KLX Inc. Reports Financial Results for Fourth Quarter and Full Year Ended January 31, 2018; Recognizes $43 Million Non-Cash Tax Charge Associated With Recently Enacted Tax Legislation; Raises 2018 Guidance

WELLINGTON, Fla., March 06, 2018 (GLOBE NEWSWIRE) -- KLX Inc. (the “Company”) (NASDAQ:KLXI), a leading distributor and value added service provider of aerospace fasteners and consumables, and a provider of services and products to the oil and gas exploration and production industry, today reported its fourth fiscal quarter and full fiscal year ended January 31, 2018 financial results.

On a GAAP basis, for the three-month period ended January 31, 2018, as compared to the three-month period ended January 31, 2017, revenues increased 18.4 percent to $442.2 million, while operating earnings increased 56.0 percent to $54.9 million. During the fourth quarter of 2017, the Company was required to revalue its deferred tax assets as result of recently enacted tax legislation. This revaluation resulted in a one-time non-cash tax charge of approximately $43 million. In addition, the Company incurred approximately $6.2 million of one-time costs primarily associated with the process being conducted by the Board to review strategic alternatives, the transition to the Aerospace Solutions Group’s new global distribution and operations center and a restructuring of the Eagle Ford Geo Region, which was the Energy Services Group’s only unprofitable region. The costs associated with the strategic alternatives review, the new facility transition and the restructuring of the Eagle Ford operations are collectively referred to as “Costs as Defined.” Including the charge associated with the revaluation of the Company’s deferred tax assets and Costs as Defined, GAAP net loss and net loss per diluted share were $(11.5) million and $(0.23) per diluted share, decreases of $29.4 million and $0.57 per diluted share, respectively. Excluding the non-cash charge associated with the revaluation of the Company’s deferred tax assets and Costs as Defined, Adjusted Net Earnings and Adjusted Net Earnings per diluted share were $50.1 million and $1.00 per diluted share, increases of 84.9 percent and 92.3 percent, respectively, as compared to the three-month period ended January 31, 2017. See "Reconciliation of Non-GAAP Financial Measures."

FOURTH QUARTER HIGHLIGHTS

  • Consolidated revenue growth of 18.4 percent to $442.2 million
  • Consolidated operating earnings of $54.9 million increased by 56.0 percent
  • Consolidated Adjusted operating earnings of $61.1 million increased 69.7 percent
  • Adjusted Net Earnings and Adjusted Net Earnings per diluted share were $50.1 million and $1.00 per diluted share, respectively, representing increases of 84.9 percent and 92.3 percent, respectively
  • Increased 2018 guidance by $0.50 per diluted share to $4.30 of Adjusted Net Earnings per diluted share to reflect the lower tax rate associated with the recent changes in tax legislation and a contribution from two product lines purchased immediately before the end of the fourth quarter

We have presented Adjusted Net Earnings and Adjusted Net Earnings per diluted share to reflect net earnings before the non-cash charge associated with the revaluation of the Company’s deferred tax assets, Costs as Defined, and amortization and non-cash compensation expense, and to include the tax benefit from the amortization of tax-deductible goodwill (“Adjusted Net Earnings” and “Adjusted Net Earnings per diluted share”). This release includes “Adjusted operating earnings,” “ASG Adjusted operating earnings” and “ESG Adjusted operating earnings,” which exclude Costs as Defined. This release also includes “Adjusted EBITDA,” “ASG Adjusted EBITDA” and “ESG Adjusted EBITDA” which exclude Costs as Defined and non-cash compensation expense, and “free cash flow.” Each of the aforementioned metrics are “non-GAAP financial measures” as defined in Regulation G of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See “Reconciliation of Non-GAAP Financial Measures.”

