10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________________

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2018

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________               

Commission File No. 001-35253

WESCO AIRCRAFT HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-5441563
(State of Incorporation)	(I.R.S. Employer Identification Number)

24911 Avenue Stanford

Valencia, California 91355

(Address of Principal Executive Offices and Zip Code)

(661) 775-7200

(Registrant’s Telephone Number, Including Area Code)

Securities Registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	New York Stock Exchange

Securities Registered pursuant to Section 12(g) of the Act: None

___________________________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesx  No¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx  No¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx  No¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	o	Non-accelerated filer	o
Smaller reporting company	o			Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

As of March 29, 2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates based on the closing price as of that day was approximately $669,796,000.

The number of shares of common stock (par value $0.001 per share) of the registrant outstanding as of November 8, 2018, was 99,557,885.

Documents Incorporated by Reference

Part III of this Annual Report on Form 10-K incorporates by reference certain information from the registrants’ definitive proxy statement for the 2019 annual meeting of stockholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year end of September 30, 2018. With the exception of the sections of the definitive proxy statement specifically incorporated herein by reference, the definitive proxy statement is not deemed to be filed as part of this Annual Report on Form 10-K.

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	4
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	25
Item 4.	Mine Safety Disclosures	25
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 8.	Financial Statements and Supplementary Data	50
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	82
Item 9A.	Controls and Procedures	82
Item 9B.	Other Information	82
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	83
Item 11.	Executive Compensation	83
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	83
Item 13.	Certain Relationships and Related Transactions, and Director Independence	83
Item 14.	Principal Accounting Fees and Services	83
Part IV
Item 15.	Exhibits, Financial Statement Schedules	84
Item 16.	Form 10-K Summary	84
Signatures		85
Exhibit Index		87

CERTAIN DEFINITIONS

Unless otherwise noted in this Annual Report, the term “Wesco Aircraft” means Wesco Aircraft Holdings, Inc., our top-level holding company, and the terms “Wesco,” “the Company,” “we,” “us,” “our” and “our Company” mean Wesco Aircraft and its subsidiaries, including (1) Wesco Aircraft Hardware Corp. (Wesco Aircraft Hardware), which is our primary historical domestic operating company and the sole member of Haas Group International, LLC, which we acquired, along with Haas Group, Inc. (now Haas Group, LLC) and its direct and indirect subsidiaries (collectively, Haas), on February 28, 2014, and (2) Wesco Aircraft EMEA, Ltd. (Wesco Aircraft EMEA), which succeeded Wesco Aircraft Europe, Ltd. (Wesco Aircraft Europe) as our primary foreign operating company. References to “fiscal year” mean the year ending or ended September 30. For example, “fiscal year 2018” or “fiscal 2018” means the period from October 1, 2017 to September 30, 2018.

2

PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning Wesco and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of management, as well as assumptions made by, and information currently available to, management. Forward-looking statements may be accompanied by words such as “achieve,” “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “drive,” “estimate,” “expect,” “forecast,” “future,” “grow,” “improve,” “increase,” “intend,” “may,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside our control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following:

• general economic and industry conditions;

• conditions in the credit markets;

• changes in military spending;

• risks unique to suppliers of equipment and services to the U.S. government;

• risks associated with the loss of significant customers, a material reduction in purchase orders by significant customers or the delay, scaling back or elimination of significant programs on which we rely;

• our ability to effectively compete in our industry;

• risks associated with our long-term, fixed-price agreements that have no guarantee of future sales volumes;

• our ability to effectively manage our inventory;

• our suppliers’ ability to provide us with the products we sell in a timely manner, in adequate quantities and/or at a reasonable cost, while also meeting our customers' quality standards;

• our ability to maintain effective information technology (IT) systems and effectively implement our new warehouse management system (WMS);

• our ability to successfully execute and realize the expected financial benefits from our “Wesco 2020” initiative;

• our ability to retain key personnel;

• risks associated with our international operations, including exposure to foreign currency movements;

• changes in trade policies;

• risks associated with assumptions we make in connection with our critical accounting estimates (including goodwill, excess and obsolete inventory and valuation allowance of our deferred tax assets) and legal proceedings;

• changes in U.S. income tax law;

• our dependence on third-party package delivery companies;

• fuel price risks;

• fluctuations in our financial results from period-to-period;

• environmental risks;

3

• risks related to the handling, transportation and storage of chemical products;

• risks related to the aerospace industry and the regulation thereof;

• risks related to our indebtedness; and

• other risks and uncertainties.

The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect our business, including those described under Part I, Item 1A. “Risk Factors” and the other documents we file from time to time with the Securities and Exchange Commission (SEC). All forward-looking statements included in this Annual Report on Form 10-K (including information included or incorporated by reference herein) are based upon information available to us as of the date hereof, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 1.  BUSINESS

Company Overview

We are the world’s leading independent distributor and provider of comprehensive supply chain management services to the global aerospace industry, based on annual sales. Our services range from traditional distribution to the management of supplier relationships, quality assurance, kitting, just-in-time (JIT) delivery, chemical management services (CMS), third-party logistics (3PL) or fourth-party logistics (4PL) programs and point-of-use inventory management. We supply over 563,000 active stock-keeping units (SKUs), including C-class hardware, chemicals, electronic components, bearings, tools and machined parts. In fiscal 2018, sales of hardware including bearings and other products represented 50.9% of our net sales, sales of chemicals represented 41.8% of our net sales and sales of electronic components represented 7.3% of our net sales. We serve our customers under both (1) long-term contractual arrangements (Contracts), which include JIT contracts that govern the provision of comprehensive outsourced supply chain management services and long-term agreements (LTAs) that typically set prices for specific products, and (2) ad hoc sales. In February 2014, we acquired 100% of the outstanding stock of Haas, a provider of chemical supply chain management services to the commercial aerospace, airline, military, automotive, energy, pharmaceutical and electronics sectors.

Founded in 1953 by the father of our current Chairman of the Board of Directors, we have grown to serve over 7,000 customers, which are primarily in the commercial, military and general aviation sectors, including the leading original equipment manufacturers (OEMs) and their subcontractors, through which we support nearly all major Western aircraft programs, and also sell products to airline-affiliated and independent maintenance, repair and overhaul (MRO) providers. We also service customers in the automotive, energy, health care, industrial, pharmaceutical and space sectors. We have 3,069 employees and operate across 56 locations in 17 countries. The following charts illustrate the composition of our fiscal year 2018 net sales based on our sales data.

4

Our Products and Services

Our Products

We offer more than 563,000 active SKUs, which fall into the following product categories during the year ended September 30, 2018 (dollars in thousands):

		Hardware		Chemicals		Electronic Components		Bearings		Machined Parts and Tooling
Net product sales		$732,892		$656,959		$114,875		$36,212		$29,512
% of net product sales		46.7%		41.8%		7.3%		2.3%		1.9%
Types of products offered	•	Blind fasteners	•	Adhesives Sealants	•	Connectors	•	Airframe control	•	Brackets
	•	Panel fasteners		and tapes	•	Relays		bearings	•	Milled parts
	•	Bolts and screws	•	Lubricants	•	Switches	•	Rod ends	•	Shims
	•	Clamps	•	Oil and grease	•	Circuit breakers	•	Spherical Bearings	•	Stampings
	•	Hi lok pins and	•	Paints and coatings	•	Lighted products	•	Ball bearing	•	Turned parts
		collars	•	Industrial gases	•	Wire and cable	•	Needle roller	•	Welded assemblies
	•	Hydraulic fittings	•	Coolants and	•	Interconnect		bearings	•	Installation/
	•	Inserts		metalworking fluids		accessories	•	Bushings		removal tooling
	•	Lockbolts and	•	Cleaners and			•	Precision bearings
		collars		cleaning solvents
	•	Nuts
	•	Rivets
	•	Springs
	•	Valves
	•	Washers

Hardware

Sales of C-class aerospace hardware represented 47%, 47% and 48% of our fiscal 2018, 2017 and 2016 product sales, respectively. Fasteners, our largest category of hardware products, include a wide range of highly engineered aerospace parts that are designed to hold together two or more components, such as rivets (both blind and solid), bolts (including blind bolts), screws, nuts and washers. Many of these fasteners are designed for use in specific aircraft platforms and others can be used across multiple platforms. Materials used in the manufacture of these fasteners range from standard alloys, such as aluminum, steel or stainless steel, to more advanced materials, such as titanium, Inconel and Waspaloy.

Chemicals

Chemical sales represented 42%, 42% and 41% of our fiscal 2018, 2017 and 2016 product sales, respectively. Our chemical product offerings include adhesives; sealants and tapes; lubricants; oil and grease; paints and coatings; industrial gases; coolants and metalworking fluids; and cleaners and cleaning solvents.

Electronic Components

We offer highly reliable interconnect and electro-mechanical products, including connectors, relays, switches, circuit breakers, lighted products, wire and cable and interconnect accessories. We also offer value-added assembled products including mil-circular and rack and panel connectors and illuminated push button switches. We maintain large quantities of connector components in inventory, which allows us to respond quickly to customer orders. In addition, our lighted switch assembly operation affords customers same day service, including engraving capabilities in multiple languages.

Bearings

Our product offering includes a variety of standard anti-friction products designed to both commercial and military aircraft specifications, such as airframe control bearings, rod ends, spherical bearings, ball bearings, needle roller bearings, bushings and precision bearings.

5

Machined Parts and Tooling

Machined parts are designed for a specific customer and are assigned unique OEM-specific SKUs. The machined parts we distribute include laser cut or stamped brackets, milled parts, shims, stampings, turned parts and welded assemblies made of materials ranging from high-grade steel or titanium to nickel based alloys.

We stock a full range of tools needed for the installation and removal of many of our products, including air and hydraulic tools as well as drill motors, and we also offer factory authorized maintenance and repair services for these tools. In addition to selling these tools, we also rent or lease these tools to our customers.

Our Services

In addition to our traditional distribution services, we have developed innovative value-added services, such as quality assurance, kitting, JIT supply chain management, CMS and 3PL/4PL programs for our customers.

Quality Assurance

Our quality assurance (QA) function is a key component of our service offering, with approximately 6% of our employees dedicated to this area. We believe we offer an industry-leading QA function as a result of our rigorous processes, sophisticated testing equipment and dedicated QA staff. Our superior QA performance is demonstrated by a comparison of our customers’ aggregate rejection rate of the products we deliver, which was 0.09% during fiscal 2018, to our rejection rate of the products we receive from our suppliers, which was 2.97% during fiscal 2018.

Our QA department inspects the inventory we purchase to ensure the accuracy and completeness of documentation. For many of our customers, these inspections are conducted at our in-house laboratory, where we operate sophisticated testing equipment. We also maintain an electronic copy of the relevant certifications for the inventory, which can include a manufacturer certificate of conformance, test reports, process certifications, material distributor certifications and raw material mill certifications. Our industry-leading QA capabilities also allow our JIT customers to reduce the number of personnel dedicated to the QA function and reduce the delays caused by the rejection of improperly inspected products.

Kitting

Kitting involves the packaging of an entire bill of materials or a complete “ship-set” of products, which reduces the amount of time workers spend retrieving products from storage locations. Kits can be customized in varying configurations and sizes and can contain up to several hundred different products. All of our kits and components contain fully certified and traceable products and are assembled by our full-service kitting department at our Central Stocking Locations (CSLs), or at our customer sites.

JIT Supply Chain Management and CMS

JIT supply chain management, which includes CMS, involves the delivery of products on an as-needed basis to the point-of-use at a customer’s manufacturing line. JIT programs are designed to prevent excess inventory build-up and shortages and improve manufacturing efficiency. Each JIT contract requires us to maintain an efficient inventory tracking, analysis and replenishment program and is designed to provide high levels of stock availability and on-time delivery. We believe customers that utilize our comprehensive JIT supply chain management services are frequently able to realize significant benefits including:

• reduced inventory levels and lower inventory excess and obsolescence (E&O) expense, in part because such customers only purchase what they need, and make more efficient use of their floor space;

• increased accuracy in forecasting and planning, resulting in substantially improved on-time delivery, reduced expediting costs and fewer disruptions of production schedules;

• improved quality assurance resulting in a substantial reduction in customer product rejection rates; and

• reduced administrative and overhead costs relating to procurement, QA, supplier management and stocking functions.

Before signing a JIT contract, our customers typically experience outages of many SKUs and, in some cases, have up to a year’s worth of inventory on hand for other SKU’s. As part of our JIT programs, we generally assume custody of the customer’s existing inventory at the onset of the contract, immediately reducing their management of their physical inventory on-hand with lower costs. Customer inventory is generally assumed on a consignment basis and is entered in our perpetual

6

inventory system in a distinct customer-specific “virtual warehouse.” Software protocol in our IT systems requires the system to first “look” to a customer’s consigned inventory when parts replenishment is required. In certain cases, we can sell this consigned inventory to our base of over 7,000 other active customers around the world, gradually drawing down the customer’s inventory. As the consigned inventory for each SKU is exhausted, our stock of Wesco-sourced product is then used for replenishment.

Another key strength of our JIT programs is our ability to utilize highly scalable and customizable point-of-use systems to develop an efficient supply chain management system and automated replenishment solution for any number of SKUs. In order to minimize inventory on hand, certain indicators are used to trigger the replenishment of product, with all replenishment activity done via hand-held scanners that transmit orders to our stocking locations.

In certain circumstances, we also provide our JIT and CMS customers with additional value-added services, including the implementation of process control and usage reduction programs; safety data-sheet management, support for environmental, health and safety compliance (EHS) and reporting; and assistance with the development of waste management strategies.

Customers are also increasingly seeking 3PL or 4PL arrangements to optimize supply chain management by outsourcing either specific logistics and distribution functions or their entire logistics function to a service provider like us.

Aftermarket Sales

We sell products to airline-affiliated, OEM-affiliated and independent MRO providers on both a Contract and ad hoc basis. We have expanded our efforts to increase our presence in both the commercial and military aerospace MRO markets, particularly as a result of our acquisition of Haas in 2014 and through the introduction of our Wesco e-commerce sales platform, which we believe provides us with a cost-effective way to further penetrate the aftermarket. In addition, we have targeted domestic and international airlines and maintenance centers that we believe are assuming an expanded role within the MRO market.

Going forward, we expect commercial MRO providers to benefit from many of the same trends as those impacting the commercial OEM market, including industry passenger volumes and capacity utilization, as well as requirements to maintain aging aircraft and the cost of fuel, which can lead to greater utilization of existing planes. The commercial MRO market may also benefit from directives or notifications announced by international industry regulators and trade associations. Such directives or notifications can serve to bolster required maintenance, and thus the demand for new and existing aerospace products. Furthermore, we expect demand in the military MRO market to be driven by changes in overall fleet size and the level of U.S. military operational activity domestically and overseas. We believe that our presence in this market helps us mitigate the volatility of new military aircraft sales with sales to the aftermarket.

Customer Contracts

We sell products to our customers under two types of arrangements: (1) Contracts, which include JIT supply chain management contracts and LTAs, and (2) ad hoc sales.

Contracts

JIT Contracts.  JIT contracts, which include CMS contracts, are typically three to five years in length and are structured to supply the product requirement for specific SKUs, production lines or facilities. Given our direct involvement with JIT customers, volume requirements and purchasing frequency under these contracts is highly predictable. Under JIT contracts, customers commit to purchase specified products from us at a fixed price or a pass-through price, on an as needed basis, and we are often responsible for maintaining high levels of stock availability of those products. JIT contracts typically contain termination for convenience provisions, which generally allow our customers to terminate their contracts on short notice without meaningful penalties and often provide for us to be reimbursed for the cost of any inventory specifically procured for the customer or inventory that is not commonly sold to our other customers. JIT customers often purchase products from us that are not covered under their contracts on an ad hoc basis. For additional information about our JIT supply chain management services, see “-Our Products and Services-Our Services-JIT Supply Chain Management and CMS.”

LTAs.  Like JIT contracts, LTAs also typically run for three to five years. LTAs are essentially negotiated price lists for customers or individual customer sites that cover a range of pre-determined products, purchased on an as-needed basis. LTAs allow the customer to buy contracted SKUs from us and may obligate us to maintain stock availability for those products. Once an LTA is in place, the customer is then able to place individual purchase orders with us for any of the contractually specified products. LTAs typically contain termination for convenience provisions, which generally allow for our customers to terminate

7

their contracts on short notice without meaningful penalties and often provide that we are reimbursed for the cost of any inventory specifically procured for the customer or inventory that is not commonly sold to other customers. LTA customers also frequently purchase products from us on an ad hoc basis, which are not captured under the contractual pricing arrangement.

Ad Hoc Sales

Ad hoc sales represent products purchased from us on an as-needed basis and are generally supplied out of our existing inventory. Typically, ad hoc orders are for smaller quantities of products than those ordered under Contracts, and are often urgent in nature. Given our breadth and volume of inventory, it is not uncommon for even our competitors to purchase products from us on an ad hoc basis when their own stocks prove to be inadequate. In an environment of increasing aircraft production and oftentimes relatively long supplier lead-times, product shortages can become increasingly common for OEMs, subcontractors, MRO providers and distributors with less sophisticated forecasting abilities and procurement organizations.

Under each of the sales arrangements described above we typically warrant that the products we sell conform to the drawings and specifications that are in effect at the time of delivery in the applicable contract, and that we will replace defective or non-conforming products for a period of time that varies from contract to contract. We, in turn, look to the product manufacturer to indemnify us for liabilities resulting from defective or non-conforming products. We do not accrue for warranty expenses as our claims related to defective and non-conforming products have been nominal.

Backlog

We believe that sales backlog is not a relevant measure of our business, given the long-term nature of our Contracts with our customers.

Customers

We sell to over 7,000 active customers worldwide. During fiscal 2018, Lockheed Martin represented approximately 11% of our total net sales, consisting of multiple contracts across multiple independent programs such that no individual contract is material. Our top 10 customers collectively accounted for 49% of our total net sales during fiscal 2018.

During fiscal 2018, 76% of our net sales were derived from major OEMs, such as Airbus, Boeing, BAE Systems, Bell Helicopter, Bombardier, Cessna, Embraer, Gulfstream, Lockheed Martin, Northrop Grumman and Raytheon, and many of their subcontractors. Government sales comprised 14% of our net sales during fiscal 2018 and were derived from various military parts procurement agencies such as the U.S. Defense Logistics Agency, or from defense contractors buying on their behalf. Aftermarket sales to airline-affiliated or independent MRO providers made up 5% of our fiscal 2018 net sales. The remaining 5% of our net sales were to other distributors.

During fiscal 2018, 55% of our net sales were derived from customers supporting commercial programs and 45% of our net sales were derived from customers supporting military programs. We also service international customers in markets that include Australia, Canada, China, France, Germany, India, Ireland, Israel, Italy, Malaysia, Mexico, Philippines, Poland, Saudi Arabia, Singapore, South Korea, Turkey and the United Kingdom. For additional information about our net sales and long-lived assets by geographic area, see Note 20 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Procurement

We source our inventory from over 6,000 suppliers globally, including Amphenol, Arconic, Consolidated Aerospace Manufacturing (CAM), Esterline, Henkel, Lisi Aerospace, PRC Desoto, Precision Castparts Corp., TriMas, and 3M. During fiscal 2018, Precision Castparts Corp. and Arconic supplied 12% and 8%, respectively, of the products we purchased. Suppliers typically prefer to deal with a relatively small number of large and sophisticated distributors in order to improve production efficiency; reduce finished goods inventory and related obsolescence costs; maintain pricing discipline; improve performance in meeting on-time-delivery targets to the end customers; and consolidate customer accounts, which can reduce administrative and overhead costs relating to sales and marketing, customer service and other functions. As a result of our size and our long-standing relationships with many of our suppliers, we are often able to take advantage of significant volume-based discounts when purchasing inventory. Given our industry position and close cooperation with suppliers, we believe that we are in an excellent position to become a distributor for new product lines as they become available.

Our management analyzes supply, demand, cost and pricing factors to make inventory investment decisions, which are facilitated by our highly customized IT systems, and we maintain close relationships with the leading suppliers in the industry.

8

Our strong understanding of the global aerospace industry is derived from our long-term relationships with major OEMs, subcontractors and suppliers. In addition, our direct insight into our customers’ production rates often allows us to detect industry trends. Furthermore, our ability to forecast demand, share inventory and usage information, and place purchase orders with our suppliers well in advance of our customer requirements can provide us with a distinct advantage in an industry where inventory availability is critical for customers that need specific products within a stipulated timeframe to meet their own production and delivery commitments. However, despite our expertise in this area, effective inventory management is an ongoing challenge, and we continue to take steps to enhance the effectiveness of our procurement practices and mitigate the negative impact of inventory builds on our cash flow. For additional information about the impact of inventory on our business, including our cash flows, see Part I, Item 1A. “Risk Factors-Risks Related to Our Business and Industry-We may be unable to effectively manage our inventory, which could have a material adverse effect on our business, financial condition and results of operations,” Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Other Factors Affecting Our Financial Results-Fluctuations in Cash Flow,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates-Inventories.”

Information Technology Systems

We have invested to build integrated, highly customized IT systems that enable our purchasing and sales organizations to make more informed decisions, our inventory management system to operate in an efficient manner and certain of our customers to make online purchases directly from us. Our primary scalable IT infrastructure is based on IBM and Oracle hardware and applications including the Oracle JD Edwards EnterpriseOne (JDE) enterprise resource planning (ERP) system and our proprietary chemical supply chain management system, tcmIS®, which was developed on the Oracle Enterprise database. These customized IT systems provide us visibility into quantities, stocking locations and purchases across our customer base by individual inventory item, enabling us to accurately fill an average of 16,000 orders per day and provide an exceptional level of customer service. These systems are fully capable of interfacing with external enterprise business systems. Additionally, we have developed functionality for JIT delivery, which can integrate directly into our customers’ manufacturing process. This functionality includes recognition of signals and actions to fill customer bins from hand-held scanners, min/max data or proprietary signals from a customer’s ERP system. JDE and tcmIS® also support our EDI functionality, which allows our system to interface with customers and suppliers, regardless of technology, data format or connectivity. tcmIS® also supports additional chemical-specific functionality, such as product labeling and Global Harmonized System compliance. We also continue to invest in our infrastructure and cyber-defense capabilities to enhance both availability and data protection.

