufacturing customers. During the second quarter, as in the first quarter, ASG experienced strong growth from its commercial aerospace customers, somewhat offset by a decline in demand from the business jet and military portion of our business. Revenue growth from our global aerospace manufacturing customers continued to outpace aftermarket revenues, which on a constant currency basis, increased 1.5% as compared with the prior year period, reflecting the record number of retirements of aging aircraft." Mr. Khoury continued, "The retirements of aging aircraft almost always occur immediately before their heavy maintenance checks. Over the last six years, nearly 3,500 aircraft have been retired and the average age of the commercial fleet has significantly declined. As the approximately 7,700 new aircraft delivered over the last six years begin to require heavy maintenance, we should experience a gradual return to historical aftermarket growth rates over the next two to three years."

Second quarter 2015 ESG revenues were $61.0 million, adjusted operating loss was $19.2 million, and adjusted EBITDA loss was $4.1 million, reflecting the challenging operating conditions that began in late 2014 and which have continued to deteriorate. ESG's financial performance reflects the 60 percent decrease in the price of oil, the nearly 60 percent decrease in the number of onshore drilling rigs, and the resulting significant cut backs in capital expenditures by our oil and gas customers. In addition, pricing pressures throughout the energy services sector contributed significantly to ESG's current period financial performance. On a GAAP basis, ESG operating loss was $26.3 million.

Commenting on the ESG business Mr. Khoury noted, "The current industry environment has resulted in essentially all industry participants engaging in major restructuring and downsizing activities. This has further expanded ESG's opportunities to build out our infrastructure. We remain steadfastly committed to our business plan of seeking out opportunities to invest in both an expansion of our capabilities and a strengthening of our geographic footprint. Over the last six months we have hired approximately 100 highly skilled technicians and other industry leaders who have significantly expanded our capabilities and customer relationships. At the same time, we are not immune to the near term financial challenges facing the oil and gas industry, and have sought to respond to current market conditions by significantly reducing our ongoing variable costs. We continue to closely examine our operations in order to optimize both our geographical presence and service offerings, but only to the extent that it does not compromise our longer term business outlook." Mr. Khoury continued, "During the first half of 2015, we substantially broadened ESG's range of services, and expanded our service offerings into the Casper, Riverton and Rock Springs, Wyoming markets and the Enid, Oklahoma and Bossier City, Louisiana markets. The start-up costs associated with these expansion activities have negatively impacted our cost base and resultant profitability by approximately $4.5 million during the quarter. We expect to deliver superior returns on these investments when the industry recovers. While we expect the currently very difficult industry headwinds to continue well into 2016, we remain confident that KLX is well positioned to take advantage of the extraordinary opportunities which are occurring as a result of these industry conditions."

SIX MONTH CONSOLIDATED RESULTS

For the six months ended July 31, 2015, revenues of $844.2 million increased 7.3 percent on a constant currency basis, as compared with the prior year period. Including the negative effects of foreign exchange, revenues increased 5.3 percent.

For the six months ended July 31, 2015, adjusted operating earnings were $102.8 million, a decrease of 31.1 percent. Adjusted operating margin was 12.2 percent. On a GAAP basis, operating earnings were $80.3 million.

For the six months ended July 31, 2015, adjusted net earnings and adjusted net earnings per diluted share were $71.4 million and $1.36 per share, declining 40.9 percent and 41.0 percent, respectively, as compared to the prior year period. On a GAAP basis, net earnings and earnings per diluted share were $25.3 million and $0.48 per share.

SIX MONTH SEGMENT RESULTS

The following is a tabular summary and commentary of revenues, adjusted operating earnings and adjusted EBITDA by segment for the six months ended July 31, 2015, as compared with the six months ended June 30, 2014. 2015 results include operating expenses associated with stand-alone public company costs, which are expected to total approximately $25 million for the year ending January 31, 2016 ($ in millions):

REVENUES
SIX MONTHS ENDED
Segment July 31, 2015 June 30, 2014 % Change
Aerospace Solutions Group $ 699.7 $ 666.9 4.9%
Energy Services Group 144.5 134.9 7.1%
Total $ 844.2 $ 801.8 5.3%
ADJUSTED OPERATING EARNINGS
SIX MONTHS ENDED
Segment July 31, 2015 June 30, 2014 % Change
Aerospace Solutions Group $ 132.4 $ 127.5 3.8%
Energy Services Group (29.6) 21.8 -235.8%
Total $ 102.8 $ 149.3 -31.1%
ADJUSTED EBITDA
SIX MONTHS ENDED
Segment July 31, 2015 June 30, 2014 % Change
Aerospace Solutions Group $ 152.7 $ 142.8 6.9%
Energy Services Group 0.1 36.0 -99.7%
Total $ 152.8 $ 178.8 -14.5%

For the six months ended July 31, 2015, ASG revenues were $699.7 million, an increase of 7.3 percent on a constant currency basis. Including the negative effects of foreign exchange, ASG revenues increased 4.9 percent. Adjusted operating earnings were $132.4 million, an increase of 3.8 percent, and adjusted operating margin was 18.9 percent. ASG's adjusted EBITDA was $152.7 million, or 21.8 percent of revenues. ASG operating earnings on a GAAP basis were $119.9 million.