FOURTH QUARTER CONSOLIDATED RESULTS

On a consolidated basis, revenues increased 18.4 percent to $442.2 million, driven by an approximate 5.5 percent increase in Aerospace Solutions Group (“ASG”) revenues and an approximate 116.1 percent increase in Energy Services Group (“ESG”) revenues. On a GAAP basis, operating earnings and operating margin of $54.9 million and 12.4 percent increased by 56.0 percent and approximately 300 basis points, respectively. Adjusted operating earnings and Adjusted operating margin were $61.1 million and 13.8 percent, respectively, reflecting an approximate 60 basis point increase in ASG’s Adjusted operating margin and continued strong year-over-year improvement at ESG. Excluding the non-cash revaluation charge and Costs as Defined, Adjusted Net Earnings and Adjusted Net Earnings per diluted share increased 84.9 percent and 92.3 percent to $50.1 million and $1.00 per diluted share, respectively.

“We are pleased to report a significant increase in both consolidated revenues and operating earnings in the fourth quarter, as compared to the same period in the prior year. Our ASG segment delivered solid revenue growth driven by a mid-single digit percentage increase in both commercial aerospace manufacturing and aftermarket revenues,” said Amin J. Khoury, Chairman and Chief Executive Officer of KLX.

“In the fourth quarter, ASG successfully completed the implementation of our new warehouse management system at our Phoenix, Arizona facility, which will now be rolled out to our other major worldwide stocking locations. In addition, the build-out of ASG’s new global distribution and operations center in Miami has been completed, and we will begin to move administrative teams into the new facility in the first quarter, with the transfer and consolidation of inventory currently held in the three legacy facilities in Miami taking place through the remainder of 2018. Together, the new global distribution and operations center, which incorporates our new warehouse automation technology, and our new warehouse management system will greatly enhance future customer service, while supporting substantial productivity gains and margin improvements, as well as more efficient inventory management that is expected to improve free cash flow. Additionally, immediately before the end of the fourth quarter, KLX acquired two new product lines. The first purchase includes high performance fasteners and precision components and assemblies dedicated to aircraft engine manufacturing. The second group of products will enable us to offer our customers technical products, systems and expertise in motion and control applications, including hydraulics, pneumatics, fluid connectors, filtration, electrical control systems, seals, compressors and engineered systems for both OEM and aftermarket applications. The total purchase price for these new product lines was approximately $65 million,” Mr. Khoury stated.

Mr. Khoury continued, “Our ESG segment once again delivered strong improvements in operating performance on a quarter-over-quarter basis, including positive Adjusted operating earnings for the first time since the fourth quarter of 2014, and a 35.1 percent increase in Adjusted EBITDA compared to the third quarter, reflecting the substantial earnings leverage inherent in the business.”

FOURTH QUARTER SEGMENT RESULTS

The following is a tabular summary and commentary of revenues, Adjusted operating earnings and Adjusted EBITDA, for the three month periods ended January 31, 2018 and January 31, 2017 ($ millions):

REVENUES
THREE MONTHS ENDED
Segment January 31, 2018 January 31, 2017 % Change
Aerospace Solutions Group $ 348.0 $ 329.8 5.5%
Energy Services Group 94.2 43.6 116.1%
Total $ 442.2 $ 373.4 18.4%
OPERATING EARNINGS (LOSS)
THREE MONTHS ENDED
Segment January 31, 2018 January 31, 2017 % Change
Aerospace Solutions Group $ 57.3 $ 54.1 5.9%
Energy Services Group (2.4) (18.9) 87.3%
Total $ 54.9 $ 35.2 56.0%
ADJUSTED OPERATING EARNINGS (LOSS)
THREE MONTHS ENDED
Segment January 31, 2018 January 31, 2017 % Change
Aerospace Solutions Group $ 59.9 $ 54.9 9.1%
Energy Services Group 1.2 (18.9) nm
Total $ 61.1 $ 36.0 69.7%
ADJUSTED EBITDA (LOSS)
THREE MONTHS ENDED
Segment January 31, 2018 January 31, 2017 % Change
Aerospace Solutions Group $ 71.1 $ 65.5 8.5%
Energy Services Group 12.7 (7.7) nm
Total $ 83.8 $ 57.8 45.0%

For the three months ended January 31, 2018, ASG revenues of $348.0 million increased approximately 5.5 percent compared to the same period in the prior year. The increase in revenues was driven by an approximate 7 percent increase in sales to commercial aerospace manufacturing customers, partially offset by a double digit percentage decline in revenues from business jet manufacturing customers. Aftermarket revenues increased by approximately 5.3 percent as compared to the prior year, driven by a substantial increase in aircraft maintenance activity among MROs, repair shops and airlines. On a GAAP basis, ASG operating earnings of $57.3 million increased 5.9 percent, and operating margin of 16.5 percent expanded approximately 10 basis points. ASG’s Adjusted operating earnings were $59.9 million or 17.2 percent of revenues, up 9.1 percent and approximately 60 basis points, respectively, as compared to the same period in the prior year. ASG Adjusted EBITDA of $71.1 million was 20.4 percent of revenues and increased 8.5 percent as compared to the prior year period.