For our shipping logistics and export compliance support, we employ Precision Software’s TRA/X. TRA/X enables us to ship globally while maintaining tracking numbers and rating information for each customer shipment. In addition, at several of our distribution facilities, we use Minerva’s AIMS inventory management system to provide the best possible warehouse flow and cycle times. AIMS is tailored to fit our global warehouse operational needs and allows us to provide an expandable warehouse management system that can also incorporate transaction processing, work-in-progress and other manufacturing operations. AIMS interfaces with a broad range of material handling equipment, including horizontal and vertical carousels, conveyors, sorting equipment, pick systems and cranes.

Going forward, we will continue to evaluate our IT infrastructure and expect to undertake efforts to modernize our capabilities, particularly through investments in additional state of the art software and hardware that is designed to improve our ability to service our customers.

Seasonality

Our net sales may fluctuate quarterly based on the number of production days at our customers' facilities, which is driven by holidays and planned production shutdowns, particularly the winter holidays during our first fiscal quarter and the summer months during our fourth fiscal quarter.

Competition

The industry in which we operate is highly competitive and fragmented. We believe the principal competitive factors in our industry include the ability to provide superior customer service and support, on-time delivery, sufficient inventory availability, competitive pricing and an effective QA program. Our competitors include both U.S. and foreign companies, including divisions of larger companies and certain of our suppliers, some of which have significantly greater financial resources than we do, and therefore may be able to adapt more quickly to changes in customer requirements than we can. In addition to facing competition for Contract customers from our primary competitors, Contract customers or potential Contract customers may also determine that it is more cost effective to establish or re-establish an in-house supply chain management

9

capability. Under these circumstances, we may be unable to sufficiently reduce our costs to provide competitive pricing while also maintaining acceptable operating margins.

Employees

As of September 30, 2018, we employed 3,069 personnel worldwide, 1,035 of whom were located at customer sites. We have 839 employees located outside of North America. We are not a party to any collective bargaining agreements with our employees.

Regulatory Matters

Governmental agencies throughout the world, including the U.S. Federal Aviation Administration (FAA), prescribe standards for aircraft components, including virtually all commercial airline and general aviation products, as well as regulations regarding the repair and overhaul of airframes and engines. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. In addition, the products we distribute must also be certified by aircraft and engine OEMs. If any of the material authorizations or approvals that allow us to supply products is revoked or suspended, then the sale of the related products would be prohibited by law, which would have an adverse effect on our business, financial condition and results of operations.

From time to time, the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations, which are usually more stringent than existing regulations. If these proposed regulations are adopted and enacted, we could incur significant additional costs to achieve compliance, which could have a material adverse effect on our business, financial condition and results of operations.

We are also subject to government rules and regulations that include the U.S. Foreign Corrupt Practices Act (FCPA), the Bribery Act 2010 (Bribery Act), the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), economic sanctions and the False Claims Act. See “Risk Factors-Risks Related to Our Business and Industry-We are subject to unique business risks as a result of supplying equipment and services to the U.S. government directly and as a subcontractor, which could lead to a reduction in our net sales from, or the profitability of our supply arrangements with, the U.S. government” and “-Our international operations require us to comply with numerous applicable anti-corruption and trade control laws and regulations, including those of the U.S. government and various other jurisdictions, and our failure to comply with these laws and regulations could adversely affect our reputation, business, financial condition and results of operations.”

Environmental Matters

We are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment and human health and safety, and the handling, transportation, storage, treatment, disposal and remediation of hazardous substances, including potentially with respect to historical chemical blending and other activities that pre-dated our purchase of Haas. Actual or alleged violations of EHS laws or permit requirements could result in restrictions or prohibitions on operations and substantial civil or criminal sanctions, as well as, under some EHS laws, the assessment of strict liability and/or joint and several liability.

Furthermore, we may be liable for the costs of investigating and cleaning up environmental contamination on or from our operations or at off-site locations, including potentially with respect to historical chemical blending and other activities that pre-dated our purchase of our businesses. We may therefore incur additional costs and expenditures beyond those currently anticipated to address all such known and unknown situations under existing and future EHS laws.

In addition, governmental, regulatory and societal demands for increasing levels of product safety and environmental protection are resulting in increased pressure for more stringent regulatory control with respect to the chemical industry. The European Union’s Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) regulations enacted in 2009 have been a continuing source of compliance obligations and restrictions on certain chemicals, and REACH-like regimes have now been adopted in several other countries. In the United States, the core provisions of the Toxic Substances Control Act (TSCA) were amended in June 2016 for the first time in nearly 40 years. Among the more significant changes are that these amendments mandate safety reviews of existing “high priority” chemicals and regulatory action to control any “unreasonable risks” identified as result of such reviews. The Environmental Protection Agency (EPA) also now must make a no “unreasonable risk” finding before a new chemical can be fully commercialized. These new mandates create uncertainty about whether existing chemicals of importance to our business may be designated for restriction and whether the new chemical approval process may become more difficult and costly to comply with. These types of changes in the Company’s regulatory

10

environment, particularly, but not limited to, in the United States, the European Union, Canada and China, could lead to heightened regulatory scrutiny and could adversely impact our ability to supply certain products and provide supply chain management services to our customers. Such changes also could result in compliance obligations for us directly or as part of our supply chain management services to customers, fines, ongoing monitoring and other future business activity restrictions, which could have a material adverse effect on the Company’s liquidity, financial position and results of operations. Finally, we have in the past sold products containing per-and polyfluoroalkyl substances (PFAS), including perfluorooctanoic acid (PFOA). Certain PFAS, including PFOA, have been targeted for risk assessment, restriction, and high priority remediation and have been the subject of ongoing and substantial litigation in the both the U.S. and European Union. We have not received any claims or enforcement actions from governments or third parties relating to PFOA or any other PFAS.

Available Information

We file annual, quarterly and current reports and other information with the SEC. The SEC maintains an Internet website (www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including us. You may also access, free of charge, our reports filed with the SEC (for example, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any amendments to those forms) through the “Investor Relations” portion of our website (www.wescoair.com). We also make available on our website our (1) Corporate Governance Guidelines, (2) Code of Business Conduct and Ethics, which applies to our directors, officers and employees, (3) Whistleblower Policy and (4) the charters of the Audit, Compensation and Nominating and Corporate Governance Committees. Reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they are filed with or furnished to the SEC. Our website is included in this Annual Report as an inactive textual reference only. The information found on our website is not part of this or any other report filed with or furnished to the SEC.

ITEM 1A.  RISK FACTORS

You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this Annual Report, including our consolidated financial statements and related notes. The risks described below are not the only ones facing us. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations. This Annual Report also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

Risks Related to Our Business and Industry

We are directly dependent upon the condition of the aerospace industry, which is closely tied to global economic conditions, and if the aerospace industry or the U.S. or global economy were to experience a recession, our business, financial condition and results of operations could be negatively impacted.

Demand for the products and services we offer are directly tied to the delivery of new aircraft, aircraft utilization, and repair of existing aircraft, which, in turn, are impacted by global economic conditions. For example, 2009 revenue passenger miles (RPMs) on commercial aircraft declined due to the global recession. During the same period, the industry experienced declines in large commercial, regional and business jet deliveries. A slowdown in the global economy, or a return to a recession, would negatively impact the aerospace industry, and could negatively impact our business, financial condition and results of operations.

Military spending, including spending on the products we sell, is dependent upon national defense budgets, and a reduction in military spending could have a material adverse effect on our business, financial condition and results of operations.

During the year ended September 30, 2018, 45% of our net sales were related to military aircraft. The military market is significantly dependent upon government budget trends, particularly the U.S. Department of Defense (DoD) budget. Future DoD budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy by the current and future presidential administrations and Congress, the U.S. government’s budget deficits, spending priorities, the cost of sustaining the U.S. military presence in overseas operations and possible political pressure to reduce U.S. Government military spending, each of which could cause the DoD budget to decline. A decline in U.S. military expenditures could result in a reduction in military aircraft production, which could have a material adverse effect on our business, financial condition and results of operations.

11

In particular, military spending may be negatively impacted by the Budget Control Act of 2011 (the Budget Control Act), which was passed in August 2011. The Budget Control Act established limits on U.S. government discretionary spending, including a reduction of defense spending by approximately $490 billion between the 2012 and 2021 U.S. government fiscal years, and also provided that the defense budget would face “sequestration” cuts of up to an additional $500 billion during that same period to the extent that discretionary spending limits were exceeded. The impact of sequestration was reduced with respect to the government’s 2014 and 2015 fiscal years, in exchange for extending sequestration into fiscal years 2022 and 2023, following the enactment of the Bipartisan Budget Act of 2013 in December 2013. The impact of sequestration was further reduced with respect to the government’s 2016 and 2017 fiscal years, following the enactment of the Bipartisan Budget Act of 2015 in November 2015 and with respect to the government’s 2018 and 2019 fiscal years, following the enactment of the Bipartisan Budget Act of 2018 in February 2018. Sequestration is currently scheduled to resume in the government’s 2020 fiscal year. We are unable to predict the impact that the cuts associated with sequestration will ultimately have on funding for the military programs which we support. However, such cuts could result in reductions, delays or cancellations of these programs, which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to unique business risks as a result of supplying equipment and services to the U.S. government directly and as a subcontractor, which could lead to a reduction in our net sales from, or the profitability of our supply arrangements with, the U.S. government.

Companies engaged in supplying defense-related equipment and services to U.S. government agencies are subject to business risks specific to the defense industry. We contract directly with the U.S. government and are also a subcontractor to customers contracting with the U.S. government. Accordingly, the U.S. government may unilaterally suspend or prohibit us from receiving new contracts pending resolution of alleged violations of procurement laws or regulations, revoke required security clearance, reduce the value of existing contracts or audit our contract-related costs and fees. In addition, most of our U.S. government contracts and subcontracts can be terminated by the U.S. government or the contracting party, as applicable, at its convenience. Termination for convenience provisions provide only for our recovery of costs incurred or committed, settlement expenses and profit on the work completed prior to termination.

In addition, we are subject to U.S. government inquiries and investigations, including periodic audits of costs that we determine are reimbursable under government contracts. U.S. government agencies routinely audit government contractors to review performance under contracts, cost structure and compliance with applicable laws, regulations, and standards, as well as the adequacy of and compliance with internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be misclassified or inaccurately allocated to a specific contract are not reimbursable, and to the extent already reimbursed, must be refunded. Also, any inadequacies in our systems and policies could result in payments being withheld, penalties and reduced future business.

Government rules require contracting officers to impose contractual withholdings at no less than certain minimum levels if a contracting officer determines that one or more of a contractor’s business systems have one or more significant deficiencies. If a contracting officer were to impose such a withholding on us or even one of our prime contractors, it would increase the risk that we would not be paid in full or paid timely. If future audit adjustments exceed our estimates, our profitability could be adversely affected.

If a government inquiry or investigation uncovers improper or illegal activities, we could be subject to civil or criminal penalties or administrative sanctions, including contract termination, fines, forfeiture of fees, suspension of payment and suspension or debarment from doing business with U.S. government agencies, any of which could materially adversely affect our reputation, business, financial condition and results of operations.

We are also subject to the federal False Claims Act, which provides for substantial civil penalties and treble damages where a contractor presents a false or fraudulent claim to the government for payment. Actions under the False Claims Act may be brought by the government or by other persons on behalf of the government (who may then share in any recovery).

If we lose significant customers, significant customers materially reduce their purchase orders or significant programs on which we rely are delayed, scaled back or eliminated, our business, financial condition and results of operations may be adversely affected.

Our top ten customers for the year ended September 30, 2018 accounted for 49% of our net sales. A reduction in purchasing by or loss of one of our larger customers for any reason, including changes in manufacturing or procurement practices, loss of a customer as a result of the acquisition of such customer by a purchaser who does not fully utilize a distribution model or uses a competitor, in-sourcing by customers, a transfer of business to a competitor, an economic

12

downturn, failure to adequately service our clients or to manage the implementation of new customer sites, decreased production or a strike, could have a material adverse effect on our business, financial condition and results of operations.

As an example of changes in manufacturing practices that could impact us, OEMs such as Boeing and Airbus have incorporated a higher proportion of composite materials in some of the aircraft they manufacture. Aircraft utilizing composite materials generally require the use of significantly fewer C-class aerospace parts than new aircraft made of more traditional non-composite materials, although the parts used are generally higher priced than C-class aerospace parts used in non-composite aircraft structures. To the extent Boeing, Airbus and other customers increase their reliance on composite materials, they may materially reduce their purchase orders from us.

As an example of the potential loss of business due to customer in-sourcing, a major OEM is undertaking an initiative to cause its first and second tier suppliers to source certain OEM-specific materials, including fasteners, directly from the OEM itself, rather than through distributors such as us. If such initiative is broadly implemented by the OEM, or if other OEMs pursue similar initiatives, a portion of our sales to their suppliers, and consequently our business, financial condition and results of operations, could be adversely affected.

In addition, major OEMs have recently indicated that they are pursuing initiatives to increase the services portion of their business. These initiatives could lead to greater in-sourcing on the part of the OEMs, which could adversely affect a portion of our sales to the OEMs and their suppliers.

We expect to derive a significant portion of our net sales from certain aerospace programs in their early production stages. Our future growth will be dependent, in part, upon our sales to various OEMs and subcontractors as related to such programs. If production of any of the programs we support is terminated or delayed, or if our sales to customers affiliated with these programs are reduced or eliminated, our business, financial condition and results of operations could be adversely affected.

We operate in a highly competitive market and our failure to compete effectively may negatively impact our results of operations.

We operate in a highly competitive global industry and compete against a number of companies, including divisions of larger companies and certain of our suppliers, some of which may have significantly greater financial resources than we do and therefore may be able to adapt more quickly to changes in customer requirements than we can. Our competitors consist of both U.S. and foreign companies and range in size from divisions of large public corporations to small privately held entities. We believe that our ability to compete depends on superior customer service and support, on-time delivery, sufficient inventory availability, competitive pricing and effective quality assurance programs. To remain competitive, we may have to adjust the prices of some of the products and services we sell and continue investing in our procurement, supply-chain management and sales and marketing functions, the costs of which could negatively impact our results of operations.

In addition, we face competition for our Contract customers from both competitors in our industry (including OEMs who are increasing the services portion of their business) and the in-sourcing of supply-chain management by our customers themselves. If any of our Contract customers decides to in-source the services we provide or switches to one of our competitors, we would be adversely affected.

We do not have guaranteed future sales of the products we sell and when we enter into Contracts with our customers we generally take the risk of certain cost increases, and our business, financial condition, results of operations and operating margins may be negatively affected if we purchase more products than our customers require, product costs increase unexpectedly, we experience high start-up costs on new Contracts or our Contracts are terminated.

A majority of our Contracts are long-term, fixed-price agreements with no guarantee of future sales volumes, and they may be terminated for convenience on short notice by our customers, often without meaningful penalties, and often provide that we are reimbursed for the cost of any inventory specifically procured for the customer or inventory that is not commonly sold to our other customers. In addition, we purchase inventory based on our forecasts of anticipated future customer demand. As a result, we may take the risk of having excess inventory if our customers do not place orders consistent with our forecasts, particularly with respect to inventory that has a more limited shelf-life. Also, even though we often enter into long-term pricing agreements with our suppliers, we do run the risk of not being able to pass along or otherwise recover unexpected increases in our product costs, including as a result of commodity price increases and tariffs, which may increase above our established prices at the time we entered into the Contract and established prices for products we provide. When we are awarded new Contracts, particularly JIT contracts, we may incur high costs, including salary and overtime costs, to hire and train on-site personnel, in the start-up phase of our performance. In the event that we purchase more products than our customers require,

13

product costs increase unexpectedly, we experience high start-up costs on new Contracts or our Contracts are terminated, our business, financial condition, results of operations and operating margins could be negatively affected.

We may be unable to effectively manage our inventory, which could have a material adverse effect on our business, financial condition and results of operations.

Due to the lead times required by many of our suppliers, we typically order products, particularly hardware products, in advance of expected sales, and the volume of such orders may be significant. Lead times generally range from several weeks up to two years, depending on industry conditions, which makes it difficult to successfully manage our inventory as we plan for future demand. In addition, demand for our products can fluctuate significantly, which can also negatively impact our cash flows and inventory level. For example, in the three months ended September 30, 2015, we determined that inventory previously purchased in connection with a specific program that was subsequently terminated had no alternative use, and we recorded a provision to write-down such inventory by $33.0 million.

If suppliers are unable to supply us with the products we sell in a timely manner, inadequate quantities and/or at a reasonable cost, while also meeting our customers' quality standards, we may be unable to meet the demands of our customers, which could have a material adverse effect on our business, financial condition and results of operations.

Our inventory is primarily sourced directly from producers and manufacturing firms, and we depend on the availability of large supplies of the products we sell, which must also meet our customers' quality standards. Our largest suppliers for the year ended September 30, 2018 were Precision Castparts Corp. and Arconic. During fiscal 2018, 12% of the products we purchased were from Precision Castparts Corp. and 8% were purchased from Arconic. In addition, our ten largest suppliers during fiscal 2018 accounted for 40% of our purchases. These manufacturers and producers may experience capacity constraints that result in their being unable to supply us with products in a timely manner, in adequate quantities and/or at a reasonable cost. Contributing factors to manufacturer capacity constraints include, among other things, industry or customer demands in excess of manufacturing capacity, labor shortages and changes in raw material flows. In addition, changes in trade policies, such as the imposition of additional tariffs on certain products imported into the United States, could result in increased procurement costs. Any significant interruption in the supply of these products or termination of our relationship with any of our suppliers could result in us being unable to meet the demands of our customers, which would have a material adverse effect on our business, financial condition and results of operations.

Our business is highly dependent on complex information technology and our business and operations could suffer in the event of cyber-security breaches.

The provision and application of IT is an increasingly critical aspect of our business. Among other things, our IT systems must frequently interact with those of our customers, suppliers and logistics providers. Our future success will depend on our continued ability to employ IT systems that drive operational efficiency and meet our customers’ demands. The failure or disruption of the hardware or software that supports our IT systems, including redundancy systems, could significantly harm our ability to service our customers and cause economic losses for which we could be held liable and which could damage our reputation. In addition, we are subject to the risk of cyber-security attacks, which includes, but is not limited to, malicious software, ransomware or terrorists attacks, unauthorized attempts to gain access to sensitive, confidential or otherwise protected information related to us, our customers and our suppliers and other cyber-security breaches. A cyber-related attack could cause a loss of data and interruptions or delays in our business (particularly with respect to our tcmIS® operating system), cause us to incur remediation costs, subject us to claims and damage our reputation. In addition, the failure or disruption of our IT systems, communications or utilities, or those of third parties on which we rely, could cause us to interrupt or suspend our operations or otherwise adversely affect our business. Our property and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption which could have a material adverse effect on our business, results of operations and financial condition. In addition, system improvements and other IT-related upgrades could require us to accelerate the depreciation of certain assets, which could have a material adverse effect on our operating results.

Our competitors may have or may develop IT systems that permit them to be more cost effective and otherwise better able to meet customer demands than we are able to with IT systems we are able to acquire or develop. Larger competitors may be able to develop or license IT systems more cost effectively than we can by spreading the cost across a larger revenue base, and competitors with greater financial resources may be able to acquire or develop IT systems that we cannot afford. If we fail to meet the demands of our customers or protect against disruptions of our IT systems, we may lose customers, which could seriously harm our business and adversely affect our operating results and operating cash flow.

14

Our implementation of a new WMS could adversely affect our business, financial condition and results of operations or the effectiveness of our financial reporting processes, including our internal controls over financial reporting.

We are currently implementing a new WMS, which we expect will provide our business with enhanced warehouse transaction management capabilities and improved labor efficiency around the globe.  Such an implementation is a major undertaking, both financially and from a management and personnel perspective.  Even if successfully implemented, we may not realize the anticipated productivity improvements or cost efficiencies from the WMS.  In addition, any disruptions, delays or deficiencies in the design and implementation of the WMS could adversely affect our ability to manage our inventory, process orders, ship products in a timely manner or provide services and customer support, and could also result in loss of information, diminished management reporting capabilities, harm to our control environment, diminished employee productivity and unanticipated increases in costs.  If we do not effectively implement the WMS or if the WMS does not operate as intended, it could adversely affect our business, financial condition and results of operations and the effectiveness of our financial reporting processes, including our internal controls over financial reporting.

If we are unable to successfully execute and realize the expected financial benefits from our “Wesco 2020” initiative, our business and financial results could be adversely affected. 

In May 2018, we announced the launch of our “Wesco 2020” initiative, which is designed to broaden and institutionalize improvements already made to our business during fiscal 2018 and further improve the Company’s service excellence, inventory management, productivity and profitability.  The Company expects “Wesco 2020” to deliver significant operational and financial benefits through footprint alignment, organizational refinement, productivity gains and investment in critical capabilities to serve customers better.  However, we may be unable to effectively execute certain of these improvement initiatives, which could limit our realization of expected costs savings, anticipated synergies and efficiencies and customer service improvements.  Moreover, the expenses associated with these initiatives can be difficult to predict, and we may incur substantial additional expenses in connection with the execution of “Wesco 2020” in excess of what is currently expected, particularly if any of these initiatives are unsuccessful or prove unsustainable, which may require us to incur additional costs. Furthermore, improvement initiatives of this sort are a complex and time-consuming process that can place substantial demands on management, which could divert attention from other business priorities or disrupt our daily operations. Any of these failures could, in turn, materially adversely affect our business, financial condition, results of operations and cash flows, and could negatively impact our ability to achieve our other strategic goals and business plans. 

We may be unable to retain personnel who are key to our operations.

Our success, among other things, is dependent on our ability to attract, develop and retain highly qualified senior management and other key personnel. Competition for key personnel is intense, and our ability to attract and retain key personnel is dependent on a number of factors, including prevailing market conditions and compensation packages offered by companies competing for the same talent. The inability to hire, develop and retain these key employees may adversely affect our operations.

There are risks inherent in international operations that could have a material adverse effect on our business, financial condition and results of operations.

While the majority of our operations are based in the United States, we have significant international operations, with facilities in Australia, Canada, China, France, Germany, India, Israel, Italy, Mexico, Singapore and the United Kingdom, and customers throughout North America, Latin America, Europe, Asia and the Middle East. For the years ended September 30, 2018 and 2017, 33% and 35%, respectively, of our net sales were derived from customers located outside the United States.

Our international operations are subject to, without limitation, the following risks:

• the burden of complying with multiple and possibly conflicting laws and any unexpected changes in regulatory requirements;

• political risks, including risks of loss due to civil disturbances, acts of terrorism, acts of war, guerilla activities and insurrection;

• unstable economic, financial and market conditions and increased expenses due to inflation, or higher interest rates;

15

• difficulties in enforcement of third-party contractual obligations and collecting receivables through foreign legal systems;

• changes in global trade policies;

• increasingly complex laws and regulations concerning privacy, data protection and data security, including the European Union’s General Data Protection Regulation;

• difficulties in staffing and managing international operations and the application of foreign labor regulations;

• differing local product preferences and product requirements; and

• potentially adverse tax consequences from changes in tax laws, requirements relating to withholding taxes on remittances and other payments by subsidiaries and restrictions on our ability to repatriate dividends from our subsidiaries.