For the six months ended July 31, 2015, ESG revenues increased 7.1 percent to $144.5 million, but declined by 28.4 percent on a pro forma basis, assuming all acquisitions were completed on February 1, 2014. Adjusted operating earnings and adjusted EBITDA for the current year period declined 235.8 percent and 99.7 percent, respectively, reflecting the lower pricing environment and the nearly 60 percent decline in North American onshore drilling rigs. On a GAAP basis, ESG operating loss was $39.6 million.

LIQUIDITY

As of July 31, 2015, cash was $418.3 million. Total long-term debt of $1.2 billion less cash, results in net debt of $781.7 million, and the Company's net debt to net capital ratio was 23.0 percent. For the six month period ending July 31, 2015, cash flows provided by operating activities were $130.4 million, including essentially no growth in ASG inventories despite the 7.3 percent increase in ASG revenues on a constant currency basis. For the six month period ending July 31, 2015, capital expenditures were $70.1 million. The Company's $750.0 million credit facility was undrawn as of July 31, 2015.

OUTLOOK

Commenting on the Company's outlook, Mr. Khoury noted, "ASG generated record revenues of $700 million for the first half of 2015, and expects full year 2015 revenues to grow at a constant currency mid-single digit rate as compared with fiscal year 2014, driven by continued strength of our global aerospace manufacturing customers and strong air travel demand." Mr. Khoury continued, "We remain focused on driving growth and margins at ASG for the remainder of 2015, while continuing to prudently manage working capital and capital expenditures."

Mr. Khoury concluded, "While the near term outlook for the financial performance of our ESG business remains challenged, we have successfully identified and added a number of resources and assets that have allowed us to expand our service offerings in the major oil and gas producing basins in North America. We remain committed to taking advantage of the extraordinarily difficult market environment, while prudently managing our costs and continuing to deliver high quality operational execution to our customers. Although we expect the market to remain challenging through the balance of this year and well into next year, our current geographical market positions, together with our recent investments, planned future investments and solid management team, position ESG for superior financial performance when industry conditions improve."

This release includes adjusted net earnings, adjusted earnings per diluted share, adjusted operating earnings, adjusted operating margin, adjusted EBITDA, free cash flow, ASG adjusted operating earnings, ASG adjusted operating margin, ESG adjusted operating earnings and ESG adjusted operating margin. Each of these measures excludes "costs as defined." For more information, see "Reconciliation of Non-GAAP Financial Measures."

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve risks and uncertainties. The Company's actual experience and results may differ materially from the experience and results anticipated in such statements. Factors that might cause such a difference include those discussed in the Company's filings with the Securities and Exchange Commission ("SEC"), which include its Annual Report on Form 10-K and Current Reports on Form 8-K. For more information, see the section entitled "Forward-Looking Statements" contained in the Company's Form 10-K and in other filings. The forward-looking statements included in this news release are made only as of the date of this news release and, except as required by federal securities laws and rules and regulations of the SEC, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About KLX Inc.

KLX Inc., through its two operating segments, provides mission critical products and complex logistical solutions to support its customers' high value assets. KLX serves its customers in demanding environments that face high cost of downtime and require dependable, high quality just-in-time customer support. The Aerospace Solutions Group is the world's leading distributor and value added service provider of aerospace fasteners and consumables offering the broadest range of aerospace hardware and consumables and inventory management services worldwide. The Energy Services Group provides vital services and products to the oil and gas industry on an episodic, 24/7 basis. For more information, visit the KLX website at www.klx.com.