For the three months ended January 31, 2018, as compared to the same period of the prior year, ESG revenues of $94.2 million increased 116.1 percent. GAAP operating loss decreased $16.5 million, or 87.3 percent, to $(2.4) million, which includes the aforementioned one-time costs. Exclusive of such costs, ESG’s Adjusted operating earnings were $1.2 million in the fourth quarter, a $20.1 million improvement over the same period last year. Adjusted EBITDA of $12.7 million improved by $20.4 million. As compared to the third quarter of 2017, revenues increased by 5.7 percent, Adjusted operating earnings improved by $3.1 million and Adjusted EBITDA improved by $3.3 million or 35.1 percent.

FULL YEAR CONSOLIDATED RESULTS

For the year ended January 31, 2018, revenues of $1.7 billion increased $246.7 million, or 16.5 percent. The consolidated results reflect a 5.9 percent increase in ASG revenues and a 109.3 percent increase in ESG revenues, both as compared to the same period in the prior year.

On a GAAP basis, operating earnings were $216.3 million, an increase of 67.2 percent. Adjusted operating earnings were $222.5 million, an increase of 70.9 percent. Adjusted EBITDA of $314.0 million and Adjusted EBITDA margin of 18.0 percent, increased approximately 44.5 percent and approximately 350 basis points, respectively.

For the year ended January 31, 2018, on a GAAP basis, net earnings and net earnings per diluted share were $53.4 million and $1.04 per diluted share, increases of 10.8 percent and 13.0 percent, respectively. Adjusted Net Earnings and Adjusted Net Earnings per diluted share increased 76.8 percent and 80.0 percent to $166.4 million and $3.24 per diluted share, respectively.

FULL YEAR SEGMENT RESULTS

The following is a tabular summary and commentary of revenues, Adjusted operating earnings and Adjusted EBITDA, for the years ended January 31, 2018 and January 31, 2017 ($ millions):

REVENUES
YEAR ENDED
Segment January 31, 2018 January 31, 2017 % Change
Aerospace Solutions Group $ 1,420.2 $ 1,340.9 5.9%
Energy Services Group 320.6 153.2 109.3%
Total $ 1,740.8 $ 1,494.1 16.5%
OPERATING EARNINGS (LOSS)
YEAR ENDED
Segment January 31, 2018 January 31, 2017 % Change
Aerospace Solutions Group $ 238.5 $ 220.6 8.1%
Energy Services Group (22.2) (91.2) 75.7%
Total $ 216.3 $ 129.4 67.2%
ADJUSTED OPERATING EARNINGS (LOSS)
YEAR ENDED
Segment January 31, 2018 January 31, 2017 % Change
Aerospace Solutions Group $ 241.1 $ 221.4 8.9%
Energy Services Group (18.6) (91.2) 79.6%
Total $ 222.5 $ 130.2 70.9%
ADJUSTED EBITDA (LOSS)
YEAR ENDED
Segment January 31, 2018 January 31, 2017 % Change
Aerospace Solutions Group $ 286.8 $ 263.0 9.0%
Energy Services Group 27.2 (45.7) nm
Total $ 314.0 $ 217.3 44.5%

For the year ended January 31, 2018, ASG revenues of $1.4 billion increased 5.9 percent compared to the same period in the prior year. Revenues from both commercial aerospace manufacturing and aftermarket customers increased by approximately 6 percent. On a GAAP basis, ASG operating earnings of $238.5 million increased 8.1 percent and operating margin increased approximately 30 basis points to 16.8 percent. ASG Adjusted operating earnings of $241.1 million increased 8.9 percent and Adjusted operating margin increased approximately 50 basis points to 17.0 percent. ASG Adjusted EBITDA of $286.8 million and Adjusted EBITDA margin of 20.2 percent increased approximately 9.0 percent and approximately 60 basis points, respectively.