In addition, fluctuations in the value of foreign currencies affect the dollar value of our net investment in foreign subsidiaries, with these fluctuations being included in a separate component of stockholders’ equity. At September 30, 2018, we reported a cumulative foreign currency translation adjustment loss of $84.4 million in stockholders’ equity, and we may incur additional adjustments in future periods. In addition, operating results of certain of our foreign subsidiaries are translated into U.S. dollars for purposes of our statements of comprehensive income at average monthly exchange rates. Moreover, to the extent that our net sales are not denominated in the same currency as our expenses, our net earnings could be materially adversely affected. For example, a portion of labor, material and overhead costs for our facilities in the United Kingdom, Germany, France and Italy are incurred in British pounds or euros, but in certain cases the related net sales are denominated in U.S. dollars. Changes in the value of the U.S. dollar or other currencies could result in material fluctuations in foreign currency translation amounts or the U.S. dollar value of transactions and, as a result, our net earnings could be materially adversely affected. At times we engage in hedging transactions to manage or reduce our foreign currency exchange risk, but these transactions may not be successful and, as a result, our business, financial condition and results of operations could be materially adversely affected. During fiscal 2018 and 2017, fluctuations in foreign currency translation had a positive impact on net sales of $1.1 million and a negative impact of $22.9 million, respectively.

Our international operations require us to comply with numerous applicable anti-corruption and trade control laws and regulations, including those of the U.S. government and various other jurisdictions, and our failure to comply with these laws and regulations could adversely affect our reputation, business, financial condition and results of operations.

Doing business on a worldwide basis requires us to comply with the laws and regulations of the U.S. government and various other jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to liabilities. These laws and regulations can apply to companies, individual directors, officers, employees and agents, and may restrict our operations, trade practices, investment decisions and partnering activities. Our risk of violating anti-corruption laws is increased because some of the international locations in which we operate lack a highly developed legal system and have elevated levels of corruption, and because our industry is highly regulated.

In particular, our international operations are subject to U.S. and foreign anti-corruption laws and regulations, such as the FCPA, the Bribery Act and other applicable anti-corruption regimes. These laws generally prohibit us from corruptly providing anything of value, directly or indirectly, to foreign government officials for the purposes of improperly influencing official decisions, improperly obtaining or retaining business, or otherwise obtaining favorable treatment. As part of our business, we may deal with governments and state-owned business enterprises, the employees and representatives of which may be considered government officials for purposes of the FCPA, the Bribery Act or other applicable anti-corruption laws. Some anti-corruption laws, such as the Bribery Act, also prohibit commercial bribery and the acceptance of bribes. In addition, the FCPA further requires publicly traded companies to maintain adequate record-keeping that accurately reflects the transactions of the company, as well as a system of internal accounting controls.

As an exporter, we must comply with various laws and regulations relating to the export of products, services and technology from the United States and other countries having jurisdiction over our operations. In the U.S., these laws include, among others, the EAR administered by the U.S. Department of Commerce’s Bureau of Industry and Security, the ITAR administered by the U.S. Department of State’s Directorate of Defense Trade Controls, and trade sanctions, regulations and embargoes administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control. These laws and regulations may require us to obtain individual validated licenses from the relevant agency to export, re-export, or transfer commodities, software, technology, or services to certain jurisdictions, individuals, or entities. We cannot be certain that our applications for

16

export licenses or other authorizations will be granted or approved. Furthermore, the export license and export authorization process is often time-consuming.

Violations of these legal requirements can be punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts, seizure and forfeiture of unlawful attempted exports, and/or denial of export privileges, as well as other remedial measures. We have established policies and procedures designed to assist us, our personnel and our agents to comply with applicable U.S. and international laws and regulations. However, there can be no guarantee that our policies and procedures will effectively prevent us, our employees and our agents from violating these regulations in every transaction in which we may engage, and violations, allegations or investigations of such violations could materially adversely affect our reputation, business, financial condition and results of operations.

Changes in trade policies, including the imposition of additional tariffs, could negatively impact our business, financial condition and results of operations.

The current United States administration has signaled support for, and in some instances has taken action with respect to, major changes to certain trade policies, such as the imposition of additional tariffs on imported products and the withdrawal from or renegotiation of certain trade agreements, including the North American Free Trade Agreement. Such changes could also result in retaliatory actions by the United States’ trade partners. For example, the United States has increased tariffs on certain imports from China, as well as on steel and aluminum products imported from various countries. In response, China, the European Union, and several other countries have imposed or proposed additional tariffs on certain exports from the United States.

We procure certain of the products we sell directly or indirectly from outside of the United States, including from China. The imposition of tariffs and other potential changes in United States trade policy could increase the cost or limit the availability of such products, which could hurt our competitive position and adversely impact our business, financial condition and results of operations. In addition, we sell a significant proportion of our products to customers outside of the United States. Retaliatory actions by other countries could result in increases in the price of our products, which could limit demand for such products, hurt our global competitive position and have a material adverse effect on our business, financial condition and results of operations.

Our total assets include substantial intangible assets, and the write-off of a significant portion of our intangible assets would negatively affect our financial results.

Our total assets reflect substantial intangible assets. At September 30, 2018, goodwill and intangible assets, net represented 24.0% of our total assets. Goodwill represents the excess of the purchase price of acquired businesses over the fair value of the assets acquired and liabilities assumed resulting from acquisitions, including the acquisition of our Company by affiliates of The Carlyle Group (Carlyle) and the acquisition of Haas. Intangible assets represent trademarks, backlogs, non-compete agreements, technology and customer relationships. On at least an annual basis, we assess whether there has been impairment in the value of goodwill and indefinite-lived intangible assets. If our testing identifies impairment under generally accepted accounting principles in the United States (GAAP), the impairment charge we calculate would result in a charge to income from operations. For example, during the three months ended June 30, 2017, we recorded a non-cash goodwill impairment of $311.1 million. Any future determination requiring the write-off of a significant portion of goodwill and unamortized identified intangible assets would negatively affect our results of operations and total capitalization, which could be material. For additional information, see “Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates-Goodwill and Indefinite-Lived Intangible Assets.”

Changes in U.S. tax law have affected and may continue to affect our business, financial condition and results of operations.

On December 22, 2017, the Tax Act was signed into law. As a fiscal year taxpayer, certain provisions of the Tax Act have impacted the Company for our fiscal year ended September 30, 2018, while other provisions of the Tax Act will impact the Company for our fiscal year beginning October 1, 2018 and beyond. We are still evaluating the full impact of the Tax Act on our liability for U.S. corporate tax and the related impact on our business, financial condition and results of operations, and based on our current estimates, we believe these changes will be material (see Note 15 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K). For example, we believe that the following changes included in the Tax Act, among others, will or could have a material impact on our liability for U.S. corporate tax: (i) the transition to a territorial tax system that generally allows for the repatriation of foreign earnings without additional U.S. corporate income tax while maintaining and expanding existing rules regarding the taxation of foreign earnings prior to their repatriation to the U.S. and (ii) the limitations on the deductibility of interest expense, entertainment expense and certain

17

executive compensation. However, our estimates regarding the impact of the Tax Act may change, possibly materially, following management’s review of historical records, refinement of calculations, modifications of assumptions and further interpretation of the Tax Act based on U.S. Treasury regulations and guidance from the Internal Revenue Service and state tax authorities.

If any of our customers were to become insolvent or experience substantial financial difficulties, our business, financial condition and results of operations may be adversely affected.

If any of the customers with whom we do business becomes insolvent or experiences substantial financial difficulties we may be unable to timely collect amounts owed to us by such customers and may not be able to sell the inventory we have purchased for such customers, which could have a material adverse effect on our business, financial condition and results of operations.

We or our suppliers or customers may experience damage to or disruptions at our or their facilities caused by natural disasters and other factors, which may result in our business, financial condition and results of operations being adversely affected.

Several of our facilities or those of our suppliers and customers could be subject to a catastrophic loss caused by earthquakes, tornadoes, floods, hurricanes, fire, power loss, telecommunication and information systems failure or other similar events. Should insurance be insufficient to recover all such losses or should we be unable to reestablish our operations, or if our customers or suppliers were to experience material disruptions in their operations as a result of such events, our business, financial condition and results of operations could be adversely affected.

We are dependent on access to and the performance of third-party package delivery companies.

Our ability to provide efficient distribution of the products we sell to our customers is an integral component of our overall business strategy. We do not maintain our own delivery networks, and instead rely on third-party package delivery companies. We cannot assure you that we will always be able to ensure access to preferred delivery companies or that these companies will continue to meet our needs or provide reasonable pricing terms. In addition, if the package delivery companies on which we rely experience delays resulting from inclement weather or other disruptions, we may be unable to maintain products in inventory and deliver products to our customers on a timely basis, which may adversely affect our business, financial condition and results of operations.

A significant labor dispute involving us or one or more of our customers or suppliers, or a labor dispute that otherwise affects our operations, could reduce our net sales and harm our profitability.

Labor disputes involving us or one or more of our customers or suppliers could affect our operations. If our customers or suppliers are unable to negotiate new labor agreements and our customers’ or suppliers’ plants experience slowdowns or closures as a result, our net sales and profitability could be negatively impacted.

While our employees are not currently unionized, they may attempt to form unions in the future, and the employees of our customers, suppliers and other service providers may be, or may in the future be, unionized. We cannot assure you that there will not be any strike, lock out or material labor dispute with respect to our business or those of our customers or suppliers in the future that materially affects our business, financial condition and results of operations.

We may be materially adversely affected by high fuel prices.

Fluctuations in the global supply of crude oil and the possibility of changes in government policies on the production, transportation and marketing of jet fuel make it impossible to predict the future availability and price of jet fuel. In the event there is an outbreak or escalation of hostilities or other conflicts or significant disruptions in oil production or delivery in oil-producing areas or elsewhere, there could be reductions in the production or importation of crude oil and significant increases in the cost of jet fuel. If there were major reductions in the availability of jet fuel or significant increases in its cost, commercial airlines would face increased operating costs. Due to the competitive nature of the airline industry, airlines are often unable to pass on increases in fuel prices to customers by increasing fares. As a result, an increase in jet fuel could result in a decrease in net income from either lower margins or, if airlines increase ticket fares, lower net sales from reduced airline travel. Decreases in airline profitability could decrease the demand for new commercial aircraft, resulting in delays of or reductions in deliveries of commercial aircraft that utilize the products we sell, and, as a result, our business, financial condition and results of operations could be materially adversely affected.

18

Our financial results may fluctuate from period-to-period, making quarter-to-quarter comparisons of our business, financial condition and results of operations less reliable indicators of our future performance.

There are many factors, such as the cyclical nature of the aerospace industry, fluctuations in our ad hoc sales, delays in major aircraft programs, planned production shutdowns, downward pressure on sales prices and changes in the volume of our customers’ orders that could cause our financial results to fluctuate from period-to-period. For example, during the year ended September 30, 2018, 24% of our net sales were derived from ad hoc sales. The prices we charge for ad hoc sales are typically higher than the prices under our Contract sales. However, customers may not continue to purchase the same amount of products from us on an ad hoc basic as they have in the past, so it cannot be assured that in any given year we will be able to generate similar levels of ad hoc net sales as we did in the past. We are also actively working to transition customers from ad hoc purchases to Contracts, which may also result in a reduction in our ad hoc net sales. In addition, our acquisition of Haas has contributed to lower our ad hoc sales as a percentage of total net sales. A significant diminution in our ad hoc sales in any given period could result in fluctuations in our financial results and operating margins. As a result of these factors, we believe that quarter-to-quarter comparisons of our financial results are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance.

We will continue to incur significant costs as a result of operating as a publicly traded company, and our management is required to devote substantial time to public company compliance requirements and investor needs.

As a publicly traded company, we will continue to incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act) and the rules of the SEC and the New York Stock Exchange have imposed various requirements on public companies. Our management and other personnel will continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will continue to result in increased legal and financial compliance costs compared to a private company and make some activities more time-consuming and costly. For example, we believe these rules and regulations make it more difficult and more expensive for us to maintain appropriate levels of director and officer liability insurance.

We are subject to health, safety and environmental laws and regulations, any violation of which could subject us to significant liabilities and penalties.

We are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment and human health and safety, and the handling, transportation, storage, treatment, disposal and remediation of hazardous substances, including potentially with respect to historical chemical blending and other activities that pre-dated the purchase of the Haas business by us. Actual or alleged violations of EHS laws, or permit requirements could result in restrictions or prohibitions on operations and substantial civil or criminal sanctions, as well as, under some EHS laws, the assessment of strict liability and/or joint and several liability.

Furthermore, we may be liable for the costs of investigating and cleaning up environmental contamination on or from our operations or at off-site locations, including potentially with respect to historical chemical blending and other activities that pre-dated the purchase of the Haas business by us. We may therefore incur additional costs and expenditures beyond those currently anticipated to address all such known and unknown situations under existing and future EHS laws.

Governmental, regulatory and societal demands for increasing levels of product safety and environmental protection are resulting in increased pressure for more stringent regulatory control with respect to the chemical industry. The European Union’s REACH regulations enacted in 2009 have been a continuing source of compliance obligations and restrictions on certain chemicals, and REACH-like regimes have now been adopted in several other countries. In the United States, the core provisions of the TSCA were amended in June 2016 for the first time in nearly 40 years. Among the more significant changes are that these amendments mandate safety reviews of existing “high priority” chemicals and regulatory action to control any “unreasonable risks” identified as result of such reviews. The EPA also now must make a no “unreasonable risk” finding before a new chemical can be fully commercialized. These new mandates create uncertainty about whether existing chemicals of importance to our business may be designated for restriction and whether the new chemical approval process may become more difficult and costly.

These types of changes in the Company’s regulatory environment, particularly, but not limited to, in the United States, the European Union, Canada and China, could lead to heightened regulatory scrutiny and could adversely impact our ability to supply certain products and provide supply chain management services to our customers. Such changes also could result in compliance obligations for us directly or as part of our supply chain management services to customers, fines, ongoing monitoring and other future business activity restrictions, which could have a material adverse effect on our business, financial condition and results of operations. Finally, we have in the past sold products containing PFAS, including PFOA. Certain

19

PFAS, including PFOA, have been targeted for risk assessment, restriction, and high priority remediation and have been the subject of ongoing and substantial litigation in the both the U.S. and European Union. We have not received any claims or enforcement actions from governments or third parties relating to PFOA or any other PFAS.

In addition, these concerns could influence public perceptions regarding our operations and our ability to attract and retain customers and employees. Moreover, changes in EHS regulations could inhibit or interrupt our operations, or require us to modify our facilities or operations. Accordingly, environmental or regulatory matters may cause us to incur significant unanticipated losses, costs, capital expenditures or liabilities, which could reduce our profitability. Such losses, costs, capital expenditures or liabilities will be subject to evolving regulatory requirements and will depend on the timing of the promulgation and enforcement of specific standards which impose requirements on our operations. As a result, these losses, costs, capital expenditures or liabilities may be more than currently anticipated.

Our operations involve risks associated with the handling, transportation, storage and disposal of chemical products that may increase our operating costs and reduce our profitability.

Our business is subject to hazards inherent in the handling, transportation, storage and disposal of chemical products. These hazards include: chemical spills, storage tank leaks, discharges or releases of toxic or hazardous substances or gases and other hazards incident to the handling, transportation, storage and disposal of dangerous chemicals. We are also potentially subject to other hazards, including natural disasters and severe weather; explosions and fires; transportation problems, including interruptions, spills and leaks; mechanical failures; unscheduled downtimes; labor difficulties; and other risks. Many potential hazards can cause bodily injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of our own or our customers’ operations and the imposition of civil or criminal penalties and liabilities. Furthermore, we are subject to present and future claims with respect to our employees when working within our own operations or when supplying chemicals to and/or providing chemical management services at our customer’s operations, other persons, including potentially our customers and their employees, workers’ compensation and other matters.

We maintain property, business interruption, products liability and casualty insurance policies which we believe are in accordance with customary industry practices, as well as insurance policies covering other types of risks, including pollution legal liability insurance, but we are not fully insured against all potential hazards and risks incident to our business. Each of these insurance policies is subject to customary exclusions, deductibles and coverage limits, in accordance with industry standards and practices. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, results of operations, financial condition and liquidity.

If the temperature control systems on which we rely fail, certain of the chemical products we sell may become “non-conforming” while in storage or in transit, and as a result, we may be responsible for providing replacement products to our customers, which could have a material adverse effect on our business, financial condition and results of operations.

Many of the chemical products we sell are sensitive to temperature. Our storage facilities and the vehicles maintained by the third-party delivery companies on whom we rely utilize sophisticated temperature control systems to ensure safe storage and handling of these products. If these temperature control systems fail, products that are sensitive to temperature may become

non-conforming to the customer’s specifications, and we may be responsible for providing replacement products, which could have a material adverse effect on our business, financial condition and results of operations.

Our reputation and/or our business, financial condition and results of operations could be adversely affected if one of the products we sell causes an aircraft to crash.

We may be exposed to liabilities for personal injury, death or property damage due to the failure of a product we have sold. We typically agree to indemnify our customers against certain liabilities resulting from the products we sell, and any third-party indemnification we seek from our suppliers and our liability insurance may not fully cover our indemnification obligations to customers. We also may not be able to maintain insurance coverage in the future at an acceptable cost. Any liability for which third-party indemnification is not available that is not covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

In addition, a crash caused by one of the products we have sold could damage our reputation for selling quality products. We believe our customers consider safety and reliability as key criteria in selecting a provider of aircraft products and believe our reputation for quality assurance is a significant competitive strength. If a crash were to be caused by one of the

20

products we sold, or if we were to otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers may be materially adversely affected.

We sell products to a highly regulated industry and our business may be adversely affected if our suppliers or customers lose government approvals, if more stringent government regulations are enacted or if industry oversight is increased.

The aerospace industry is highly regulated in the United States and in other countries. The FAA prescribes standards and other requirements for aircraft components in the U.S. and comparable agencies, such as the European Aviation Safety Agency, the Civil Aviation Administration of China and the Japanese Civil Aviation Bureau, regulate these matters in other countries. Our suppliers and customers must generally be certified by the FAA, the DoD and similar agencies in foreign countries. If any of our suppliers’ government certifications are revoked, we would be less likely to buy such supplier’s products, and, as a result, would need to locate a suitable alternate supply of such products, which we may be unable to accomplish on commercially reasonable terms or at all. If any of our customers’ government certifications are revoked, their demand for the products we sell would decline. In each case, our business, financial condition and results of operations may be adversely affected.

In addition, if new and more stringent government regulations are adopted or if industry oversight increases, our suppliers and customers may incur significant expenses to comply with such new regulations or heightened industry oversight. In the case of our suppliers, these expenses may be passed on to us in the form of price increases, which we may be unable to pass along to our customers. In the case of our customers, these expenses may limit their ability to purchase products from us. In each case, our business, financial condition and results of operations may be adversely affected.

We may be unable to successfully consummate or integrate future acquisitions, which could negatively impact our business, financial condition and results of operations.

We may consider future acquisitions, some of which could be material to us. Depending upon the acquisition opportunities available, we may need to raise additional funds through the capital markets or arrange for additional debt financing to consummate such acquisitions. We may be unable to raise the capital required for future acquisitions on satisfactory terms or at all, which could adversely affect our business, financial condition and results of operations. Economics related to acquisitions including valuation, purchase price, synergies and competitive advantage may rely on our ability to efficiently integrate an acquired business with our existing enterprise, which we may not be able to execute successfully.

The results of the United Kingdom’s referendum on withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business, which could reduce the price of our common stock.

We have material business operations in both the United Kingdom and the broader European Union. In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum. The terms of the withdrawal are subject to a negotiation period that could last until or beyond March 2019, two years after the government of the United Kingdom formally initiated the withdrawal process in March 2017. This has created significant uncertainty about the future relationship between the United Kingdom and the European Union, and has given rise to calls for the governments of other European Union member states to consider withdrawal.

These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Asset valuations, currency exchange rates and credit ratings may be especially subject to increased market volatility. Lack of clarity about future United Kingdom laws and regulations as the United Kingdom determines which European Union laws to replace or replicate in the event of a withdrawal, including financial laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws and employment laws, could decrease foreign direct investment in the United Kingdom, increase costs, depress economic activity and restrict our access to capital. If the United Kingdom and the European Union are unable to negotiate acceptable withdrawal terms or if other European Union member states pursue withdrawal, barrier-free access between the United Kingdom and other European Union member states or among the European economic area overall could be diminished or eliminated. Any of these factors could have a direct or indirect impact on our business in the United Kingdom and the broader European Union, on our suppliers and customers in the United Kingdom and the broader European Union and on our business outside the United Kingdom and the broader European Union, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our common stock.

21

Our substantial indebtedness could adversely affect our financial health and could harm our ability to react to changes to our business.

As of September 30, 2018, our total indebtedness outstanding under our Credit Facilities (as defined in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities”) was $854.6 million, which was 55.2% of our total capitalization.

In addition, we may incur substantial additional indebtedness in the future. Our Credit Facilities contain certain significant qualifications and exceptions that allow us to incur additional indebtedness, and the indebtedness incurred in compliance with these qualifications and exceptions could be substantial. If we incur additional debt, the risks associated with our substantial leverage would increase.

Our substantial indebtedness could have important consequences to investors. For example, it could:

• increase our vulnerability to general economic downturns and industry conditions;

• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate requirements;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• place us at a competitive disadvantage compared to competitors that have less debt; and

• limit, along with the financial and other restrictive covenants contained in the documents governing our indebtedness, among other things, our ability to borrow additional funds, make investments and incur liens.

In addition, all of our debt under the Credit Facilities bears interest at floating rates, causing us to enter into interest rate swap derivative instruments to partially offset our exposure to interest rate fluctuations, which result in additional risks. As of September 30, 2018, we had a current interest rate hedge liability of $0.3 million. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Derivatives not qualifying as cash flow hedges will default to a mark-to-market accounting treatment and are recorded directly to the income statement. Our derivatives also expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement, which could negate the intended protection from our hedge instruments. See further discussion on our derivative financial instruments in Note 12 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Credit Facilities or otherwise in amounts sufficient to enable us to service our indebtedness. If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital and cannot assure you that we will be successful in implementing any such actions or that any actions we take will allow us to stay in compliance with the terms of our indebtedness.