KLX INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In Millions, Except Per Share Data)
THREE MONTHS ENDED SIX MONTHS ENDED
July 31, 2015 June 30, 2014 June 30, 2014 July 31, 2015 June 30, 2014 June 30, 2014
(As Adjusted) (1) (GAAP) (As Adjusted) (1) (GAAP)
Revenues $ 412.7 $ 430.9 $ 430.9 $ 844.2 $ 801.8 $ 801.8
Cost of sales 315.3 299.9 299.9 639.2 555.7 555.7
Selling, general and administrative 64.6 60.0 60.0 124.7 106.2 106.2
Operating earnings 32.8 71.0 71.0 80.3 139.9 139.9
Interest expense (1) 20.6 20.6 (0.1) 39.2 39.2 (0.2)
Earnings before income taxes 12.2 50.4 71.1 41.1 100.7 140.1
Income tax expense (1) 4.8 19.7 25.7 15.8 39.3 50.7
Net earnings $ 7.4 $ 30.7 $ 45.4 $ 25.3 $ 61.4 $ 89.4
Net earnings per common share:
Basic $ 0.14 $ 0.59 $ 0.87 $ 0.48 $ 1.18 $ 1.71
Diluted $ 0.14 $ 0.59 $ 0.87 $ 0.48 $ 1.17 $ 1.71
Weighted average common shares:
Basic 52.2 52.2 52.2 52.2 52.2 52.2
Diluted 52.4 52.3 52.3 52.4 52.3 52.3
(1) Interest expense for 2014 period adjusted to reflect the 2015 capital structure and to utilize the 2015 estimated effective tax rate (39%) in both periods
KLX INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Millions)
July 31, December 31,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ 418.3 $ 470.8
Accounts receivable 286.9 308.0
Inventories 1,315.4 1,289.2
Deferred income taxes 40.8 37.5
Other current assets 62.1 50.6
Total current assets 2,123.5 2,156.1
Long-term assets 2,143.1 2,147.5
$ 4,266.6 $ 4,303.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 261.0 $ 330.2
Total long-term liabilities 1,376.5 1,353.1
Total stockholders' equity 2,629.1 2,620.3
$ 4,266.6 $ 4,303.6
KLX INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
SIX MONTHS ENDED
July 31, 2015 June 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 25.3 $ 89.4
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization 42.6 27.7
Deferred income taxes 20.6 15.9
Non-cash compensation 7.4 1.8
Excess tax benefits realized from prior exercises of restricted stock (0.9) (0.6)
Provision for doubtful accounts 0.8 0.5
Loss (gain) on disposal of property and equipment 0.9 (0.3)
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable 16.0 (85.3)
Inventories 6.1 (52.5)
Other current and non-current assets (12.3) (5.8)
Accounts payable 10.9 49.7
Other current and non-current liabilities 13.0 (19.3)
Net cash flows provided by operating activities 130.4 21.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (70.1) (56.4)
Acquisitions, net of cash acquired 1.0 (511.6)
Net cash flows used in investing activities (69.1) (568.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (0.1) --
Cash proceeds from stock issuance 0.8 --
Excess tax benefits realized from prior exercises of restricted stock 0.9 --
Net transfers from B/E Aerospace, Inc. -- 509.6
Deferred acquisition payments (91.0) --
Net cash flows (used in) provided by financing activities (89.4) 509.6
Effect of foreign exchange rate changes on cash and cash equivalents (0.8) 0.4
Net decrease in cash and cash equivalents (28.9) (36.8)
Cash and cash equivalents, beginning of period 447.2 78.6
Cash and cash equivalents, end of period $ 418.3 $ 41.8

KLX INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

This release includes "adjusted net earnings," "adjusted earnings per diluted share," "adjusted operating earnings," "adjusted operating margin," "adjusted EBITDA," "free cash flow," "ASG adjusted operating earnings," "ASG adjusted operating margin," "ESG adjusted operating earnings" and "ESG adjusted operating margin," in each case excluding "costs as defined," each of which are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Each of these measures is adjusted to exclude costs as defined from their most directly comparable GAAP measure.

The Company uses the above described adjusted measures to evaluate and assess the operational strength and performance of the business and of particular segments of the business. The Company believes these financial measures are relevant and useful for investors because it allows investors to have a better understanding of the Company's actual operating performance unaffected by the impact of the costs as defined. These financial measures should not be viewed as a substitute for, or superior to, operating earnings or net earnings (each as defined under GAAP), the most directly comparable GAAP measures, as a measure of the Company's operating performance.

Pursuant to the requirements of Regulation G of the Exchange Act, we are providing the following tables that reconcile the above mentioned non-GAAP financial measures to the most directly comparable GAAP financial measures:

KLX INC.
RECONCILIATION OF NET EARNINGS PER DILUTED SHARE
TO ADJUSTED NET EARNINGS PER DILUTED SHARE
(In Millions, Except Per Share Data)
THREE MONTHS ENDED SIX MONTHS ENDED
July 31, 2015 June 30, 2014 July 31, 2015 June 30, 2014
Net earnings $ 7.4 $ 45.4 $ 25.3 $ 89.4
Amortization expense 6.7 7.5 13.3 13.8
Non-cash compensation 3.5 0.8 7.4 1.8
Income taxes 4.8 25.7 15.8 50.7
Costs as defined* 14.1 7.3 22.5 9.4
Adjusted earnings before tax expense 36.5 86.7 84.3 165.1
Income taxes at normalized rate 14.2 33.8 32.9 64.4
Less: impact of goodwill deduction ** 10.0 10.0 20.0 20.0
Adjusted income taxes 4.2 23.8 12.9 44.4
Adjusted net earnings $ 32.3 $ 62.9 $ 71.4 $ 120.7
Adjusted net earnings per diluted share $0.62 $1.20 $1.36 $2.31
Diluted weighted average shares 52.4 52.3 52.4 52.3
* Costs and expenses related to one-time post spin-off related activities and start-up costs in connection with our ESG geographical and service line expansion activities
** Tax benefit of goodwill deduction calculated at an assumed benefit of approximately 39%
KLX INC.
RECONCILIATION OF OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
THREE MONTHS ENDED
July 31, 2015 June 30, 2014
Operating earnings $ 32.8 $ 71.0
Costs as defined (1) 14.1 7.3
Adjusted operating earnings 46.9 78.3
Depreciation and amortization 21.7 16.4
Non-cash compensation 3.5 0.8
Adjusted EBITDA $ 72.1 $ 95.5
KLX INC.
RECONCILIATION OF AEROSPACE SOLUTIONS GROUP OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
THREE MONTHS ENDED
July 31, 2015 June 30, 2014
ASG operating earnings $ 59.1 $ 59.7
Costs as defined (1) $ 7.0 $ 4.2
Adjusted ASG operating earnings 66.1 63.9
Depreciation and amortization 7.1 6.9
Non-cash compensation 3.0 0.5
Adjusted EBITDA $ 76.2 $ 71.3
KLX INC.
RECONCILIATION OF ENERGY SERVICES GROUP OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
THREE MONTHS ENDED
July 31, 2015 June 30, 2014
ESG operating earnings $ (26.3) $ 11.3
Costs as defined (1) $ 7.1 $ 3.1
Adjusted ESG operating earnings (19.2) 14.4
Depreciation and amortization 14.6 9.5
Non-cash compensation 0.5 0.3
Adjusted EBITDA $ (4.1) $ 24.2
RECONCILIATION OF NET CASH FLOW PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
(In Millions)
THREE MONTHS ENDED
July 31, 2015 June 30, 2014
Net cash flow provided by operating activities $ 23.8 $ 20.1
Capital expenditures (34.5) (35.4)
Free cash flow $ (10.7) $ (15.3)
(1) Costs and expenses related to one-time post-spin-off related activities and start-up costs in connection with our ESG geographical and service line expansion activities
KLX INC.
RECONCILIATION OF OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
SIX MONTHS ENDED
July 31, 2015 June 30, 2014
Operating earnings $ 80.3 $ 139.9
Costs as defined (1) 22.5 9.4
Adjusted operating earnings $ 102.8 $ 149.3
Depreciation and amortization 42.6 27.7
Non-cash compensation 7.4 1.8
Adjusted EBITDA $ 152.8 $ 178.8
KLX INC.
RECONCILIATION OF AEROSPACE SOLUTIONS GROUP OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
SIX MONTHS ENDED
July 31, 2015 June 30, 2014
ASG operating earnings $ 119.9 $ 123.3
Costs as defined (1) $ 12.5 $ 4.2
Adjusted ASG operating earnings $ 132.4 $ 127.5
Depreciation and amortization 14.2 13.8
Non-cash compensation 6.1 1.5
Adjusted EBITDA $ 152.7 $ 142.8
KLX INC.
RECONCILIATION OF ENERGY SERVICES GROUP OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
SIX MONTHS ENDED
July 31, 2015 June 30, 2014
ESG operating earnings $ (39.6) $ 16.6
Costs as defined (1) $ 10.0 $ 5.2
Adjusted ESG operating earnings $ (29.6) $ 21.8
Depreciation and amortization 28.4 13.9
Non-cash compensation 1.3 0.3
Adjusted EBITDA $ 0.1 $ 36.0
RECONCILIATION OF NET CASH FLOW PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
(In Millions)
SIX MONTHS ENDED
July 31, 2015 June 30, 2014
Net cash flow provided by operating activities $ 130.4 $ 21.2
Capital expenditures (70.1) (56.4)
Free cash flow $ 60.3 $ (35.2)
(1) Costs and expenses related to one-time post-spin-off related activities and start-up costs in connection with our ESG geographical and service line expansion activities

CONTACT: Michael Perlman Assistant Treasurer KLX Inc. (561) 383-5100

Source:KLX Inc.