For the year ended January 31, 2018, ESG revenues of $320.6 million increased by 109.3 percent, as compared to the same period in the prior year. GAAP operating loss improved by $69.0 million to $(22.2) million, while Adjusted operating loss improved by $72.6 million to $(18.6) million. Adjusted EBITDA improved by $72.9 million to $27.2 million.

LIQUIDITY

For the year ended January 31, 2018, net cash flow provided by operations was $206.6 million. The Company generated free cash flow of $121.7 million, or approximately 227.9 percent of net earnings and 73.1 percent of Adjusted Net Earnings. Capital expenditures were $84.9 million, reflecting investments related to the Company’s new 550,000 square foot ASG Miami global distribution and operations center, and discrete investments within the ESG business. In addition, as previously discussed, immediately prior to the end of the fourth quarter the Company invested approximately $65 million to expand ASG’s product offerings. As of January 31, 2018, cash on hand was approximately $255 million. Total long-term debt of $1.2 billion less cash, resulted in net debt of approximately $945 million, and the Company’s net debt to net capital ratio was approximately 29 percent. There were no borrowings outstanding under the Company’s $750.0 million credit facility. For the past twelve-month period ended January 31, 2018, the Company repurchased approximately $80 million of KLXI common stock at an average price of $48.04 per share.

OUTLOOK

The Company is today increasing its 2018 guidance for both revenues and earnings. The Company expects its future after-tax earnings to be positively impacted by the recently implemented reduction to the corporate tax rate. Furthermore, the Company’s Fiscal 2018 outlook excludes approximately $20 million of new facility transition costs.

  • 2018 revenues are expected to increase by approximately 15 percent to approximately $2.0 billion
  • Adjusted operating earnings are expected to increase approximately 32 percent to approximately $293 million
  • Adjusted EBITDA is expected to increase approximately 24 percent to approximately $390 million
  • Adjusted Net Earnings are expected to increase approximately 32 percent to approximately $220 million
  • Adjusted Net Earnings per diluted share is expected to increase approximately 33 percent to approximately $4.30 per diluted share
  • ASG revenues are expected to increase by approximately 8 percent to approximately $1,540 million
  • ESG revenues are expected to increase by approximately 44 percent to approximately $450 - $475 million

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 Exchange Act. 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 Annual Report on 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 a 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 oil and gas exploration and production companies 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 YEAR ENDED
January 31, 2018 January 31, 2017 January 31, 2018 January 31, 2017
Revenues$ 442.2 $ 373.4 $ 1,740.8 $ 1,494.1
Cost of sales 321.7 281.4 1,263.8 1,126.1
Selling, general and administrative 65.6 56.8 260.7 238.6
Operating earnings 54.9 35.2 216.3 129.4
Interest expense 18.8 19.1 75.8 75.9
Earnings before income taxes 36.1 16.1 140.5 53.5
Income tax expense 47.6 (1.8) 87.1 5.3
Net earnings (loss)$ (11.5) $ 17.9 $ 53.4 $ 48.2
Net earnings (loss) per common share:
Basic$ (0.23) $ 0.35 $ 1.06 $ 0.93
Diluted $ (0.23) $ 0.34 $ 1.04 $ 0.92
Weighted average common shares:
Basic 49.9 51.6 50.5 51.8
Diluted 49.9 52.2 51.3 52.2


KLX INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Millions)
January 31, January 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents$ 255.3 $ 277.3
Accounts receivable 316.1 261.3
Inventories, net 1,407.9 1,381.4
Other current assets 51.7 39.6
Total current assets 2,031.0 1,959.6
Long-term assets 1,759.0 1,738.7
$ 3,790.0 $ 3,698.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities$ 287.5 $ 257.1
Total long-term liabilities 1,232.6 1,220.1
Total stockholders' equity 2,269.9 2,221.1
$ 3,790.0 $ 3,698.3