The terms of the Credit Facilities and other debt instruments may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The Credit Facilities contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests. The Credit Facilities include covenants restricting, among other things, our ability to:

• incur or guarantee additional indebtedness or issue preferred stock;

• pay distributions on, redeem or repurchase our capital stock;

• make investments;

22

• sell assets;

• enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us;

• incur or allow liens;

• consolidate, merge or transfer all or substantially all of our assets;

• engage in transactions with affiliates;

• enter into sale leaseback transactions;

• change fiscal periods;

• enter into agreements that restrict the granting of liens or the making of subsidiary distributions;

• enter into certain hedging arrangements outside of the ordinary course of business;

• make optional prepayments and modifications of certain debt instruments; and

• engage in certain business activities.

In addition, the Credit Facilities contain a maximum leverage ratio covenant. A breach of this financial covenant could result in a default under the Credit Facilities. If any such default occurs, the lenders under the Credit Facilities may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. The lenders under the Credit Facilities also have the right in these circumstances to terminate any commitments to provide further borrowings. In addition, following an event of default under the Credit Facilities, the lenders under those facilities will have the right to proceed against the collateral granted to them to secure the debt, which includes our available cash. If the debt under the Credit Facilities was to be accelerated, we cannot assure you that our assets would be sufficient to repay in full our debt. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Credit Facilities” for additional information about the Company’s compliance with the Consolidated Total Leverage Ratio (as defined in the Credit Agreement) maintenance covenant contained in the Credit Agreement.

Risks Related to our Common Stock

The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.

Volatility in the market price of our common stock may prevent you from being able to sell your common stock at or above the price you paid for your common stock. The market price of our common stock could fluctuate significantly for various reasons, including:

• our operating and financial performance and prospects;

• our quarterly or annual earnings or those of other companies in our industry;

• the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

• changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies in our industry;

• the failure of securities analysts to cover our common stock or changes in analyst recommendations;

• credit ratings downgrades or other negative actions by ratings agencies for us or our subsidiaries;

• strategic actions by us or our competitors, such as acquisitions or restructurings;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

• changes in accounting standards, policies, guidance, interpretations or principles;

23

• the delay in impact on our profitability caused by the time lag between when we experience cost increases until these increases flow through cost of sales because of our method of accounting for inventory, or the impact from our inability to pass on such cost increases to our customers;

• material litigation or government investigations;

• changes in general conditions in the United States and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events;

• changes in key personnel;

• sales of common stock by us or members of our management team;

• the volume of trading in our common stock; and

• the realization of any risks described under “Risk Factors.”

In addition, in recent years, the U.S. stock market has experienced significant price and volume fluctuations. This volatility has significantly impacted the market price of securities issued by many companies, including companies in our industry. The changes have often been unrelated or disproportionate to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with our Company, and these fluctuations could materially reduce our share price and cause you to lose all or part of your investment.

We have no plans to pay regular dividends on our common stock, so you may not receive funds without selling your common stock.

We have no plans to pay regular dividends on our common stock. We generally intend to invest our future earnings, if any, to fund our growth and reduce debt. Any payment of future dividends will be at the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our Board of Directors deems relevant. The Credit Facilities also effectively limit our ability to pay dividends. Accordingly, you may have to sell some or all of your common stock in order to generate cash flow from your investment. You may not record a gain on your investment when you sell your common stock and you may lose the entire amount of the investment.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay or prevent a change of control of our Company or changes in our management and, as a result, depress the trading price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could discourage, delay or prevent a change in control of our Company or changes in our management that the stockholders of our Company may deem advantageous. These provisions:

• establish a classified Board of Directors, with three classes of directors;

• authorize the issuance of blank check preferred stock that our Board of Directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;

• limit the ability of stockholders to remove directors;

• prohibit our stockholders from calling a special meeting of stockholders;

• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of stockholders;

• provide that our Board of Directors is expressly authorized to amend, or to alter or repeal our bylaws; and

• establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our Company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing, which could result in us taking corporate actions other than those you desire.

24

Future sales of our common stock in the public market could lower our share price, and any additional capital raised by us through the sale of equity or convertible debt securities may dilute your ownership in our Company and may adversely affect the market price of our common stock.

We and our existing stockholders may sell additional shares of common stock in subsequent public offerings. We may also issue additional shares of common stock or convertible debt securities to finance future investments including acquisitions. As of September 30, 2018, we had 950,000,000 shares of common stock authorized and 99,557,885 shares of common stock outstanding. In addition, we have 2,041,586 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2018 and 2,341,594 available shares of common stock reserved for issuance under the Wesco Aircraft Holdings, Inc. 2014 Incentive Award Plan (the 2014 Plan).

We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including sales pursuant to Carlyle’s registration rights and shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. 

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES

Our global headquarters is located at 24911 Avenue Stanford, Valencia, California 91355. As of September 30, 2018, we have a total of 56 administrative, sales and/or stocking facilities, all of which are either leased or located at a customer site, except for our global headquarters, which is owned by us. These facilities, including facilities in Northlake, Texas; McDonough, Georgia; Wichita, Kansas; Austin, Texas; Mississauga, Ontario; Cleckheaton, United Kingdom and Clayton West, United Kingdom, are located in 17 countries, including the U.S., Australia, Canada, China, France, Germany, India, Israel, Italy, Mexico, Singapore and the United Kingdom.

Our warehouse operations are divided between CSLs and Forward Stocking Locations (FSLs). Our CSLs serve as the primary supply warehouses for most of our net sales and also house our procurement, customer service, document control, IT, material support and quality assurance functions. Our CSLs are supported by sales offices throughout the U.S., Australia, Canada, China, France, Germany, India, Israel, Italy, Mexico, Singapore and the United Kingdom.

Complementing our CSLs and sales offices are FSLs. An FSL is a specialized stocking point for one or more Contracts located within a geographic region. FSLs are typically located either near or within a customer facility and are established to support large Contracts. In certain instances, FSLs initially established to service a single customer are expanded to service other regional customers.

We believe that our existing facilities, including both owned and leased, are in good condition and suitable for the conduct of our business. For additional information regarding obligations under operating leases, see Note 17 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 3.  LEGAL PROCEEDINGS

We are involved in various legal matters that arise in the ordinary course of our business. We believe that the ultimate outcome of such matters will not have a material adverse effect on our business, financial condition or results of operations. However, there can be no assurance that such actions will not be material or adversely affect our business, financial condition or results of operations. For more information see Note 4 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

25

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stockholders and Market Information About Our Common Stock

Our common stock began trading on the New York Stock Exchange under the symbol “WAIR” on July 28, 2011. As of November 8, 2018, we had approximately 63 holders of record of our common stock and the closing price reported on the New York Stock Exchange of our common stock was $11.13 per share.

Dividends

We have not paid dividends in the past and we do not intend to pay any cash dividends for the foreseeable future. We intend to retain earnings, if any, for the future operation and expansion of our business and the repayment of debt. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, cash requirements, financial condition, contractual restrictions, restrictions imposed by applicable laws and other factors that our Board of Directors may deem relevant. Our existing indebtedness effectively limits our ability to pay dividends and make distributions to our stockholders.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

During the quarter ended September 30, 2018, we repurchased 108,433 shares of common stock in connection with shares surrendered to satisfy statutory minimum tax withholding obligations in connection with the vesting of restricted stock awards under the 2014 Plan. We expended approximately $1,220,000 to repurchase these shares.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
July 1, 2018 - July 31, 2018		—	$	—		—	$	—
August 1, 2018 - August 31, 2018		—		—		—		—
September 1, 2018 - September 30, 2018		108,433		11.25		—		—
Total		108,433	$	11.25		—	$	—

26

Performance

The graph set forth below compares the cumulative total shareholder return on our common stock between September 30, 2013 and September 30, 2018 to (1) the cumulative total return of U.S. companies listed on the New York Stock Exchange and (2) the cumulative total return of a peer group selected by the Company (Esterline Technologies Corporation (ESL), Fastenal Company (FAST), HEICO Corporation (HEI), KLX Inc. (KLXI), MSC Industrial Direct Co., Inc. (MSM), Transdigm Group Incorporated (TDG) and W.W. Grainger, Inc. (GWW)) over the same period. The peer group reflects a mix of companies that we believe is reflective of our broader industry and line-of-business. This graph assumes an initial investment of $100 on September 30, 2013, in our common stock, the market index and the peer group and assumes the reinvestment of dividends, if any. The historical information set forth below is not necessarily indicative of future price performance.

Company/Market/Peer Group	9/30/2013	9/30/2014	9/30/2015	9/30/2016	9/30/2017	9/30/2018
Wesco Aircraft Holdings, Inc.	$100.00	$83.13	$58.29	$64.17	$44.91	$53.75
New York Stock Exchange (U.S. Companies)	100.00	116.24	111.81	127.92	149.01	168.75
Peer Group	100.00	105.76	94.98	113.84	122.76	184.82

27

ITEM 6.  SELECTED FINANCIAL DATA

The selected income statement and other data for each of the years ended September 30, 2018, 2017 and 2016 and the selected balance sheet data as of September 30, 2018 and 2017 have been derived from our audited consolidated financial statements that are included in this Annual Report. The selected income statement and other data for the years ended September 30, 2015, and 2014 and the selected balance sheet data as of September 30, 2016, 2015 and 2014 have been derived from audited consolidated financial statements that are not included in this Annual Report on Form 10-K.

The financial data set forth below are not necessarily indicative of future results of operations. This data should be read in conjunction with, and is qualified in its entirety by reference to, Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes thereto included elsewhere in this Annual Report.

	Years Ended September 30,
	2018			2017			2016			2015			2014
	(in thousands except per share data)
Consolidated statements of income data:
Net sales (1)	$	1,570,450		$	1,429,429		$	1,477,366		$	1,497,615		$	1,355,877
Income (loss) from operations (1)	$	109,468		$	(208,795	)	$	158,750		$	(206,365	)	$	183,934
Interest expense, net (1)	(48,880		)	(39,821		)	(36,901		)	(37,092		)	(29,225		)
Other income, net	24			369			3,741			1,841			2,199
Income (loss) before income taxes	60,612			(248,247		)	125,590			(241,616		)	156,908
Income tax (provision) benefit	(27,958		)	10,901			(34,212		)	86,872			(54,806		)
Net income (loss)	$	32,654		$	(237,346	)	$	91,378		$	(154,744	)	$	102,102
Per share data:
Net income (loss) per share
Basic	$	0.33		$	(2.40	)	$	0.94		$	(1.60	)	$	1.06
Diluted	$	0.33		$	(2.40	)	$	0.93		$	(1.60	)	$	1.05
Weighted average shares outstanding
Basic	99,157			98,701			97,634			96,955			95,951
Diluted	99,500			9,701			98,166			96,955			97,606
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	46,222		$	61,625		$	77,061		$	82,866		$	104,775
Total assets (4)	1,789,476			1,754,107			1,948,578			2,020,973			2,412,274
Long-term debt and capital lease obligations (2) (3)	774,106			790,854			835,989			954,730			1,081,825
Total stockholders’ equity	692,469			649,731			882,915			817,573			992,290

(1) We acquired Haas in February 2014.

(2) Total long-term debt and capital lease obligations excludes current portion.

(3) Total long-term debt related to term loan A and term loan B as of September 30, 2018, 2017 and 2016 was reduced by deferred debt issuance costs of $8.8 million, $11.7 million and $7.6 million, respectively, as required by ASC 2015-03 which we adopted on October 1, 2016. Total long-term debt was not retroactively recast to include deferred debt issuance costs as of September 30, 2015 and 2014.

(4) Total assets as of September 30, 2016 was retroactively recast to reflect the reclassification of $7.6 million of deferred debt issuance costs related to term loan A and term loan B from long-term assets to long-term debt as required by ASC 2015-03. Total assets was not retroactively recast to exclude deferred debt issuance costs as of September 30, 2015 and 2014.

28

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Annual Report on Form 10-K.

The statements in this discussion regarding industry trends, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Part I, Item 1A. “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Industry Trends Affecting Our Business

We rely on demand for new commercial and military aircraft for a significant portion of our sales. Commercial aircraft demand is driven by many factors, including the global economy, industry passenger volumes and capacity utilization, airline profitability, introduction of new models and the lifecycle of current fleets. Demand for business jets is closely correlated to regional economic conditions and corporate profits, but also influenced by new models and changes in ownership dynamics. Military aircraft demand is primarily driven by government spending, the timing of orders and evolving U.S. Department of Defense strategies and policies.

Aftermarket demand is affected by many of the same trends as those in OEM channels, as well as requirements to maintain aging aircraft and the cost of fuel, which can lead to greater utilization of existing planes. Demand in the military aftermarket is further driven by changes in overall fleet size and the level of U.S. military operational activity domestically and overseas.

Supply chain service providers and distributors have been aided by these trends along with an increase in outsourcing activities, as OEMs and their suppliers focus on reducing their capital commitments and operating costs.

Commercial Aerospace Market

Over the past three years, major airlines have ordered new aircraft at a robust pace, aided by strong profits and increasing passenger volumes. At the same time, volatile fuel prices have led to greater demand for fuel-efficient models and new engine options for existing aircraft designs. The rise of emerging markets has added to the growth in overall demand at a stronger pace than seen historically. Large commercial OEMs have indicated that they expect a high level of deliveries, primarily due to continued demand and their unprecedented level of backlogs.

Business aviation has lagged the larger commercial market, reflecting a deeper downturn in the last recession, changes in corporate spending patterns and an uncertain economic outlook. While overall business aviation production levels remain below their pre-recession peak, recent indicators point to improved market conditions. Production has increased for new models, and the number of pre-owned aircraft relative to the total business aviation in-service fleet has fallen to multiyear lows. Whether these improved conditions lead to increased deliveries in the future remains uncertain.

Military Aerospace Market

Military production has fluctuated for many aircraft programs in the past few years. Increases in the U.S. Department of Defense budget for fiscal years 2018 and 2019 have supported greater production of certain military programs. In particular, we believe the services we provide the Joint Strike Fighter program will benefit our business as production for that program increases. We believe increased sales from other established programs that directly benefit from these changes also will benefit our business.

U.S. Department of Defense spending continues to be uncertain for fiscal years 2020 through 2023, given that the limits imposed upon U.S. government discretionary spending by the Budget Control Act and the Bipartisan Budget Act of 2013 remain in effect for these fiscal years, unless Congress acts to raise the spending limits or repeal or suspend the provisions of these laws. Future budget cuts or changes in spending priorities could result in existing program delays, changes or cancellations.

29

Other Factors Affecting Our Financial Results

Fluctuations in Revenue

 There are many factors, such as changes in customer aircraft build rates, customer plant shut downs, variation in customer working days, changes in selling prices, the amount of new customers’ consigned inventory and increases or decreases in customer inventory levels, that can cause fluctuations in our financial results from quarter to quarter. To normalize for short-term fluctuations, we tend to look at our performance over several quarters or years of activity rather than discrete short-term periods. As such, it can be difficult to determine longer-term trends in our business based on quarterly comparisons. Ad hoc business tends to vary based on the amount of disruption in the market due to changes in aircraft build rates, new aircraft introduction, customer or site consolidations, and other factors. Fluctuations in our ad hoc business tend to be partially offset by our Contract business as most of our ad hoc revenue comes from our Contract customers.

 We will continue our strategy of seeking to expand our relationships with existing ad hoc customers by transitioning them to Contracts, as well as expanding relationships with our existing Contract customers to include additional customer sites, additional SKUs and additional levels of service. New Contract customers and expansion of existing Contract customers to additional sites and SKUs sometimes leads to a corresponding decrease in ad hoc sales as a portion of the SKUs sold under Contracts were previously sold to the same customer as ad hoc sales. We believe this strategy serves to mitigate some of the fluctuations in our net sales. Our sales to Contract customers may fail to meet our expectations for a variety of reasons, in particular if industry build rates are lower than expected or, for certain newer JIT customers, if their consigned inventory, which must be exhausted before corresponding products are purchased directly from us, is greater than we expected.

 If any of our customers are acquired or controlled by a company that elects not to utilize our services, or attempt to implement in-sourcing initiatives, it could have a negative effect on our strategy to mitigate fluctuations in our net sales. Additionally, although we derive a significant portion of our net sales from the building of new commercial and military aircraft, we have not typically experienced extreme fluctuations in our net sales when sales for an individual aircraft program decrease, which we believe is attributable to our diverse base of customers and programs.

Fluctuations in Margins

 Our gross margins are impacted by changes in product mix. Generally, our hardware products have higher gross profit margins than chemicals and electronic components.

 We also believe that our strategy of growing our Contract sales and converting ad hoc customers into Contract customers could negatively affect our gross profit margins, as gross profit margins tend to be higher on ad hoc sales than they are on Contract-related sales. However, we believe any potential adverse impact on our gross profit margins would be outweighed by the benefits of a more stable long-term revenue stream attributable to Contract customers. 

Our Contracts generally provide for fixed prices, which can expose us to risks if prices we pay to our suppliers rise due to increased raw material or other costs. However, we believe our expansive product offerings and inventories, our ad hoc sales and, where possible, our longer-term agreements with suppliers have enabled us to mitigate this risk. Some of our Contracts are denominated in foreign currencies and fixed prices in these Contracts can expose us to fluctuations in foreign currency exchange rates with the U.S. dollar.

Fluctuations in Cash Flow

Our cash flows are affected by fluctuations in our inventory. When we are awarded new programs, we generally increase our inventory to prepare for expected sales related to the new programs, which often take time to materialize, and to achieve minimum stock requirements, if any. As a result, if certain programs for which we have procured inventory are delayed or if certain newer JIT customers’ consigned inventory is larger than we expected, we may experience a more sustained inventory increase.

Inventory fluctuations may also be attributable to general industry trends. Factors that may contribute to fluctuations in inventory levels in the future could include (1) purchases to take advantage of favorable pricing, (2) purchases to acquire high-volume products that are typically difficult to obtain in sufficient quantities; (3) changes in supplier lead times and the timing of inventory deliveries; (4) purchases made in anticipation of future growth; and (5) purchases made in connection with new customer Contracts or the expansion of existing Contracts. While effective inventory management is an ongoing challenge, we continue to take steps to enhance the sophistication of our procurement practices to mitigate the negative impact of inventory buildups on our cash flow.

30

Our accounts receivable balance as a percentage of net sales may fluctuate from quarter to quarter. These fluctuations are primarily driven by changes, from quarter to quarter, in the timing of sales within the quarter and variation in the time required to collect the payments. The completion of customer Contracts with accelerated payment terms can also contribute to these quarter-to-quarter fluctuations. Similarly, our accounts payable may fluctuate from quarter to quarter, which is primarily driven by the timing of purchases or payments made to our suppliers.

Segment Presentation

We conduct our business through three reportable segments: the Americas, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific). We evaluate segment performance based primarily on segment income or loss from operations. Each segment reports its results of operations and makes requests for capital expenditures and working capital needs to our chief operating decision maker (CODM). Our Chief Executive Officer serves as our CODM. 

Key Components of Our Results of Operations

The following is a discussion of the key line items included in our financial statements for the periods presented below under the heading “Results of Operations.” These are the measures that management utilizes to assess our results of operations, anticipate future trends and evaluate risks in our business.

Net Sales

Our net sales include sales of hardware, chemicals, electronic components, bearings, tools and machined parts, and eliminate all intercompany sales. We also provide certain services to our customers, including quality assurance, kitting, JIT delivery, CMS, 3PL or 4PL programs and point-of-use inventory management. However, these services are provided by us contemporaneously with the delivery of the product, and as such, once the product is delivered, we do not have a post-delivery obligation to provide services to the customer. Accordingly, the price of such services is generally included in the price of the products delivered to the customer, and revenue is recognized upon delivery of the product, at which point, we have satisfied our obligations to the customer. We do not account for these services as a separate element, as the services generally do not have stand-alone value and cannot be separated from the product element of the arrangement.

We serve our customers under Contracts, which include JIT contracts and LTAs, and with ad hoc sales. Under JIT contracts, customers typically commit to purchase specified products from us at a fixed price, on an as needed basis, and we are responsible for maintaining stock availability of those products. LTAs are typically negotiated price lists for customers or individual customer sites that cover a range of pre-determined products, purchased on an as-needed basis. Ad hoc purchases are made by customers on an as-needed basis and are generally supplied out of our existing inventory. Contract customers often purchase products that are not captured under their Contract on an ad hoc basis.

Income (Loss) from Operations

Income (loss) from operations is the result of subtracting the cost of sales and selling, general, and administrative expenses from net sales, and is used primarily to evaluate our performance and profitability.

The principal component of our cost of sales is product cost, which was 94.4% of our total cost of sales for the year ended September 30, 2018. The remaining components are freight and expediting fees, import duties, tooling repair charges, packaging supplies and inventory adjustment charges, which collectively were 5.6% of our total cost of sales for the year ended September 30, 2018.

Product cost is determined by the current weighted average cost of each inventory item, except for chemical parts for which the first-in, first-out method is used, and the provision, if any, for excess and obsolete inventory (E&O). The inventory provision is calculated to write-down the value of excess and obsolete inventory to its net realizable value. We review inventory for excess quantities and obsolescence quarterly. For a description of our E&O provision policy, see “—Critical Accounting Policies and Estimates—Inventories.” Charges to cost of sales for the E&O provision and related items of $16.8 million, $12.9 million and $14.6 million were recorded during the years ended September 30, 2018, 2017 and 2016, respectively. We believe that these amounts appropriately reflect the risk of E&O inventory inherent in our business and the proper net realizable value of inventories. For a more detailed description of the E&O provision, see Note 5 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

31

The principal components of our selling, general and administrative expenses are salaries, wages, benefits and bonuses paid to our employees; stock-based compensation; commissions paid to outside sales representatives; travel and other business expenses; training and recruitment costs; marketing, advertising and promotional event costs; rent; bad debt expense; professional services fees (including legal, audit and tax); and ordinary day-to-day business expenses. Depreciation and amortization expense is also included in selling, general and administrative expenses, and consists primarily of scheduled depreciation for leasehold improvements, machinery and equipment, vehicles, computers, software and furniture and fixtures. Depreciation and amortization also includes intangible asset amortization expense.

Other Expenses

Interest Expense, Net.  Interest expense, net consists of the interest we pay on our long-term debt, interest and fees on our revolving facility (as defined below under “—Liquidity and Capital Resources—Credit Facilities”) and our line-of-credit and deferred debt issuance costs, net of interest income.

Other Income, Net.  Other income, net is primarily comprised of foreign exchange gain or loss associated with transactions denominated in currencies other than the respective functional currency of the reporting subsidiary.

Critical Accounting Policies and Estimates

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and judgments on an on-going basis and may revise our estimates and judgments as circumstances change. Actual results may materially differ from what we anticipate, and different assumptions or estimates about the future could materially change our reported results. We believe the following accounting policies are the most critical in that they significantly affect our financial statements, and they require our most significant estimates and complex judgments.

Inventories

Our inventory is comprised solely of finished goods. Inventories are stated at the lower of cost or net realizable value (LCNRV). The method by which amounts are removed from inventory are weighted average cost for all inventory, except for chemical parts for which the first-in, first-out method is used.

We charge cost of sales for inventory provisions to write down our inventory to the LCNRV. Most of our inventory provisions relate to the write-down of excess quantities of products, based on our inventory levels compared to assumptions about future demand and market conditions. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently written-up. The process for evaluating E&O inventory often requires us to make subjective judgments and estimates concerning forecasted demand, including quantities and prices at which such inventories will be able to be sold in the normal course of business.

The components of our inventory are subject to different risks of excess quantities or obsolescence. Our hardware inventory, which does not expire or have a pre-determined shelf life, bears a higher risk of our having excess quantities than risk of becoming obsolete due to spoilage. However, our chemical inventory becomes obsolete when it has aged past its shelf-life, cannot be recertified and is no longer usable or able to be sold, or the inventory has been damaged on-site or in-transit. In such instances, a full write-down is taken against such inventory.

Demand for our products can fluctuate significantly. Our estimates of future product demand and selling prices may prove to be inaccurate, in which case we may have understated or overstated the write-down required for E&O inventories. In the future, if our inventories are determined to be valued higher than LCNRV, we will be required to reduce the value of such inventories to LCNRV and recognize the differences in our cost of goods sold at the time of such determination. Conversely, if our inventories are determined to be valued below LCNRV, we may have over-reported our costs of goods sold in previous periods and will be required to defer the recognition of such additional operating income until those inventories are sold. Charges to cost of sales for E&O provisions and related items were $16.8 million, $12.9 million and $14.6 million in the years ended September 30, 2018, 2017 and 2016, respectively. We believe that these amounts appropriately reflect the valuation risk of E&O inventory inherent in our business.

32

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired in a business combination. Goodwill and indefinite-lived intangible assets acquired in a business combination are not amortized, but instead tested for impairment at least annually or more frequently should an event occur or circumstances indicate that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy, or disposition of a reporting unit or a portion thereof. Goodwill and indefinite lived intangibles impairment testing is performed at the reporting unit level on July 1 of each year, as well as when circumstances change that might indicate impairment.

We test goodwill for impairment by performing a qualitative assessment process, or using a two-step quantitative assessment process. If we choose to perform a qualitative assessment process and determine it is more likely than not (that is, a likelihood of more than 50 percent) that the carrying value of the net assets is more than the fair value of the reporting unit, the two-step quantitative assessment process is then performed; otherwise, no further testing is required. Factors utilized in the qualitative assessment include the following: macroeconomic conditions; industry and market considerations; cost factors; overall financial performance; Wesco entity specific operating results and other relevant Wesco entity specific events. We may elect not to perform the qualitative assessment process and, instead, proceed directly to the two-step quantitative assessment process.

The first step identifies potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of fair value of a reporting unit are determined based on a discounted cash flow analysis and market earnings multiples. A discounted cash flow analysis requires us to make various judgmental assumptions, including assumptions related to discount rates, revenue growth rates, projected operating margins, terminal values and working capital. The assumptions about revenue growth rates, projected operating margins and terminal values are based on the forecast and long-term business plans of each reporting unit. Discount rate and working capital level assumptions are based on an assessment of the risk inherent in the discounted cash flows of the respective reporting units. If the fair value exceeds the carrying value of a reporting unit, goodwill is not considered impaired and the second step of the test is unnecessary. If the carrying amount of a reporting unit’s goodwill exceeds the fair value of a reporting unit, the second step measures the impairment loss, if any.

The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The implied fair value of the reporting unit’s goodwill is calculated by creating a hypothetical balance sheet as if the reporting unit had just been acquired. This balance sheet contains all assets and liabilities recorded at fair value (including any intangible assets that may not have any corresponding carrying value in our balance sheet). The implied value of the reporting unit’s goodwill is calculated by subtracting the fair value of the net assets from the fair value of the reporting unit. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The preparation of our internal forecasts requires significant judgments, including the estimation of the long-term rate of revenue growth for our business, future product costs, cost containment activities, changes in working capital, interest rates, discount rates, and other factors. Changes in these factors could significantly change our internal forecasts, which could significantly change the amount of impairment recorded, if any.

As of July 1, 2018, we performed our annual Step 1 goodwill impairment tests on our three reporting units, Americas, EMEA and APAC. The results of these tests indicated that the estimated fair values of our reporting units exceeded their carrying values.

As previously disclosed, as of June 30, 2017, we performed a two-step quantitative assessment on goodwill impairment on all our reporting units, which was triggered by events identified in our quarterly qualitative assessment. As a result, we recognized a total impairment charge of $311.1 million. We also performed our fiscal year 2017 annual goodwill impairment test as of July 1, 2017, concurrent with our restructuring of our reporting units, which indicated no impairment for any of the three new reporting units, Americas, EMEA and APAC. Out of the $311.1 million goodwill impairment charge, $308.4 million was assigned to the Americas reporting unit and $2.7 million was assigned to the APAC reporting unit based on their relative fair value as of July 1, 2018. See Note 8 of the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended September 30, 2017 for additional information.

33

Revenue Recognition

We recognize product and service revenue when (1) persuasive evidence of an arrangement exists, (2) title transfers to the customer, (3) the sales price charged is fixed or determinable and (4) collection is reasonably assured. In instances where title does not pass to the customer upon shipment, we recognize revenue upon delivery or customer acceptance, depending on the terms of the sales contract.

We report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the transaction. We assess whether we act as a principal in the transaction or as an agent acting on behalf of others by considering such factors as to whether or not we obtain control of the product, the form of consideration we receive, our ability to influence pricing, and our performance obligations. Based upon these criteria, if we are the principal in the transaction and have the risks and rewards of ownership, the transactions are recorded as gross in the consolidated statements of comprehensive income. If we do not act as a principal in the transaction, the transactions are recorded on a net basis in the consolidated statements of comprehensive income. The majority of our revenue is recorded on a gross basis with the exception of certain gas, energy and chemical management service contracts that are recorded as net revenue.

We also enter into sales rebate and profit sharing arrangements with our customers. Such customer incentives are accounted for as a reduction to gross sales and recorded based upon estimates at the time products are sold. These estimates are based upon historical experience for similar programs and products. We review such rebates and profit-sharing arrangements on an ongoing basis and accruals are adjusted, if necessary, as additional information becomes available.

Management provides allowances for credits and returns, based on historic experience, and adjusts such allowances as considered necessary. To date, such provisions have been within the range of management’s expectations and the allowance established.

Income Taxes

We recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is established, when necessary, to reduce net deferred tax assets to the amount expected to be realized. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which temporary differences become deductible or includible in taxable income. We consider projected future taxable income and tax planning strategies in our assessment. Our foreign subsidiaries are taxed in local jurisdictions at local statutory rates. The Company includes interest and penalties related to income taxes, including unrecognized tax benefits, within income tax expense.

We determine whether it is more likely than not that some or all of the deferred tax assets will not be realized.  We have recorded valuation allowances of $37.9 million and $18.6 million as of September 30, 2018 and 2017, respectively, against certain deferred tax assets, which consist primarily of foreign tax credits and foreign net operating losses. The valuation allowances are based on our estimates of taxable income by jurisdictions in which we operate and the period over which our deferred tax assets will be recoverable. If actual results differ from these estimates or if we revise these estimates in future periods, we may need to adjust the valuation allowances which could materially impact our financial position and results of operations.

Stock-Based Compensation

We account for all stock-based compensation awards to employees and members of our Board of Directors based upon their fair values as of the date of grant using a fair value method and recognize the fair value of each award as an expense over the requisite service period using the graded vesting method for awards with performance conditions and the straight-line method for awards with service conditions only.

For purposes of calculating stock-based compensation, we estimate the fair value of stock options using a Black-Scholes option pricing model, which requires the use of certain subjective assumptions including expected term, volatility, expected dividend, risk-free interest rate, and the fair value of our common stock. These assumptions generally require significant judgment.

34

We estimate the expected term of employee options using the average of the time-to-vesting and the contractual term. We derive our expected volatility from the historical volatilities of the price of our common stock over the expected term of the options. Our expected dividend rate is zero, as we have never paid any dividends on our common stock and do not anticipate any dividends in the foreseeable future. We base the risk-free interest rate on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to each grant’s expected life.

We estimate the fair value of restricted stock units and awards based on the market price of the shares underlying the awards on the grant date. Fair value for performance-based awards reflects the estimated probability that the performance condition will be met. Fair value for awards with total stockholder return performance metrics reflects the fair value calculated using the Monte Carlo simulation model, which incorporates stock price correlation and other variables over the time horizons matching the performance periods.

Management estimates a forfeiture rate for each grant of awards based on its judgment and expectations of employee turnover behavior and other factors. Quarterly actual forfeiture could have a significant effect on reported stock-based compensation expense, as the cumulative effect of adjusting the amortization of stock-based compensation expense is recognized in the period when the forfeiture occurs.

The following table summarizes the amount of stock-based compensation expense recognized in our consolidated statements of comprehensive income (in thousands):

	2018		2017		2016
Stock-based compensation expense	$	9,252	$	7,335	$	8,490

If any of the factors change and/or we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there is a difference between the assumptions used in determining stock-based compensation expense and the actual factors that become known over time, we may change the input factors used in determining stock-based compensation costs for future grants. Additionally, we may change the estimates that the performance obligations may be met. These changes, if any, may materially impact our results of operations in the period such changes are made. We expect to continue to grant stock options in the future, and to the extent that we do, our actual stock-based compensation expense recognized in future periods will likely increase.

Results of Operations

Consolidated

	Years Ended September 30,
Consolidated Result of Operations	2018			2017			2016
	(dollars in thousands)
Net sales	$	1,570,450		$	1,429,429		$	1,477,366
Gross profit	$	403,156		$	361,907		$	393,692
Selling, general & administrative expenses	293,688			259,588			234,942
Goodwill impairment charge	—			311,114			—
Income (loss) from operations	109,468			(208,795		)	158,750
Interest expense, net	(48,880		)	(39,821		)	(36,901		)
Other income, net	24			369			3,741
Income (loss) before income taxes	60,612			(248,247		)	125,590
(Provision) benefit for income taxes	(27,958		)	10,901			(34,212		)
Net income (loss)	$	32,654		$	(237,346	)	$	91,378

35

	(as a percentage of net sales, numbers rounded)
Gross profit	25.7	%	25.3	%	26.6	%
Selling, general & administrative expenses	18.7	%	18.2	%	15.9	%
Goodwill impairment charge	—	%	21.7	%	—	%
Income (loss) from operations	7.0	%	(14.6	)%	10.7	%
Interest expense, net	(3.1	)%	(2.8	)%	(2.5	)%
Other income, net	—	%	—	%	0.3	%
Income (loss) before income taxes	3.9	%	(17.4	)%	8.5	%
(Provision) benefit for income taxes	(1.8	)%	0.8	%	(2.3	)%
Net income (loss)	2.1	%	(16.6	)%	6.2	%

Year ended September 30, 2018 compared with the year ended September 30, 2017

Net Sales

Consolidated net sales increased$141.0 million, or 9.9%, to $1,570.5 million for the year ended September 30, 2018 compared with $1,429.4 million for the year ended September 30, 2017. The $141.0 million increase reflects growth in chemical product sales, ad hoc sales and hardware Contract sales. Chemical product sales and hardware Contract sales together added $91.4 million of net sales and reflect both new business and a net increase for existing Contracts, partially offset by declines from Contract expirations. Ad hoc sales were also higher, increasing $49.6 million when compared with the prior year, reflecting growth at several key customers. Ad hoc and Contract sales as a percentage of net sales represented 24% and 76%, respectively, for 2018, which was unchanged from the prior year. The $141.0 million increase in net sales included one-time sales of $16.9 million related to contract claims.

Income (loss) from Operations

Consolidated income from operations was $109.5 million for the year ended September 30, 2018 compared with a $208.8 million loss from operations for the year ended September 30, 2017. The increase in income from operations resulted primarily from a prior year non-cash goodwill impairment charge of $311.1 million recorded in the three months ended June 30, 2017. Excluding the goodwill impairment charge, income from operations increased $7.1 million compared with the prior year. The $7.1 million increase is comprised of higher gross profit of $41.2 million which was partially offset by an increase in SG&A expenses of $34.1 million. Excluding the prior year goodwill impairment charge, income from operations as a percentage of net sales was 7.0% for the year ended September 30, 2018 compared to 7.2% for the prior year.

The increase in gross profit was primarily driven by the revenue growth described above. Average gross margins increased 0.4 percentage points, primarily due to higher margins on ad hoc sales and a stronger sales mix, partially offset by lower margins on chemical product sales, compared with the prior year.

The $34.1 million increase in SG&A expenses largely reflected increases in payroll and other personnel related costs of $15.5 million and professional fees of $15.9 million. The higher payroll and other personnel related costswere due in part to increased staffing in the second half of fiscal 2017 to implement new Contracts and to improve overall service to customers. Higher professional fees primarily reflect costs for outside consultants supporting the execution of the Company's "Wesco 2020" initiative. Higher SG&A costs are reflected in a 0.5 percentage points increase in SG&A measured as a percent of net sales.

Interest Expense, Net

Interest expense, net was $48.9 million for the year ended September 30, 2018, which increased$9.1 million, compared to the year ended September 30, 2017. The increase was primarily due to both higher short-term borrowings and interest rates, partially offset by a lower amortization of deferred debt issuance costs when compared with the prior year which included a $2.3 million write off of deferred debt issuance costs.

36

Provision (Benefit) for Income Taxes

The income tax provision was $28.0 million for the year ended September 30, 2018, compared to the income tax benefit of $10.9 million for the year ended September 30, 2017. For the year ended September 30, 2017, we recorded a consolidated pre-tax loss of $248.2 million which resulted in an income tax benefit yielding an effective tax rate of 4.4%. For the year ended September 30, 2018, our effective tax rate was 46.1%. The 41.7 percentage point change of the effective tax rate compared to the same period in the prior year resulted primarily from (i) a $311.1 million goodwill impairment charge, a portion of which is permanently not deductible for tax purposes resulting in a lower income tax benefit and (ii) the establishment of a $15.1 million valuation allowance with respect to deferred tax assets for foreign tax credits resulting in a lower income tax benefit, both of which occurred during the year ended September 30, 2017 as well as (iii) an unfavorable provisional tax adjustment related to the enactment of the Tax Act which occurred during the year ended September 30, 2018. The difference in effective tax rates between years was partially offset in the current year by a decrease of the U.S. federal statutory tax rate from 35% to 21% related to the enactment of the Tax Act. The tax rate change became effective as of January 1, 2018 and therefore favorably impacts only a portion of our fiscal year ending September 30, 2018.

Net Income (Loss)

We reported net income of $32.7 million for the year ended September 30, 2018, compared to a net loss of $237.3 million for the year ended September 30, 2017. The increase in net income primarily reflects the goodwill impairment charge of $311.1 million in 2017, as well as a current year increase in gross profit of $41.2 million, partially offset by current year increases in SG&A expenses of $34.1 million, interest expense of $9.1 million and the provision for income taxes, as discussed above.

Year ended September 30, 2017 compared with the year ended September 30, 2016

Net Sales

 Consolidated net sales decreased $48.0 million, or 3.2%, to $1,429.4 million for the year ended September 30, 2017 compared with $1,477.4 million for the year ended September 30, 2016. Foreign currency translation impacts reduced sales by $22.9 million. Excluding foreign currency translation impacts, net sales for the year ended September 30, 2017 decreased $25.1 million compared to the same period in the prior year. The $25.1 million decrease was due to a decrease in ad hoc sales of $27.7 million, partially offset by an increase in Contract sales of $2.6 million. The decline in ad hoc sales was primarily due to production schedule changes and customer service issues. Contract sales for the year ended September 30, 2016 included $9.8 million related to a large commercial hardware contract that ended on March 31, 2015. Excluding this $9.8 million, which did not repeat in the corresponding 2017 period, Contract sales increased $12.4 million due to significant new Contracts partially offset by lost Contracts and declines on existing and renewed Contracts. The reduction in customer production days and customer service issues also affected Contract sales; however, other increases in Contract sales more than offset this impact. Ad hoc and Contract sales as a percentage of net sales represented 24% and 76%, respectively, for the year ended September 30, 2017 as compared to 25% and 75%, respectively, for the same period in the prior year.

Income (loss) from Operations

Consolidated loss from operations was $208.8 million for the year ended September 30, 2017 due to the non-cash goodwill impairment charge of $311.1 million partially offset by $102.3 million in income from operations. Income from operations excluding the goodwill impairment charge decreased $56.5 million, or 35.5%, compared with $158.8 million income from operations for the year ended September 30, 2016. Loss from operations was 14.6% of net sales for the year ended September 30, 2017. Excluding the goodwill impairment, income from operations as a percentage of net sales was 7.2% compared to an income from operations of 10.7% of net sales for the year ended September 30, 2016, a decrease of 3.5 percentage points. Average gross margins decreased 1.3 percentage points and SG&A as a percent of net sales increased by 2.3 percentage points.

The $56.5 million decrease in income from operations excluding the goodwill impairment charge was comprised of a decrease in gross profit of $31.8 million and an increase in SG&A expenses of $24.7 million. Foreign currency translation had a $7.2 million negative impact on gross profit. The remaining $24.6 million decrease in gross profit was primarily driven by the decrease in sales on a constant currency basis and decline in gross margins. The 1.3 percentage point decline in gross margins was due primarily to changes in product mix, a decrease in ad hoc margins and an increase in provisions for customer claims compared to the same period of the prior year.

37

The $29.0 million increase in SG&A expenses, excluding a benefit of $4.3 million related to the impact of foreign currency translation, largely reflected increases in payroll and other personnel related costs of $25.3 million, IT related costs of $2.5 million, travel expenses of $1.9 million, rent expense of $1.7 million, depreciation expense of $1.3 million, repair and maintenance costs of $1.0 million and bad debt expenses of $1.0 million. The increase in payroll and other personnel related costswas due in part to increased staffing required to begin implementing new contracts, and, to a lesser extent, to other headcount increases, wage increases, and higher incentive compensation than in fiscal 2016. These increases were partially offset by decreases in professional fees of $2.9 million, commissions of $1.2 million, non-cash stock-based compensation of $1.1 million and property and liability insurance of $1.0 million.

Changes in unallocated corporate costs are included above, which were $0.2 million lower than the prior year, primarily driven by decreases in non-cash stock-based compensation of $1.8 million and professional fees of $1.7 million, partially offset by an increase in payroll and other personnel related costs of $3.4 million including $1.7 million of severance costs.

Interest Expense, Net

Interest expense, net was $39.8 million for the year ended September 30, 2017, which increased $2.9 million, or 7.9%, compared to the year ended September 30, 2016. The increase was primarily due to $2.3 million of deferred debt issuance costs written off in the year ended September 30, 2017 as debt extinguishment loss related to the Credit Agreement (as defined and described in Note 11 of Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K), as well as additional interest expense from our borrowing against the revolving facility, partially offset by a lower interest expense due to a reduction of the term loans compared to the same period of the prior year.

Other Income, Net

Other income, net was $0.4 million for the year ended September 30, 2017, which decreased by $3.4 million compared to the year ended September 30, 2016. The decline was primarily related to a decrease in foreign currency exchange gain associated with transactions denominated in currencies other than the respective functional currency of the reporting subsidiary.

Provision (Benefit) for Income Taxes

The income tax benefit was $10.9 million for the year ended September 30, 2017, compared to the income tax provision of $34.2 million for the year ended September 30, 2016. Our effective tax rate was 4.4% and 27.2% for the years ended September 30, 2017 and 2016, respectively. The decrease in our effective tax rate resulted primarily from (1) the $311.1 million goodwill impairment charge, a portion of which is permanently not deductible for tax purposes, (2) the recording of $37.5 million of U.S. taxes on certain previously undistributed foreign earnings, and (3) the establishment of a $15.1 million valuation allowance with respect to a deferred tax asset for foreign tax credits. Refer to Note 15 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information about our benefit for income taxes for the year ended September 30, 2017. Management’s decision to record a $37.5 million U.S. tax charge on certain undistributed foreign earnings will allow for the future repatriation of up to $126.5 million of foreign earnings to the U.S. without an expected incremental U.S. tax provision impact.

Net Income (loss)

We reported a net loss of $237.3 million for the year ended September 30, 2017, compared to a net income of $91.4 million for the year ended September 30, 2016. Net loss was 16.6% of net sales for the year ended September 30, 2017, as compared to net income of 6.2% of net sales for the year ended September 30, 2016. This decrease in net income was primarily driven by a non-cash goodwill impairment charge of $311.1 million, a decrease in gross profit of $31.8 million and an increase in SG&A expenses of $24.7 million, partially offset by a benefit for income taxes, as discussed above.

38

Americas Segment

	Years Ended September 30,
Americas Results of Operations	2018		2017			2016
	(dollars in thousands)
Net sales	$	1,271,893	$	1,142,366		$	1,177,496
Gross profit	329,828		284,285			301,706
Selling, general & administrative expenses	200,920		189,383			167,547
Goodwill impairment charge	—		308,403			—
Income (loss) from operations	$	128,908	$	(213,501	)	$	134,159

	(as a percentage of net sales, numbers rounded)
Gross profit	25.9	%	24.9	%	25.6	%
Selling, general & administrative expenses	15.8	%	16.6	%	14.2	%
Goodwill impairment charge	—	%	27.0	%	—	%
Income (loss) from operations	10.1	%	(18.7	)%	11.4	%

Year ended September 30, 2018 compared with the year ended September 30, 2017

Net Sales

Net sales for our Americas segment increased $129.5 million, or 11.3%, to $1,271.9 million for the year ended September 30, 2018, compared with $1,142.4 million for the year ended September 30, 2017. The $129.5 millionincrease was due primarily to an increase in ad hoc sales, chemical product sales and hardware Contract sales, and one-time sales of $16.9 million in 2018 related to customer contract related claims.