KLX INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
YEAR ENDED
January 31, 2018 January 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 53.4 $ 48.2
Adjustments to reconcile net earnings to
net cash flows provided by operating activities:
Depreciation and amortization 66.1 66.9
Deferred income taxes 80.9 6.2
Non-cash compensation 26.4 20.2
Provision for inventories 17.2 20.7
Provision for doubtful accounts and sales returns 0.2 3.2
Loss on disposal of property, equipment and other 1.3 3.3
Amortization of deferred financing fees 4.5 4.3
Changes in operating assets and liabilities, net of effects
from acquisitions:
Accounts receivable (44.4) 6.9
Inventories (9.2) (5.0)
Other current and non-current assets (19.5) (4.6)
Accounts payable 9.9 11.0
Other current and non-current liabilities 19.8 (30.4)
Net cash flows provided by operating activities 206.6 150.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (84.9) (35.5)
Acquisitions, net of cash acquired (64.8) (220.8)
Net cash flows used in investing activities (149.7) (256.3)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock and other (92.1) (44.9)
Cash proceeds from stock issuance 2.0 1.5
Net cash flows used in financing activities (90.1) (43.4)
Effect of foreign exchange rate changes on cash and
cash equivalents 11.2 (1.7)
Net decrease in cash and cash equivalents (22.0) (150.5)
Cash and cash equivalents, beginning of period 277.3 427.8
Cash and cash equivalents, end of period$ 255.3 $ 277.3

KLX INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

This release includes “Adjusted Net Earnings” and “Adjusted Net Earnings per diluted share” to reflect net earnings before the non-cash charge associated with the revaluation of the Company’s deferred tax assets, Costs as Defined, and the amortization and non-cash compensation expense, and to include the tax benefit from the amortization of tax-deductible goodwill. This release includes “Adjusted operating earnings,” “ASG Adjusted operating earnings” and “ESG Adjusted operating earnings,” which excludes Costs as Defined. This release also includes “Adjusted EBITDA,” “ASG Adjusted EBITDA” and “ESG Adjusted EBITDA,” which excludes non-cash compensation expense and Costs as Defined, and “free cash flow,” which are “non-GAAP financial measures” as defined in Regulation G of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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, net earnings or net cash flows provided by operating activities (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
TO ADJUSTED NET EARNINGS PER DILUTED SHARE
(In Millions, Except Per Share Data)
THREE MONTHS ENDED YEAR ENDED
January 31, 2018 January 31, 2017 January 31, 2018 January 31, 2017
Net earnings (loss) $ (11.5) $ 17.9 $ 53.4 $ 48.2
Amortization expense 4.8 4.9 19.3 19.6
Non-cash compensation 1 6.1 5.5 25.4 20.2
Income taxes (benefit) 2 47.6 (1.8) 87.1 5.3
Costs as Defined 3 6.2 0.8 6.2 0.8
Adjusted earnings before tax expense 53.2 27.3 191.4 94.1
Income taxes 4 6.3 2.7 59.7 9.3
Less: impact of goodwill deduction 5 3.2 2.5 34.7 9.3
Adjusted income taxes 3.1 0.2 25.0 -
Adjusted net earnings $ 50.1 $ 27.1 $ 166.4 $ 94.1
Adjusted net earnings
per diluted share $ 1.00 $ 0.52 $ 3.24 $ 1.80
Diluted weighted average
shares 49.9 52.2 51.3 52.2
1 Excludes approximately $1 million of ESG restructuring costs that are included in Costs as Defined
2 Includes an approximate $43 million non-cash tax charge resulting from a revaluation of the Company's deferred tax asset in response to recent tax legislation for the three and twelve month periods ended January 31, 2018
3 Costs and expenses related to review of strategic alternatives, transitioning to ASG's global distribution and operations center, and a restructuring of ESG's Eagle Ford Geo region
4 Income taxes are calculated at each respective periods effective tax rate, with the exception of the three month period ending January 31, 2017 which is calculated at the year-end rate. The three and twelve month periods ended January 31, 2018 excludes the approximate $43 million non-cash tax charge
5 For purposes of this calculation, tax benefit of goodwill deduction is limited to income tax at current effective rate (excluding approximate $43 millllion non-cash tax charge)