Income (Loss) from Operations

Income from operations for our Americas segment for the year ended September 30, 2018 was $128.9 million compared with a $213.5 million loss from operations for the year ended September 30, 2017. The increase in income from operations reflects primarily a prior year non-cash goodwill impairment charge of $308.4 million. Excluding the prior year goodwill impairment charge, income from operations increased $34.0 million compared with the prior year. The $34.0 million increase is comprised of higher gross profit of $45.5 million which was partially offset by an increase in SG&A expenses of $11.5 million. Income from operations as a percentage of net sales was 10.1% for the year ended September 30, 2018, compared with 8.3% for the year ended September 30, 2017 excluding the goodwill impairment charge.

The $45.5 millionincrease in gross profit was primarily driven by increases in ad hoc, hardware Contract and chemical product sales compared with the prior year. Average gross margins increased 1.0 percentage point, due primarily to higher margins for ad hoc and hardware Contract sales, offset partially by lower margins for chemical product sales, compared with the same period in the prior year.

The $11.5 millionincrease in SG&A expenses reflected increases in payroll and other personnel related costs of $11.9million, bad debt expense of $0.7 million and depreciation expense of $0.7 million. These increases were partially offset by lower stock-based compensation expense of $0.3 million, IT related costs of $0.2 million, integration costs of $0.5 million and marketing and travel costs of $0.5 million. The increase in payroll and other personnel related costswas due in part to increased staffing required to implement new Contracts and improve overall service to customers. SG&A as a percent of net sales declined 0.8 percentage points.

Year ended September 30, 2017 compared with the year ended September 30, 2016

Net Sales

Net sales for our Americas segment decreased $35.1 million, or 3.0%, to $1,142.4 million for the year ended September 30, 2017, compared with $1,177.5 million for the year ended September 30, 2016. Foreign currency translation

39

impacts reduced sales by $3.3 million. Excluding foreign currency translation impacts, net sales for the year ended September 30, 2017 decreased $31.8 million compared to the same period in the prior year. The $31.8 million decline was due to a decrease in ad hoc sales of $34.9 million, slightly offset by an increase in Contract sales of $3.1 million. The $34.9 million decline in ad hoc sales was primarily due to production schedule changes and customer service issues. Contract sales for the year ended September 30, 2016 included $9.8 million related to a large commercial hardware contract that ended on March 31, 2015. Excluding this $9.8 million, which did not repeat in the corresponding 2017 period, Contract sales increased $12.9 million due to increases in contract volume and new contracts, net of contracts losses.

Income (loss) from Operations

Loss from operations for our Americas segment for the year ended September 30, 2017 was $213.5 million due to the non-cash goodwill impairment charge of $308.4 million partially offset by $94.9 million in income from operations. Income from operations excluding goodwill impairment decreased $39.3 million, or 29.3%, compared with $134.2 million of income from operations for the same period in the prior year. Excluding the goodwill impairment charge, income from operations as a percentage of net sales was 8.3% for the year ended September 30, 2017, compared to 11.4% for the year ended September 30, 2016, a decline of 3.1 percentage points. Average gross margins decreased 0.7 percentage points and SG&A as a percent of net sales increased by 2.4 percentage points.

The $39.3 million decrease in income from operations excluding goodwill impairment charge was comprised of a decrease in gross profit of $17.4 million and an increase in SG&A expenses of $21.9 million. The foreign currency translation impact on gross profit was a negative $1.3 million. The remaining $16.1 million decline in gross profit was primarily driven by lower net sales, and a decrease in gross margins caused by changes in sales mix, partially offset by lower write downs of E&O inventory. The 0.7 percentage point decline in gross margins was due primarily to changes in product mix, a decrease in ad hoc margins and an increase in provisions for customer claims compared to the same period of the prior year. The increase in SG&A expenses was $22.8 million after adjusting for the $0.9 million favorable foreign currency translation impact, which was largely driven by increases in payroll and other personnel related costs of $17.5 million, IT related costs of $2.5 million, rent expense of $1.5 million, bad debt expense of $1.3 million, travel expenses of $1.1 million, depreciation expense of $1.1 million, non-cash stock-based compensation of $0.7 million and repair and maintenance cost of $0.7 million. These increases were partially offset by decreases in professional fees of $1.3 million, commission of $1.1 million and property liability insurance of $1.0 million.

EMEA Segment

	Years Ended September 30,
EMEA Results of Operations	2018		2017		2016
	(dollars in thousands)
Net sales	$	262,087	$	258,072	$	274,952
Gross profit	64,499		$	70,209	86,096
Selling, general & administrative expenses	46,573		45,071		42,215
Income from operations	$	17,926	$	25,138	$	43,881

	(as a percentage of net sales, numbers rounded)
Gross profit	24.6	%	27.2	%	31.3	%
Selling, general & administrative expenses	17.8	%	17.5	%	15.3	%
Income from operations	6.8	%	9.7	%	16.0	%

Year ended September 30, 2018 compared with the year ended September 30, 2017

Net Sales

Net sales for our EMEA segment increased $4.0 million, or 1.6%, to $262.1 million for the year ended September 30, 2018, compared with $258.1 million for the year ended September 30, 2017. The $4.0 million increase reflects higher chemical product sales, partially offset by a decline in Ad hoc sales and hardware Contract sales.

40

Income from Operations

Income from operations for our EMEA segment declined $7.2 million, or 28.7%, to $17.9 million for the year ended September 30, 2018, compared to $25.1 million for the year ended September 30, 2017. The $7.2 million decline in income from operations was comprised of a decrease in gross profit of $5.7 million and an increase in SG&A expenses of $1.5 million. Income from operations as a percentage of net sales was 6.8% for the year ended September 30, 2018, compared to 9.7% for the year ended September 30, 2017, a decrease of 2.9 percentage points.

The $5.7 million decline in gross profit was primarily driven by lower Contracts sales of hardware products and a weaker sales mix compared with the prior year. Average gross margins declined 2.6 percentage points, due primarily to a weaker sales mix and lower margins for hardware Contract sales and chemical product sales compared with the prior year.

The $1.5 millionincrease in SG&A expenses primarily reflects a negative $1.8 million impact resulting from strengthening of the British Pound vs. the U.S. dollar. Excluding the exchange rate impact of $1.8 million, SG&A decreased slightly compared to the prior year, primarily driven by decreases in marketing and travel expenses of $0.5 million, bad debt expense of $0.7 million, partially offset by increases in payroll and other people costs of $1.1 million.

Year ended September 30, 2017 compared with the year ended September 30, 2016

Net Sales

Net sales for our EMEA segment decreased $16.9 million, or 6.1%, to $258.1 million for the year ended September 30, 2017, compared with $275.0 million for the year ended September 30, 2016. Foreign currency translation impacts reduced sales by $19.5 million. Excluding foreign currency translation impacts, net sales for the year ended September 30, 2017 increased $2.6 million compared to the same period in the prior year. The $2.6 million increase was due to ad hoc sales growth of $7.2 million, partially offset by a decline in Contract sales of $4.6 million. The increase in ad hoc sales was primarily due to increased customer production rates and expanded content. The decrease in Contract sales was driven by a decline in existing contract volumes partially offset by new contracts in excess of lost business.

Income from Operations

Income from operations for our EMEA segment decreased $18.7 million, or 42.7%, to $25.1 million for the year ended September 30, 2017, compared to $43.9 million for the year ended September 30, 2016. Income from operations as a percentage of net sales was 9.7% for the year ended September 30, 2017, compared to 16.0% for the year ended September 30, 2016, a decrease of 6.3 percentage points. The decrease in income from operations was comprised of a $15.9 million decrease in gross profit and a $2.8 million increase in SG&A expenses. Average gross margins decreased 4.1 percentage points and SG&A as a percent of net sales increased by 2.2 percentage points. The $15.9 million decrease in gross profit was partially due to a $5.9 million decrease due to negative foreign currency translation impact. The remaining $10.0 million decrease in gross profit was primarily driven by lower product margin, higher write downs of E&O inventory, higher freight and expedite costs, partially offset by the increase in sales on a constant currency basis. The 4.1 percentage point decline in gross margins was due primarily to a decrease in chemical margins, a decrease in ad hoc margins due to higher than usual margins in the prior year, an increase in write downs of E&O inventory and changes in product mix compared to the same period of the prior year. Excluding a favorable $3.4 million impact of foreign currency translation, SG&A expenses increased by $6.2 million, largely driven by increases in payroll and other people costs of $3.9 million, travel expenses of $0.6 million, repair and maintenance costs of $0.3 million, rent expense of $0.2 million, warehouse expense of $0.2 million, depreciation expense of $0.2 million and professional fees of $0.2 million.

41

APAC Segment

	Years Ended September 30,
APAC Results of Operations	2018		2017			2016
	(dollars in thousands)
Net sales	$	36,470	$	28,991		$	24,918
Gross profit	8,829		7,413			5,890
Selling, general & administrative expenses	6,812		4,874			4,694
Goodwill impairment charge	—		2,711			—
Income (loss) from operations	$	2,017	$	(172	)	$	1,196

	(as a percentage of net sales, numbers rounded)
Gross profit	24.2	%	25.6	%	23.6	%
Selling, general & administrative expenses	18.7	%	16.8	%	18.8	%
Goodwill impairment charge	—	%	9.4	%	—	%
Income (loss) from operations	5.5	%	(0.6	)%	4.8	%

Year ended September 30, 2018 compared with the year ended September 30, 2017

Net Sales

Net sales for our APAC segment increased $7.5 million, or 25.8%, to $36.5 million for the year ended September 30, 2018, compared with $29.0 million for the year ended September 30, 2017. The increase primarily reflects increases in ad hoc sales, hardware Contract sales and chemical product sales.

Income (Loss) from Operations

Income from operations of our APAC segment for the year ended September 30, 2018 was $2.0 million compared with a $0.2 million of loss from operations for the same period in the prior year. The $2.2 millionincrease in income from operations primarily resulted from a non-cash goodwill impairment charge of $2.7 million recorded for the three months ended June 30, 2017. Excluding the prior year's goodwill impairment charge of $2.7 million, income from operations declined $0.5 million when compared with the prior year. Gross profit increased $1.4 million, which was more than offset by an increase in SG&A expenses of $1.9 million. Excluding the prior year's goodwill impairment charge, income from operations as a percentage of net sales declined 3.3 percentage points compared with the prior year.

The $1.4 millionincrease in gross profit was primarily driven by increases in ad hoc sales and hardware Contract sales and a lower E&O provision, partially offset by lower chemical product sales compared with the prior year. Average gross margins declined 1.4 percentage points due primarily to lower gross margins in ad hoc sales, hardware Contract sales and chemical product sales, offset partially by a stronger sales mix and a lower E&O provision, compared with the prior year.

The $1.9 millionincrease in SG&A expenses was due primarily to increases in payroll and other personnel related costs of $1.1 million and building and equipment related expenses of $0.6 million as part of our growth in the APAC region. SG&A as a percent of net sales increased 1.9 percentage points.

Year ended September 30, 2017 compared with the year ended September 30, 2016

Net Sales

Net sales for our APAC segment increased $4.1 million, or 16.3%, to $29.0 million for the year ended September 30, 2017, compared with $24.9 million for the year ended September 30, 2016. Foreign currency translation impacts reduced sales by $0.2 million. Excluding foreign currency translation impacts, net sales for the year ended September 30, 2017 increased $4.3 million compared to the same period in the prior year. The $4.3 million increase was due to Contract sales growth of $4.1 million and ad hoc sales growth of $0.2 million. The increase in Contract sales was primarily due to increased customer production rates and new contracts.

42

Income (loss) from Operations

Loss from operations of our APAC segment for the year ended September 30, 2017 was $0.2 million due to the non-cash goodwill impairment charge of $2.7 million partially offset by $2.5 million in income from operations. Income from operations excluding the goodwill impairment increased $1.3 million, or 112.2%, compared with $1.2 million of income from operations for the same period in the prior year. Excluding the goodwill impairment, income from operations as a percentage of net sales was 8.8% for the year ended September 30, 2017, compared to 4.8% for the year ended September 30, 2016, an increase of 4.0 percentage points. The $1.3 million increase in income from operations was comprised of an increase in gross profit of $1.5 million, partially offset by an increase in SG&A expenses of $0.2 million. Average gross margins increased 2.0 percentage points and SG&A as a percent of net sales decreased by 2.0 percentage points. The increase in gross profit was primarily driven by higher net sales and lower write downs of E&O inventory. The 2.0 percentage point increase in gross margins was primarily driven by lower write downs of E&O inventory. The higher SG&A expenses was driven by an increase in payroll and other personnel related costs of $0.5 million, partially offset by a decrease in bad debt expense of $0.2 million.

Unallocated Corporate Costs

	Selling, General and Administrative Expenses
Years Ended September 30,	Americas		EMEA		APAC		Unallocated Corporate Costs		Consolidated
2018	$	200,920	$	46,573	$	6,812	$	39,383	$	293,688
2017	189,383		45,071		4,874		20,260		259,588
2016	167,547		42,215		4,694		20,486		234,942

SG&A expenses for the Americas, EMEA and APAC segments are discussed previously. Following are discussions on SG&A expenses not allocated to the three segments.

Year ended September 30, 2018 compared with the year ended September 30, 2017

Unallocated corporate costs were $19.1 million higher than the prior year, primarily driven by increases in professional fees of $15.9 million mainly reflecting costs for outside consultants assisting with the Company's "Wesco 2020" initiative, stock-based compensation expense of $2.3 million, and payroll and other personnel related costs of $0.3 million.

Year ended September 30, 2017 compared with the year ended September 30, 2016

Unallocated corporate costs were $0.2 million lower than the prior year, primarily driven by decreases in non-cash stock-based compensation of $1.8 million and professional fees of $1.7 million, partially offset by an increase in payroll and other personnel related costs of $3.4 million including $1.7 million of severance costs.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash flow from operations and available borrowings under our revolving facility. We have historically funded our operations, debt payments, capital expenditures and discretionary funding needs from our cash from operations. We had total available cash and cash equivalents of $46.2 million and $61.6 million as of September 30, 2018 and 2017, respectively, of which $21.3 million, or 46.1%, and $48.7 million, or 79.0%, was held by our foreign subsidiaries as of September 30, 2018 and 2017, respectively. None of our cash and cash equivalents consisted of restricted cash and cash equivalents as of September 30, 2018 or 2017. All of our foreign cash and cash equivalents are readily convertible into U.S. dollars or other foreign currencies.

As previously disclosed, during the three months ended September 30, 2017, we reassessed the potential need to repatriate foreign earnings based on our current long-range outlook, the current imbalance between cash generated and used in the U.S. and the increase in the percentage of excess cash that must be used to repay debt under the Credit Agreement. We determined it was likely that we would, in the future, repatriate approximately $126.5 million of previously earned and undistributed earnings. Accordingly, we recognized a $38.7 million deferred tax liability for U.S. taxes that would become due upon such repatriation net of foreign tax credits estimated to be available in the years when we expected to repatriate the previously undistributed earnings. With the enactment of the Tax Act, we reduced the deferred tax liability by $37.7 million to

43

$1.0 million during the three months ended December 31, 2017, and further reduced the deferred tax liability by $0.5 million to $0.5 million during the three months ended September 30, 2018 (see Note 15 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion about the transition tax provision for our foreign earnings under the Tax Act).

Our primary uses of cash currently are for:

• operating expenses;

• working capital requirements to fund the growth of our business;

• capital expenditures that primarily relate to IT equipment, software development and implementation and our warehouse operations; and

• debt service requirements for borrowings under the Credit Facilities (as defined below under “—Credit Facilities”).

Due to fluctuations in our cash flows, including for investment in working capital to fund growth in our operations, it is necessary from time to time to borrow under our revolving facility to meet cash demands. Provided we are in compliance with applicable covenants, we can borrow up to $180.0 million on our revolving credit facility of which $54.0 million was outstanding as of September 30, 2018. We anticipate that cash provided by operating activities, cash and cash equivalents and borrowing capacity under our revolving facility will be sufficient to meet our cash requirements for the next twelve months. As of September 30, 2018, we did not have any material capital expenditure commitments.

Cash Flows

Our cash and cash equivalents decreased by $15.4 million during the year ended September 30, 2018. The decrease primarily reflects our focus to reduce cash balances while we have borrowings under our revolving facility.

A summary of our operating, investing and financing activities are shown in the following table (in thousands):

	Years Ended September 30,
Consolidated statements of cash flows data:	2018			2017			2016
Net Income (loss)	$	32,654		$	(237,346	)	$	91,378
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	69,753			346,433			64,012
Subtotal	102,407			109,087			155,390
Changes in working capital assets and liabilities	(84,539		)	(136,015		)	(37,935		)
Net cash provided by (used in) operating activities	17,868			(26,928		)	117,455
Net cash used in investing activities	(5,666		)	(8,923		)	(11,992		)
Net cash (used in) provided by financing activities	(27,144		)	20,645			(108,121		)
Effect of foreign currency exchange rate on cash and cash equivalents	(461		)	(230		)	(3,147		)
Net decrease in cash and cash equivalents	$	(15,403	)	$	(15,436	)	$	(5,805	)

44

Operating Activities

Our cash flows from operations fluctuates based on the level of profitability during the period as well as the timing of investments in inventory, collections of cash from our customers, payments of cash to our suppliers, and the timing of cash payments or receipts associated with other working capital accounts such as changes in our prepaid expenses and accrued liabilities or the timing of our tax payments.

Year ended September 30, 2018 compared with the year ended September 30, 2017

Our operating activities generated $17.9 million of cash in the year ended September 30, 2018, an increase of $44.8 million as compared to the year ended September 30, 2017.  The increase in operating cash flow of $44.8 million reflects a $6.7 million decline in cash provided from net income excluding non-cash items, which was more than offset by a series of year-over-year differences reflected in balance sheet changes reducing cash used for operations by $51.5 million. Comparing 2018 to 2017, the key balance sheet changes include:

Favorable changes totaling $77.0 million:

• a smaller inventory increase of $56.7 million due to lower incremental investment based upon tighter inventory management,

• a net $6.5 million favorable change in income taxes payable and income taxes receivable including a provisional tax provided for repatriation of our foreign earnings (the “Transition Tax”), and

• a $13.8 million favorable difference in the change for remaining working capital assets and liabilities for the year ended September 30, 2018.

Unfavorable changes totaling $25.5 million:

• a $19.9 million increase in the accounts receivable balance largely driven by higher overall sales, and

• a $5.6 million decline in the accounts payable balance principally reflecting differences in timing of payments around the cutoff of each fiscal year.

See Note 15 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion about the transition tax provision for our foreign earnings under the Tax Act.

Year ended September 30, 2017 compared with the year ended September 30, 2016

Our operating activities used $26.9 million of cash in the year ended September 30, 2017, a decrease of $144.4 million as compared to the year ended September 30, 2016.  The decrease in operating cash flow of $144.4 million was primarily due to cash used for inventory purchases of $129.8 million during fiscal 2017 as compared to cash used for inventory purchases of $41.8 million during fiscal 2016, and to a lesser extent, a $46.3 million decrease in net (loss) income adjusted for non-cash items. The remaining decrease of $10.1 million represents cash used for other working capital changes. The $88.0 million increase of cash used for inventory purchases was to support new contracts, multi-year inventory purchases to support long-term contracts, and increased stocking to support our MRO and ad hoc business objectives. During the year ended September 30, 2017, net loss adjusted for non-cash items provided cash of $109.1 million, while net income adjusted for non-cash items provided cash of $155.4 million in the prior year. The decrease of $46.3 million of cash provided from results of operations was due to lower sales volumes, a decline in gross margins and higher spending for SG&A expenses.

Investing Activities

Our investing activities used $5.7 million, $8.9 million and $12.0 million of cash in the years ended September 30, 2018, 2017 and 2016, respectively. Investing activities consist primarily of software development and software implementation projects and the purchase of property and equipment for our warehouses and distribution locations.

Financing Activities

Our financing activities used $27.1 million of cash in the year ended September 30, 2018, which consisted of $68.5 million and $20.0 million for repayments of our borrowings under our revolving facility and long-term debt, respectively, $3.0 million for repayments of our capital lease obligations, a $1.9 million payment for debt issuance costs and a $1.3 million settlement for restricted stock tax withholding, partially offset by $67.5 million of short-term borrowings.

45

Our financing activities generated $20.6 million of cash in the year ended September 30, 2017, which consisted primarily of $55.0 million of short-term borrowings and $3.0 million of proceeds received in connection with the exercise of stock options, partially offset by $21.3 million for repayments of our long-term debt, $2.1 million for repayments of our capital lease obligations and a $12.8 million payment for debt issuance costs.

Our financing activities used $108.1 million of cash in the year ended September 30, 2016, which consisted primarily of $111.0 million for repayments of our long-term debt, $1.3 million for repayments of capital lease obligations, and a $2.1 million payment for debt issuance costs, partially offset by $6.1 million of proceeds received in connection with the exercise of stock options.

Credit Facilities

The credit agreement, dated as of December 7, 2012 (as amended, the Credit Agreement), by and among the Company, Wesco Aircraft Hardware Corp. and the lenders and agents party thereto, which governs our senior secured credit facilities, provides for (1) a $400.0 million senior secured term loan A facility (the term loan A facility), (2) a $180.0 million revolving facility (the revolving facility) and (3) a $525.0 million senior secured term loan B facility (the term loan B facility). We refer to the term loan A facility, the revolving facility and the term loan B facility, together, as the “Credit Facilities.” See Note 11 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a summary of the Credit Facilities and the Credit Agreement.

As of September 30, 2018, our outstanding indebtedness under our Credit Facilities was $854.6 million, which consisted of (1) $360.0 million of indebtedness under the term loan A facility, (2) $54.0 million of indebtedness under the revolving facility, and (3) $440.6 million of indebtedness under the term loan B facility. As of September 30, 2018, $126.0 million was available for borrowing under the revolving facility to fund our operating and investing activities under the terms and any covenants contained in the Credit Agreement.

As disclosed in Note 11 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, our borrowings under the Credit Facilities are subject to a financial covenant based upon our Consolidated Total Leverage Ratio, with the maximum ratio set at 6.00 for the quarter ended September 30, 2018. In addition, the Excess Cash Flow Percentage (as such term is defined in the Credit Agreement) is 75%, provided that the Excess Cash Flow Percentage shall be reduced to (i) 50%, if the Consolidated Total Leverage Ratio is less than 4.00 but greater than or equal to 3.00, (ii) 25%, if the Consolidated Total Leverage Ratio is less than 3.00 but greater than or equal to 2.50, and (iii) 0%, if the Consolidated Total Leverage Ratio is less than 2.50.

The Credit Agreement also contains customary negative covenants, including restrictions on our and our restricted subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness or enter into transactions with affiliates. As of September 30, 2018, we were in compliance with all of the foregoing covenants, and our Consolidated Total Leverage Ratio was 4.18.

A breach of the Consolidated Total Leverage Ratio covenant or any of other covenants contained in the Credit Agreement could result in an event of default in which case the lenders may elect to declare all outstanding amounts to be immediately due and payable. If the debt under the Credit Facilities were to be accelerated, our available cash would not be sufficient to repay our debt in full.

46

Contractual Obligations

The following table is a summary of contractual cash obligations at September 30, 2018 (in thousands):

			Payments Due by Period
	Total		< 1 Year		1 - 3 Years		3 - 5 Years		> 5 Years
Long-term debt obligations (1)	$	891,189	$	59,980	$	831,209	$	—	$	—
Borrowings under the revolving facility (2)	57,462		56,608		854		—		—
Capital lease obligations	4,534		2,211		1,673		585		65
Operating lease obligations	50,785		12,439		17,435		12,481		8,430
Transition tax payable (3)	9,277		742		1,484		1,484		5,567
Total by period	1,013,247		$	131,980	$	852,655	$	14,550	$	14,062
Other long-term liabilities (uncertainty in the timing of future payments) (4)	9,771
Total (5)	$	1,023,018

(1) Includes both principal and estimated variable interest expense payments. The interest rate used to calculate the estimated future variable interest expense is based on the actual interest rate applicable to the Company’s indebtedness as of September 30, 2018, which was 5.25% for the term loan A facility and 4.75% for the term loan B facility. The actual variable interest expense paid by the Company in the future may vary from what is presented above. Investors should refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities” and “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk” for additional information.

(2) Includes both principal, estimated variable interest expense payments and estimated undrawn fees. The interest rate used to calculate the estimated future variable interest expense is based on the weighted-average actual interest rate of 5.15%applicable to the Company’s borrowings under the revolving facility as of September 30, 2018. The actual variable interestexpense paid by the Company in the future may vary from what is presented above. Investors should refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities” and “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk” for additional information.

(3) Includes our U.S. tax payable for the Transition Tax for repatriation of our foreign earnings.

(4) Other long-term liabilities primarily include non-current income taxes payable and non-current deferred tax liabilities. Due to the uncertainty in the timing of future payments, uncertain tax positions of approximately $7.0 million and non-current deferred tax liabilities of approximately $2.8 million were presented as one aggregated amount in the total column on a separate line in this table.

(5) In addition to the contractual obligations noted in the table below, the Company may issue purchase orders to suppliers in the ordinary course of business to purchase inventory in advance of expected delivery at lead-times that vary based on a variety of factors specific to individual suppliers and circumstances. As of September 30, 2018, the Company had approximately $401.2 million of these open purchase orders that are not included in the table below. In most cases, open purchase orders for products that have not yet entered the supplier’s production process can be cancelled without incurring significant termination fees or other penalties. For industry standard products, once production has begun, cancellation of an open purchase order may require payment of a termination fee or other adjustments to the pricing of the uncancelled portion of the applicable order which generally are insignificant in amount and typically subject to negotiation. For proprietary products, a cancellation fee may apply or we may be required to pay up to the full purchase price for the cancelled product if we cancel after the start of the production process. However, in many cases, our customers are contractually obligated to pay the costs associated with the cancellation of such proprietary parts.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements.

47

Recently Issued and Adopted Accounting Pronouncements

See Note 3 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a summary of recently issued and adopted accounting pronouncements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Our exposure to market risk consists of foreign currency exchange rate fluctuations, changes in interest rates and fluctuations in fuel prices.

Foreign Currency Exposure

We operate on an international basis with a portion of our revenue and expenses transacted in currencies other than the U.S. dollar. During the years ended September 30, 2018 and 2017, 28% and 29%, respectively, of our net sales were made by our foreign subsidiaries, and our total net sales to customers outside the U.S. represented 33% and 35%, respectively, of our total net sales. The majority of our foreign sales are denominated in U.S. dollars and our major foreign subsidiaries have U.S. dollar functional currencies. We are exposed to three types of foreign currency exposure: economic exposure (which could impact our operating margins where the proportions of revenue and expenses denominated in a foreign currency are different), transactional exposure (which could result in foreign currency transaction gains or losses) and translation impacts (which could impact the amount of revenues, expenses, assets and liabilities reported in U.S. dollars).

Wesco Aircraft EMEA’s revenues and product costs are predominately denominated in U.S. dollars while its operating expenses are predominately denominated in British pounds. When our subsidiaries have revenues or expenses denominated in currencies other than their functional currencies, exchange rate movements can impact the operating margins reported by the subsidiaries. Due to the relative size of its operations, Wesco Aircraft EMEA represents our primary economic exposure with respect to foreign currency fluctuations. A hypothetical 10% weakening of the U.S. dollar against the British pound would have decreased our operating profit by $2.3 million and a hypothetical 10% weakening of the U.S. dollar against the euro would have decreased our operating profit by $1.9 million.

Certain assets, including certain bank accounts and accounts receivables of some of our business units, and certain liabilities, including accounts payable, exist in currencies other than the functional currency of the related business units. As a result, these assets and liabilities are affected by foreign currency exchange rate fluctuations. These balances are principally denominated in U.S. dollars, British pounds, euros, Canadian dollars, and Mexican pesos. When these transactions are entered into, outstanding or settled in a currency other than the functional currency, we may recognize a foreign currency transaction gain or loss. We attempt to limit this exposure by seeking to maintain a low net asset or net liability exposure to each currency.

The results of operations of our foreign subsidiaries are translated into U.S. dollars at the average foreign currency exchange rate for each relevant period. This impact is sometimes partially offset by the economic impact when the underlying sale or expense is denominated in U.S. dollars making the net exposure difficult to quantify, predict, or mitigate. Any adjustments resulting from the translation are recorded in accumulated other comprehensive loss on our statements of changes in stockholders’ equity.

From time to time, we enter into currency forward and option contracts to limit exposure to foreign currency exchange rate changes and will continue to monitor our exposure to foreign currency exchange rate changes. As of September 30, 2018, we had no outstanding currency forward and option contracts. We do not enter into currency forward and option contracts for trading or speculative purposes.

Interest Rate Risk

Our principal interest rate exposure relates to our Credit Facilities, which bear interest at a variable rate. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities.” If interest rates rise, our debt service obligations on the borrowings under the Credit Facilities would increase even though the amount borrowed remained the same, which would affect our results of operations, financial condition and liquidity. If variable interest rates were to increase by 1.0%, our interest expense would increase $8.5 million per year, without taking into account the effect of any hedging instruments.

We periodically enter into interest rate swap agreements to manage interest rate risk on our borrowing activities. On September 30, 2018, we had three interest rate swap agreements, one of which effectively fixed our interest rate on variable rate debt of $275.0 million to 2.2625% plus the applicable margin and two of which effectively fixed our interest rate on

48

variable rate debt of $160.8 million to 2.7900% plus the applicable margin. See further discussion on our derivative financial instruments in Note 12 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

We do not hold or issue derivative financial instruments for trading or speculative purposes.

Fuel Price Risk

Our principal direct exposure to increases in fuel prices is as a result of potential increased freight costs caused by fuel surcharges or other fuel cost-driven price increases implemented by the third-party package delivery companies on which we rely. Our annual freight costs (which consists of in-bound and out-bound freight-related costs, net of freight revenue) during the years ended September 30, 2018 and 2017 were $29.7 million and $26.9 million, respectively, and as a result, we do not believe the impact of these potential fuel surcharges or fuel cost-driven price increases would have a material impact on our business, financial condition and results of operations. However, increases in fuel prices may have an indirect material adverse effect on our business, financial condition and results of operations, as such increases may contribute to decreased airline profitability and, as a result, decreased demand for new commercial aircraft that utilize the products we sell. See Part I, Item 1A. “Risk Factors—We may be materially adversely affected by high fuel prices.” We do not use derivatives to manage our exposure to fuel prices.

49

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Audited Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	51
Consolidated Balance Sheets	53
Consolidated Statements of Comprehensive Income (Loss)	54
Consolidated Statements of Stockholders’ Equity	55
Consolidated Statements of Cash Flows	56
Notes to Consolidated Financial Statements	57

50

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Wesco Aircraft Holdings, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Wesco Aircraft Holdings, Inc. and its subsidiariesas of September 30, 2018 and 2017, and the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended September 30, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of September 30, 2018, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2018 and 2017, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2018in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2018, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

51

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

November 15, 2018

We have served as the Company's auditor since 2006.

52

Wesco Aircraft Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except share and per share data)

	As of September 30,
	2018			2017
Assets
Current assets:
Cash and cash equivalents	$	46,222		$	61,625
Accounts receivable, net of allowance for doubtful accounts of $2,877 and $3,109 at September 30, 2018 and 2017, respectively	283,775			256,301
Inventories	884,212			827,870
Prepaid expenses and other current assets	15,291			13,733
Income taxes receivable	2,017			3,617
Total current assets	1,231,517			1,163,146
Property and equipment, net	44,205			50,355
Deferred debt issuance costs, net	2,827			3,676
Goodwill	266,644			266,644
Intangible assets, net	163,438			178,292
Deferred tax assets	65,135			76,038
Other assets	15,710			15,956
Total assets	$	1,789,476		$	1,754,107
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	180,494		$	184,273
Accrued expenses and other current liabilities	42,767			35,329
Income taxes payable	2,295			3,290
Capital lease obligations, current portion	2,205			2,952
Short-term borrowings and current portion of long-term debt	74,000			75,000
Total current liabilities	301,761			300,844
Capital lease obligations, less current portion	2,329			2,013
Long-term debt, less current portion	771,777			788,838
Deferred income taxes	2,803			3,197
Other liabilities	18,337			9,484
Total liabilities	1,097,007			1,104,376
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share: 50,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, class A, $0.001 par value, 950,000,000 shares authorized, 99,557,885 and 99,450,902 shares issued and outstanding at September 30, 2018 and 2017, respectively	99			99
Additional paid-in capital	444,531			436,522
Accumulated other comprehensive loss	(82,980		)	(84,626		)
Retained earnings	330,819			297,736
Total stockholders’ equity	692,469			649,731
Total liabilities and stockholders’ equity	$	1,789,476		$	1,754,107

See the accompanying notes to the consolidated financial statements.

53

Wesco Aircraft Holdings, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands, except per share data)

	Years Ended September 30,
	2018			2017			2016
Net sales	$	1,570,450		$	1,429,429		$	1,477,366
Cost of sales	1,167,294			1,067,522			1,083,674
Gross profit	403,156			361,907			393,692
Selling, general and administrative expenses	293,688			259,588			234,942
Goodwill impairment charge	—			311,114			—
Income (loss) from operations	109,468			(208,795		)	158,750
Interest expense, net	(48,880		)	(39,821		)	(36,901		)
Other income, net	24			369			3,741
Income (loss) before income taxes	60,612			(248,247		)	125,590
(Provision) benefit for income taxes	(27,958		)	10,901			(34,212		)
Net income (loss)	32,654			(237,346		)	91,378
Other comprehensive loss, net of income taxes:
Change in net foreign currency translation adjustment	(1,862		)	(7,138		)	(39,211		)
Change in net unrealized holding losses on derivatives	3,937			2,073			(1,629		)
Other comprehensive income (loss), net of income taxes	2,075			(5,065		)	(40,840		)
Comprehensive income (loss)	$	34,729		$	(242,411	)	$	50,538
Net income (loss) per share:
Basic	$	0.33		$	(2.40	)	$	0.94
Diluted	$	0.33		$	(2.40	)	$	0.93
Weighted average shares outstanding:
Basic	99,156,998			98,700,879			97,634,155
Diluted	99,500,477			98,700,879			98,165,856

See the accompanying notes to the consolidated financial statements.

54

Wesco Aircraft Holdings, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(dollars in thousands)

	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total Shareholders' Equity
	Shares	Amount
Balance at September 30, 2015	97,538,124	$	98	$	412,492		$	(38,721	)	$	443,704		$	817,573
Issuance of common stock	1,076,784	1		6,072			—			—			6,073
Settlement on restricted stock tax withholding	—	—		(857		)	—			—			(857		)
Excess tax benefit related to restricted stock units and stock options exercised	—	—		1,098			—			—			1,098
Stock-based compensation expense	—	—		8,490			—			—			8,490
Net income	—	—		—			—			91,378			91,378
Other comprehensive loss	—	—		—			(40,840		)	—			(40,840		)
Balance at September 30, 2016	98,614,908	99		427,295			(79,561		)	535,082			882,915
Issuance of common stock	835,994	—		2,964			—			—			2,964
Settlement on restricted stock tax withholding	—	—		(1,072		)	—			—			(1,072		)
Stock-based compensation expense	—	—		7,335			—			—			7,335
Net loss	—	—		—			—			(237,346		)	(237,346		)
Other comprehensive loss	—	—		—			(5,065		)	—			(5,065		)
Balance at September 30, 2017	99,450,902	99		436,522			(84,626		)	297,736			649,731
Issuance of common stock	106,983	—		78			—			—			78
Settlement on restricted stock tax withholding	—	—		(1,321		)	—			—			(1,321		)
Effect of adoption of accounting standard	—	—		—			(429		)	429			—
Stock-based compensation expense	—	—		9,252			—			—			9,252
Net income	—	—		—			—			32,654			32,654
Other comprehensive income	—	—		—			2,075			—			2,075
Balance at September 30, 2018	99,557,885	$	99	$	444,531		$	(82,980	)	$	330,819		$	692,469

See the accompanying notes to the consolidated financial statements.

55

Wesco Aircraft Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollars in thousands)

	Years Ended September 30,
	2018			2017			2016
Operating activities
Net income (loss)	$	32,654		$	(237,346	)	$	91,378
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	29,256			28,352			27,980
Amortization of deferred debt issuance costs	5,688			6,143			4,627
Bad debt and sales return reserve	220			225			(810		)
Stock-based compensation expense	9,252			7,335			8,490
Inventory provision	16,780			12,900			14,615
Goodwill impairment charge	—			311,114			—
Deferred income taxes	9,172			(21,070		)	13,212
Other non-cash items	(615		)	1,434			(4,102		)
Subtotal	102,407			109,087			155,390
Changes in assets and liabilities:
Accounts receivable	(28,393		)	(8,531		)	(4,077		)
Income tax receivable	1,544			(2,159		)	(1,269		)
Inventories	(73,106		)	(129,772		)	(41,798		)
Prepaid expenses and other assets	365			(5,989		)	(1,204		)
Accounts payable	(3,430		)	2,201			34,657
Accrued expenses and other liabilities	19,252			11,761			(11,008		)
Income tax payable	(771		)	(3,526		)	(13,236		)
Net cash provided by (used in) operating activities	17,868			(26,928		)	117,455
Investing activities
Purchase of property and equipment	(5,666		)	(8,923		)	(13,992		)
Proceeds from sales of assets	—			—			2,000
Net cash used in investing activities	(5,666		)	(8,923		)	(11,992		)
Financing activities
Proceeds from short-term borrowings	67,500			77,000			—
Repayments of short-term borrowings	(68,500		)	(22,000		)	—
Repayments of long-term debt	(20,000		)	(21,344		)	(111,000		)
Debt issuance costs	(1,900		)	(12,796		)	(2,126		)
Repayments of capital lease obligations	(3,001		)	(2,107		)	(1,309		)
Excess tax benefit related to stock-based incentive plans	—			—			1,098
Net proceeds from exercise of stock options	78			2,964			6,073
Settlement on restricted stock tax withholding	(1,321		)	(1,072		)	(857		)
Net cash (used in) provided by financing activities	(27,144		)	20,645			(108,121		)
Effect of foreign currency exchange rate on cash and cash equivalents	(461		)	(230		)	(3,147		)
Net decrease in cash and cash equivalents	(15,403		)	(15,436		)	(5,805		)
Cash and cash equivalents, beginning of period	61,625			77,061			82,866
Cash and cash equivalents, end of period	$	46,222		$	61,625		$	77,061

Supplemental disclosure of cash flow information (see Note 18)

 See the accompanying notes to the consolidated financial statements.

56

Wesco Aircraft Holdings, Inc. & Subsidiaries

Notes to the Consolidated Financial Statements

Note 1. Organization and Business

Our company, Wesco Aircraft Holdings, Inc., is a distributor and provider of comprehensive supply chain management services to the global aerospace industry. Our services range from traditional distribution to the management of supplier relationships, quality assurance, kitting, just-in-time (JIT) delivery, chemical management services, third-party logistics or fourth-party logistics programs and point-of-use inventory management.

In addition to the central stocking facilities, we use a network of forward-stocking locations to service customers in a JIT and or ad hoc manner. There are 56 administrative, sales and/or stocking facilities around the world with concentrations in North America and Europe. In addition to product fulfillment, we also provide comprehensive supply chain management services for selected customers. These services include procurement and JIT inventory management and delivery services.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of majority-owned and controlled subsidiaries. All intercompany accounts, transactions and profits have been eliminated. When we do not have a controlling interest in an entity, but exert significant influence over the entity, we apply the equity method of accounting. Our financial statements have been prepared under the assumption that our Company will continue as a going concern.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, receivable valuations and allowance for sales returns, inventory valuations of excess and obsolescence (E&O) inventories, the useful lives of long-lived assets including property, equipment and intangible assets, annual goodwill impairment assessment, stock-based compensation, income taxes and contingencies. Actual results could differ from such estimates.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities from date of purchase of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable consist of amounts owed to us by customers. We perform periodic credit evaluations of the financial condition of our customers, monitor collections and payments from customers, and generally do not require collateral. Accounts receivable are generally due within 30 to 60 days. We provide for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. We reserve for an account when we doubt whether it is collectible. We estimate our allowance for doubtful accounts based on historical experience, aging of accounts receivable and information regarding the creditworthiness of our customers. To date, losses have been within the range of management’s expectations. If the estimated allowance for doubtful accounts subsequently proves to be insufficient, additional allowances may be required.

57

Our allowance for doubtful accounts activity consists of the following (in thousands):

Allowance for Doubtful Accounts	Balance at Beginning of Period		Charges to Cost and Expenses			Write-offs			Balance at End of Period
Year ended September 30, 2018	$	3,109	$	(27	)	$	(205	)	$	2,877
Year ended September 30, 2017	3,846		(133		)	(604		)	3,109
Year ended September 30, 2016	5,892		(846		)	(1,200		)	3,846

Inventories

Inventories are stated at the lower of cost or net realizable value. The method by which amounts are removed from inventory and relieved to Cost of Sales is the weighted average cost for all inventory, except for chemical products for which the first-in, first-out method is used. In-bound freight-related costs of $1.2 million, $1.5 million and $1.9 million as of September 30, 2018, 2017, and 2016, respectively, are included as part of the cost of inventory held for resale.

We record E&O provisions, as appropriate, to write-down inventory to estimated net realizable value. The components of our inventory are subject to different risks of E&O. Our hardware inventory, which does not decay or have a pre-determined shelf life, bears a higher risk of having excess quantities than becoming obsolete due to spoilage. Our hardware inventory E&O assessment requires the use of subjective judgments and estimates including the forecasted demand for each part. The forecasted demand considers a number of factors, including historical sales trends, current and forecasted customer demand, including customer liability provisions based on selected contractual rights, consideration of available sales channels and the time horizon over which we expect the hardware part to be sold. A full E&O write-down is recorded for on-hand quantities in excess of this forecasted demand. Our chemical inventory, which has a limited shelf-life, becomes obsolete when it has aged past its shelf-life and cannot be recertified and is no longer usable or able to be sold. Therefore, we typically maintain lower on-hand quantities of chemical products. A full E&O write-down is recorded for on-hand quantities which cannot be sold due to expiration or quantities in excess of forecasted demand. During the years ended September 30, 2018, 2017 and 2016, we recorded a provision of $16.8 million, $12.9 million and $14.6 million, respectively, to write down E&O inventory to net realizable value.

Property and Equipment

Property and equipment are stated at cost, less accumulated amortization and depreciation, computed using the straight-line method over the estimated useful life of each asset. Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the assets. Expenditures for repair and maintenance costs are expensed as incurred, and expenditures for major renewals and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts and any gain or loss is reflected in the consolidated statements of comprehensive income. The useful lives for depreciable assets are as follows:

Buildings and improvements	2 - 39.5 years
Machinery and equipment	5 - 7 years
Furniture and fixtures	7 years
Vehicles	5 years
Computer hardware and software	3 - 7 years

Impairment of Long-Lived Assets

We assess potential impairments of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Factors we consider include, but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. We have determined that our asset group for impairment testing comprises assets and liabilities of each of our reporting units, which consist of the Americas, Europe, Middle-East and Africa (EMEA) and Asia Pacific (APAC) reporting units (see change in our reporting units discussed under "Goodwill and Indefinite-Lived Intangible Assets" below). We have identified customer relationships as the primary asset because it is the principal asset from which the reporting units derive their cash flow generating capacity and has the longest remaining useful life. Recoverability is assessed by comparing the carrying value of the

58

asset group to the undiscounted cash flows expected to be generated by these assets. Impairment losses are measured as the amount by which the carrying values of the primary assets exceed their fair values.

Deferred Debt Issuance Costs

Deferred debt issuance costs are amortized using the straight-line method, which approximates the effective interest method, over the term of the related credit arrangement; such amortization is included in interest expense in the consolidated statements of comprehensive income. Amortization of deferred debt issuance costs was $5.7 million, $6.1 million and $4.6 million for the years ended September 30, 2018, 2017 and 2016, respectively. As of September 30, 2018 and 2017, the remaining unamortized deferred debt issuance costs are $11.6 million and $15.4 million, respectively, of which $8.8 million and $11.7 million, respectively, was offset against the long-term debt.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill, which represents the excess of the consideration paid over the fair value of the net assets acquired in a business combination, and other acquired intangible assets with indefinite lives are not amortized, but are tested for impairment at least annually or more frequently when an event occurs or circumstances change such that it is more likely than not that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy, or disposition of a reporting unit or a portion thereof. Goodwill and indefinite-lived intangibles asset impairment testing is performed at the reporting unit level on July 1 of each year. We have one operating unit under each of the three operating segments, Americas, EMEA and APAC.

We test goodwill for impairment by performing a qualitative process, or a two-step quantitative assessment process. The first step of the quantitative process involves comparing the carrying value of net assets, including goodwill, to the fair value of the reporting unit. If the fair value exceeds its carrying amount, goodwill is not considered impaired and the second step of the process is unnecessary. If the carrying amount of a reporting unit’s goodwill exceeds its fair value, the second step measures the impairment loss, if any.