KLX INC.
RECONCILIATION OF CONSOLIDATED OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
THREE MONTHS ENDED YEAR ENDED
January 31,
2018
January 31,
2017
January 31,
2018
January 31,
2017
Operating earnings$ 54.9 $ 35.2 $ 216.3 $ 129.4
Costs as Defined 1 6.2 0.8 6.2 0.8
Adjusted operating earnings 61.1 36.0 222.5 130.2
Depreciation and amortization 16.6 16.3 66.1 66.9
Non-cash compensation 2 6.1 5.5 25.4 20.2
Adjusted EBITDA$ 83.8 $ 57.8 $ 314.0 $ 217.3
RECONCILIATION OF AEROSPACE SOLUTIONS GROUP OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
THREE MONTHS ENDED YEAR ENDED
January 31,
2018
January 31,
2017
January 31,
2018
January 31,
2017
ASG operating earnings$ 57.3 $ 54.1 $ 238.5 $ 220.6
Costs as Defined 1 2.6 0.8 2.6 0.8
Adjusted ASG operating earnings 59.9 54.9 241.1 221.4
Depreciation and amortization 8.0 7.6 31.8 30.4
Non-cash compensation 3.2 3.0 13.9 11.2
Adjusted EBITDA$ 71.1 $ 65.5 $ 286.8 $ 263.0
RECONCILIATION OF ENERGY SERVICES GROUP OPERATING LOSS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
THREE MONTHS ENDED YEAR ENDED
January 31,
2018
January 31,
2017
January 31,
2018
January 31,
2017
ESG operating loss $ (2.4) $ (18.9) $ (22.2) $ (91.2)
Costs as Defined 1 3.6 - 3.6 -
Adjusted ESG operating earnings (loss) 1.2 (18.9) (18.6) (91.2)
Depreciation and amortization 8.6 8.7 34.3 36.5
Non-cash compensation 2 2.9 2.5 11.5 9.0
Adjusted EBITDA (loss)$ 12.7 $ (7.7) $ 27.2 $ (45.7)
RECONCILIATION OF NET CASH FLOW PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
(In Millions)
THREE MONTHS ENDED YEAR ENDED
January 31,
2018
January 31,
2017
January 31,
2018
January 31,
2017
Net cash flow provided by operating activities$ 66.1 $ 11.8 $ 206.6 $ 150.9
Capital expenditures (27.3) (1.6) (84.9) (35.5)
Free cash flow$ 38.8 $ 10.2 $ 121.7 $ 115.4
1 Costs and expenses related to strategic review, transitioning to ASG's global distribution and operations center, and a restructuring of ESG's Eagle Ford Geo region
2 Excludes approximately $1 million of ESG restructuring costs that are included in Costs as Defined

KLX INC.
RECONCILIATION OF 2018 OUTLOOK; NET EARNINGS
TO ADJUSTED NET EARNINGS AND ADJUSTED NET EARNINGS PER DILUTED SHARE
(In Millions, Except Per Share Data)
2018 Outlook
(Approximate Amounts)
Net earnings $ 147
Amortization expense 19
Non-cash compensation 21
Income taxes 50
New facility transition costs 20
Adjusted earnings before tax expense 257
Income taxes at estimated effective tax rate 65
Less: impact of goodwill deduction * 28
Adjusted income taxes 37
Adjusted net earnings $ 220
Adjusted net earnings
per diluted share $ 4.30
Diluted weighted average shares 51.2
* For purposes of this calculation, tax benefit of goodwill deduction is limited to income taxes at the estimated effective tax rate

KLX INC.
RECONCILIATION OF 2018 OUTLOOK; CONSOLIDATED OPERATING EARNINGS
TO ADJUSTED OPERATING EARNINGS AND ADJUSTED EBITDA
(In Millions)
2018 Outlook
(Approximate Amounts)
Operating earnings$ 273
New facility transition costs 20
Adjusted operating earnings 293
Depreciation and amortization 76
Non-cash compensation 21
Adjusted EBITDA$ 390


CONTACT:

Michael Perlman
Director, Investor Relations
KLX Inc.
(561) 791-5435

Source:KLX Inc.