The fair value of our reporting units is determined using a combination of a discounted cash flow analysis (income approach) and market earnings multiples (market approach). These fair value approaches require significant management judgment and estimate. The determination of fair value using a discounted cash flow analysis requires the use of key judgments, estimates and assumptions including revenue growth rates, projected operating margins, changes in working capital, terminal values, and discount rates. We develop these key estimates and assumptions by considering our recent financial performance and trends, industry growth projections, and current sales pipeline based on existing customer contracts and the timing and amount of future contract renewals. The determination of fair value using market earnings multiples requires the use of key judgments, estimates and assumptions related to projected earnings and applying those amounts to earnings multiples using appropriate peer companies. We develop our projected earnings using the same judgments, estimates, and assumptions used in the discounted cash flow analysis.

The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The implied fair value of the reporting unit’s goodwill is calculated by creating a hypothetical balance sheet as if the reporting unit had just been acquired. This balance sheet contains all assets and liabilities recorded at fair value (including any intangible assets that may not have any corresponding carrying value in our balance sheet). The implied value of the reporting unit’s goodwill is calculated by subtracting the fair value of the net assets from the fair value of the reporting unit. If the carrying value of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. We performed our goodwill impairment tests during the year ended September 30, 2017, which resulted in an interim goodwill impairment charge of $311.1 million. Refer to Note 8 for additional information.

Indefinite-lived intangibles consist of a trademark, for which we estimate fair value and compare such fair value to the carrying amount. If the carrying amount of the trademark exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, we primarily utilize reported market transactions and discounted cash flow analysis. We use a three-tier fair value hierarchy that maximizes the use of observable inputs and

59

minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels whereby the highest priority is given to Level 1 inputs and the lowest to Level 3 inputs. The three broad categories are:

Level 1:	Quoted prices in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
Level 3:	Unobservable inputs for the asset or liability.

The definition of fair value includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterparty or us) will not be fulfilled. For financial assets traded in an active market (Level 1), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have been adjusted accordingly.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

We use observable market-based inputs to calculate fair value of our interest rate swap agreements and outstanding debt instruments, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.

Where available, we utilize quoted market prices or observable inputs rather than unobservable inputs to determine fair value.

Derivative Financial Instruments

We periodically enter into cash flow derivative transactions, such as interest rate swap agreements, to hedge exposure to various risks related to interest rates. We recognize all derivatives at their fair value as either assets or liabilities. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the changes in fair value of the derivative contract are recorded in accumulated other comprehensive loss, net of taxes, and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Derivatives not qualifying as cash flow hedges will default to a mark-to-market accounting treatment and will be recorded directly to the income statement. We present derivative instruments in operating, investing, or financing activities in our consolidated statements of cash flows consistent with the cash flows of the hedged item.

Comprehensive Income or Loss

Comprehensive income or loss generally represents all changes in stockholders’ equity, except those resulting from investments by or distributions to stockholders. Our comprehensive income or loss consists of net income or loss, foreign currency translation adjustments and fair value adjustments for cash flow hedges.

Revenue Recognition

We recognize product and service revenue when (1) persuasive evidence of an arrangement exists, (2) title transfers to the customer, (3) the sales price charged is fixed or determinable, and (4) collection is reasonably assured. In instances where title does not pass to the customer upon shipment, we recognize revenue upon delivery or customer acceptance, depending on the terms of the sales contract.

In connection with the sales of our products, we often provide certain supply chain management services to our JIT customers. These services include the timely replenishment of products at the customer site, while also minimizing the customer’s on-hand inventory. We provide these services contemporaneously with the delivery of the product, and as such, once the product is delivered, we do not have a post-delivery obligation to provide services to the customer. Accordingly, the price of such services is generally included in the price of the products delivered to the customer, and revenue is recognized

60

upon delivery of the product, at which point we have satisfied our obligations to the customer. We do not account for these services as a separate element, as the services do not have stand-alone value and cannot be separated from the product element of the arrangement. Additionally, we do not present service revenues apart from product revenues, as the service revenues represent less than 10% of our consolidated net sales.

We report revenue on a gross or net basis, based on management’s assessment of whether we act as a principal or agent in the transaction, in our presentation of net sales and costs of sales. If we are the principal in the transaction and have the risks and rewards of ownership, the transactions are recorded as gross in the consolidated statements of comprehensive income. If we do not act as a principal in the transaction, the transactions are recorded on a net basis in the consolidated statements of comprehensive income. The majority of our revenue is recorded on a gross basis with the exception of certain gas, energy and chemical manager service contracts that are recorded as net revenue.

We also enter into sales rebates and profit-sharing arrangements. Such customer incentives are accounted for as a reduction to gross sales and recorded based upon estimates at the time products are sold. These estimates are based upon historical experience for similar programs and products. We review such rebates and profit-sharing arrangements on an ongoing basis and accruals are adjusted, if necessary, as additional information becomes available.

We provide allowances for credits and returns based on historic experience and adjust such allowances as considered necessary. To date, such provisions have been within the range of our expectations and the allowance established. Sales tax collected from customers is excluded from net sales in the consolidated statements of comprehensive income.

In connection with our JIT supply chain management programs, at times, we assume customer inventory on a consignment basis. This consigned inventory remains the property of the customer but is managed and distributed by us. We earn a fixed fee per unit on each shipment of the consigned inventory; such amounts represent less than 1% of consolidated net sales.

Shipping and Handling Costs

We record revenue for shipping and handling billed to our customers. Shipping and handling revenues were $3.9 million, $4.6 million and $5.1 million for the years ended September 30, 2018, 2017 and 2016, respectively.

Shipping and handling costs are primarily included in cost of sales. Total shipping and handling costs were $33.5 million, $31.4 million and $28.0 million for the years ended September 30, 2018, 2017 and 2016, respectively.

Income Taxes

We recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is established, when necessary, to reduce net deferred tax assets to the amount expected to be realized. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which temporary differences become deductible or includible in taxable income. We consider projected future taxable income and tax planning strategies in our assessment. Our foreign subsidiaries are taxed in local jurisdictions at local statutory rates. The Company includes interest and penalties related to income taxes, including unrecognized tax benefits, within income tax expense.

Concentration of Credit Risk and Significant Vendors and Customers

We maintain our cash and cash equivalents in bank deposit accounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts and do not believe we are exposed to any significant credit risk from cash and cash equivalents.

We purchase our products on credit terms from vendors located throughout North America and Europe. For the years ended September 30, 2018, 2017 and 2016, we made 12%, 13%, and 12%, respectively, of our purchases from Precision Castparts Corp. and the amounts payable to this supplier were 4% and 6% of total accounts payable at September 30, 2018 and 2017, respectively. Additionally, for the years ended September 30, 2018, 2017 and 2016, we made 8%, 9%, and 8%, respectively, of our purchases from Arconic and the amounts payable to this supplier were 6% and 6% of total accounts payable

61

at September 30, 2018 and 2017, respectively. The majority of the products we sell are available through multiple channels and, therefore, this reduces the risk related to any vendor relationship.

For the years ended September 30, 2018 and 2017, we derived approximately 11% of our total net sales from one individual customer. For the year ended September 30, 2016, we did not derive 10% or more of our total net sales from any individual customer. Government sales, which were derived from various military parts procurement agencies such as the U.S. Defense Logistics Agency, or from defense contractors buying on their behalf, comprised 14%, 16% and 15% of our net sales during fiscal 2018, 2017 and 2016, respectively.

Foreign Currency Translation and Transactions

The financial statements of foreign subsidiaries and affiliates where the local currency is the functional currency are translated into U.S. dollars using exchange rates in effect at each period-end for assets and liabilities and average exchange rates during the period for results of operations. The adjustment resulting from translating the financial statements of such foreign subsidiaries is reflected as a separate component of stockholders’ equity. Foreign currency transaction gains and losses are reported as other income (expense), net in the consolidated statements of comprehensive income. For the years ended

September 30, 2018, 2017 and 2016, realized foreign currency transaction gains were $0.3 million, $0.1 million and $3.2 million, respectively.

Stock-Based Compensation

We recognize all stock-based awards to employees and directors as stock-based compensation expense based upon their fair values on the date of grant.

We estimate the fair value of stock-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as an expense during the requisite service periods. We have estimated the fair value for each option award as of the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model considers, among other factors, the expected life of the award and the expected volatility of our stock price. We recognize the stock-based compensation expense over the requisite service period (generally a vesting term of three years) using the graded vesting method for performance condition awards and the straight-line method for service condition only awards, which is generally a vesting term of three years. Stock options typically have a contractual term of 10 years. The stock options granted have an exercise price equal to the closing stock price of our common stock on the grant date. Compensation expense for restricted stock units and awards are based on the market price of the shares underlying the awards on the grant date. Compensation expense for performance based awards reflects the estimated probability that the performance condition will be met. Compensation expense for awards with total stockholder return performance metrics reflects the fair value calculated using the Monte Carlo simulation model, which incorporates stock price correlation and other variables over the time horizons matching the performance periods.

Net Income or Net Loss Per Share

Basic net income or net loss per share is computed by dividing net income or net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income or net loss per share includes the dilutive effect of both outstanding stock options and restricted shares, calculated using the treasury stock method.

Note 3. Recent Accounting Pronouncements

Changes to generally accepted accounting principles in the United States (GAAP) are established by the Financial Accounting Standards Board (FASB), in the form of Accounting Standards Update, to the FASB’s Accounting Standards Codification.

We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

New Accounting Standards Updates

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which specifies the modification accounting applicable to any entity that changes the terms or conditions of a share-based payment award. ASU 2017-09 is effective for the Company in fiscal year 2019. Early adoption is

62

permitted. We do not anticipate the adoption of ASU 2017-09 will have a significant impact on our consolidated financial statements.

 In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the current requirements for testing goodwill for impairment by eliminating the second step of the two-step impairment test to measure the amount of an impairment loss. ASU 2017-04 is effective for the Company in fiscal year 2021, including interim reporting periods within that reporting period, and all annual and interim reporting periods thereafter. Early adoption is permitted. We do not anticipate the adoption of ASU 2017-04 will have a significant impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is amended by ASU2018-01, ASU 2018-10 and ASU 2018-11 that were issued by FASB in January 2018, July 2018 and July 2018, respectively (collectively, the amended ASU 2016-02). The amended ASU 2016-02 requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. The amended ASU 2016-02 retains a distinction between finance leases (i.e. capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amended ASU 2016-02 also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach shall be used when adopting ASU 2016-02, which includes a number of optional practical expedients that entities may elect to apply. The amended ASU 2016-02 is effective for the Company in fiscal year 2020 and interim periods therein, with early application permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. As of September 30, 2018, total future minimum payments under our operating leases amounted to $50.8 million.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which affects the accounting for equity investments (excluding investments recorded under the equity method), financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective for the Company in fiscal year 2019, with early adoption permitted for certain provisions. We do not anticipate the adoption of ASU 2016-01 will have a significant impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-10, ASU 2017-13 and ASU 2017-14, which the FASB issued in August 2015, March 2016, April 2016, May 2016, May 2016, December 2016, May 2017, September 2017 and November 2017, respectively (collectively, the amended ASU 2014-09). The amended ASU 2014-09 provides a single comprehensive model for the recognition of revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It requires an entity to recognize revenue when the entity transfers 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. The amended ASU 2014-09 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) with the customer, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The amended ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date for the amended ASU 2014-09 for the Company is fiscal year 2019, including interim reporting periods within that reporting period.

To assess the impact of this new standard, the Company established an implementation project team, identified its revenue streams and contracts with customers across our businesses and applied the principles of the new standard against a selection of contracts to assist in the determination of potential revenue accounting differences. Based on our assessment, we do not anticipate that the adoption of this revised guidance will have a significant impact on our financial position, results of operations or cash flows. Our hardware product revenues will continue to be recognized as shipments are made and control transfers to the customer. Revenues for products and services provided under our chemical management service contracts will be recognized over time as control transfers to the customer. The Company has designed and implemented internal controls, policies and processes to comply with the new standard. We adopted Topic 606 in the first quarter of fiscal 2019 using the modified retrospective method of adoption, which resulted in no changes to the opening consolidated balance sheet as of October 1, 2018.

63

Adopted Accounting Standards Updates

Effective July 1, 2018, we early adopted ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify from AOCI to retained earnings stranded tax effects resulting from the enactment of the Tax Act. ASU 2018-02 was enacted on December 22, 2017 and requires certain disclosures about the stranded tax effects. An entity has the option of applying the new guidance at the beginning of the period of adoption or retrospectively to each period (or periods) in which the tax effects related to items remaining in accumulated other comprehensive income are recognized. We elected not to reclassify prior periods. Adoption of this standard resulted in an increase of $0.4 million to retained earnings as of July 1, 2018 due to the reclassification of the stranded tax effects as a result of the Tax Act from AOCI to retained earnings. This reclassification is reflected in the "Effect of adoption of accounting standard" line in the consolidated statements of stockholders' equity.

Effective April 1, 2018, we early adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 expands the eligibility of hedging strategies that qualify for hedge accounting, changes the assessment of hedge effectiveness and modifies the presentation and disclosure of hedging activities. The adoption of ASU 2017-12 did not have a material impact on our consolidated financial statements.

Effective October 1, 2017, we early adopted ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. ASU 2016-07 eliminates the requirement that when an investment subsequently qualifies for use of the equity method as a result of an increase in level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. ASU 2016-07 requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and to adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. In addition, ASU 2016-07 requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The adoption of ASU 2016-07 did not have a material impact on our consolidated financial statements.

Effective October 1, 2017, we adopted ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires an entity to measure inventory at the lower of cost or net realizable value and eliminates current GAAP options for measuring market value. ASU 2015-11 defines realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of ASU 2015-11 did not have a material impact on our consolidated financial statements.

Note 4. Commitments and Contingencies

Operating Leases

We lease office and warehouse facilities (certain of which are from related parties) and warehouse equipment under various non-concealable operating leases that expire at various dates through May 31, 2027. Certain leases contain escalation clauses based on the Consumer Price Index. We are also committed under the terms of certain of these operating lease agreements to pay property taxes, insurance, utilities and maintenance costs.

64

Future minimum rental payments under operating leases as of September 30, 2018 are as follows (dollars in thousands):

	Third Party		Related Party		Total
Years Ended September 30,
2019	$	10,575	$	1,864	$	12,439
2020	9,364		317		9,681
2021	7,583		170		7,753
2022	6,382		283		6,665
2023	5,539		278		5,817
Thereafter	8,160		270		8,430
	$	47,603	$	3,182	$	50,785

Total rent expense for the years ended September 30, 2018, 2017 and 2016 was $13.4 million, $12.6 million and $11.9 million, respectively.

Capital Lease Commitments

We lease certain equipment under capital lease agreements that require minimum monthly payments that expire at various dates through February 29, 2024. The gross amount of these leases at September 30, 2018 and September 30, 2017 are $4.8 million and $5.3 million, respectively.

Future minimum lease payments under capital lease agreements as of September 30, 2018 are as follows (in thousands):

Years Ended September 30,
2019	$	2,311
2020	1,292
2021	474
2022	401
2023	215
Thereafter	66
	4,759
Less: Interest	(226		)
Total	$	4,533

Indemnifications

In the normal course of business, we provide indemnifications to our customers with regard to certain products and enter into contracts and agreements that may contain representations and warranties and provide for general indemnifications. Our maximum exposure under many of these agreements is not quantifiable as we have a limited history of prior indemnification claims and payments. Payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, we could incur costs in the future as a result of indemnification obligations.

Litigation

We are involved in various legal matters that arise in the ordinary course of business. Management, after consulting with outside legal counsel, believes that the ultimate outcome of such matters will not have a material adverse effect on our financial position, results of operations or cash flows. There can be no assurance, however, that such actions will not be material or adversely affect our business, financial position and results of operations or cash flows.

Note 5. Inventory

Our inventory is comprised solely of finished goods.

Charges to cost of sales for E&O provisions and related items were $16.8 million, $12.9 million and $14.6 million in the years ended September 30, 2018, 2017 and 2016, respectively. We believe that these amounts appropriately write-down E&O inventory to its net realizable value.

Note 6. Related Party Transactions

We entered into a management agreement with The Carlyle Group to provide certain financial, strategic advisory and consultancy services. Under this management agreement, we are obligated to pay The Carlyle Group, or a designee thereof, an annual management fee of $1.0 million (paid quarterly) plus fees and expenses associated with company-related meetings. The management fee was waived by an entity affiliated with The Carlyle Group for fiscal 2018 and the third and fourth quarters of fiscal 2017. We incurred expense of $0.1 million, $0.6 million and $1.3 million for the years ended September 30, 2018, 2017 and 2016, respectively, related to this management agreement. These amounts were paid to The Carlyle Group during the years endedSeptember 30, 2018,2017and2016.

65

We lease several office and warehouse facilities under operating lease agreements from entities controlled by our former chief executive officer, who is also our Chairman of the Board. Rent expense on these facilities was $1.9 million, $1.6 million and $1.8 million for the years ended September 30, 2018, 2017 and 2016, respectively (see Note 4).

Note 7. Property and Equipment, net

Property and equipment, net, consists of the following at September 30 (in thousands):

	2018			2017
Land, buildings and improvements	$	31,966		$	31,202
Machinery and equipment	22,321			21,265
Furniture and fixtures	7,930			8,011
Vehicles	859			942
Computer hardware and software	56,643			50,395
Construction in progress	3,684			4,300
	123,403			116,115
Less: accumulated depreciation	(79,198		)	(65,760		)
Property and equipment, net	$	44,205		$	50,355

At September 30, 2018 and 2017, property and equipment included assets of $18.4 million, and $15.6 million respectively, acquired under capital lease arrangements. Accumulated amortization of assets acquired under capital leases was $11.3 million and $7.9 million as of September 30, 2018 and 2017, respectively.

Depreciation and amortization expense for property and equipment was $14.4 million, $13.4 million and $12.1 million during the years ended September 30, 2018, 2017 and 2016, respectively (including amortization expense of $3.4 million, $2.5 million and $1.5 million on assets acquired under capital leases for the years ended September 30, 2018, 2017 and 2016, respectively).

Note 8. Goodwill and Intangible Assets, net

Goodwill

A reconciliation of our goodwill balance is as follows (in thousands):

	Americas September 30,						EMEA September 30,					APAC September 30,						Consolidated September 30,
	2018			2017			2018		2017			2018			2017			2018			2017
Beginning balance, gross	$	773,384		$	773,384		$	51,190	$	53,297		$	16,955		$	16,955		$	841,529		$	843,636
Accumulated impairment	(569,201		)	(260,798		)	—		—			(5,684		)	(2,973		)	(574,885		)	(263,771		)
Beginning balance, net	$	204,183		$	512,586		$	51,190	$	53,297		$	11,271		$	13,982		$	266,644		$	579,865
Foreign currency translation	—			—			—		(2,107		)	—			—			—			(2,107		)
Goodwill impairment	—			(308,403		)	—		—			—			(2,711		)	—			(311,114		)
Ending balance, gross	$	773,384		$	773,384		$	51,190	$	51,190		$	16,955		$	16,955		$	841,529		$	841,529
Accumulated impairment	(569,201		)	(569,201		)	—		—			(5,684		)	(5,684		)	(574,885		)	(574,885		)
Ending balance, net	$	204,183		$	204,183		$	51,190	$	51,190		$	11,271		$	11,271		$	266,644		$	266,644

We performed our annual Step 1 goodwill impairment tests on July 1, 2018. The results of these tests indicated that the estimated fair values of our reporting units exceeded their carrying values.

As previously disclosed, as of June 30, 2017, we performed a two-step quantitative assessment on goodwill impairment on all our reporting units, which was triggered by events identified in our quarterly Step 0 qualitative assessment. As a result, we recognized a total impairment charge of $311.1 million. We also performed our fiscal year 2017 annual

66

goodwill impairment test as of July 1, 2017, concurrent with our restructuring of our reporting units, which indicated no impairment for any of the three new reporting units, Americas, EMEA and APAC. Out of the $311.1 million goodwill impairment charge, $308.4 million was assigned to the Americas reporting unit and $2.7 million was assigned to the APAC reporting unit based on their relative fair value as of July 1, 2018. See Note 8 of the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended September 30, 2017 for additional information.

Intangible Assets

As of September 30, 2018 and 2017, the gross amounts and accumulated amortization of intangible assets is as follows (in thousands):

	2018					2017
	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
Customer relationships (12 to 20 year life)	$	172,603	$	(75,102	)	$	172,603	$	(64,319	)
Trademarks (5 years to indefinite life)	52,930		(4,583		)	52,930		(3,610		)
Backlog (2 year life)	4,327		(4,327		)	4,327		(4,327		)
Non-compete agreements (3 to 4 year life)	1,457		(1,457		)	1,457		(1,457		)
Technology (10 year life)	32,260		(14,670		)	32,260		(11,572		)
Total intangible assets	$	263,577	$	(100,139	)	$	263,577	$	(85,285	)

Estimated future intangible amortization expense as of September 30, 2018 is as follows (in thousands):

2019	$	14,855
2020	14,721
2021	14,317
2022	14,317
2023	14,317
Thereafter	53,078
	$	125,605

Amortization expense included in the statements of comprehensive income (loss) for the years ended September 30, 2018, 2017 and 2016 was $14.9 million, $14.9 million and $15.8 million, respectively. In addition to amortizing intangibles, we assigned an indefinite life to the Wesco Aircraft trademark. As of September 30, 2018 and 2017, the trademark had a carrying value of $37.8 million.

Note 9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30,
	2018		2017
Accrued compensation and related expenses	$	18,590	$	16,271
Accrual for professional fees	951		951
Accrued customer rebates	5,604		4,240
Accrued taxes (property, sales and use)	1,083		2,083
Deferred revenue	971		301
Accrual for severance and other expenses	1,203		354
Interest rate swap	289		2,462
Other accruals	14,076		8,667
Accrued expenses and other current liabilities	$	42,767	$	35,329

67

Note 10. Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, accounts receivable and payable, accrued and other current liabilities and a revolving facility. The carrying amounts of these instruments approximate fair value because of their short-term maturities. The fair value of interest rate swap agreements is determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement. The fair value of the long-term debt instruments is determined using current applicable rates for similar instruments as of the balance sheet date, a Level 2 measurement.

The carrying amounts and fair values of the debt instruments and interest rate swap hedge instrument were as follows (in thousands):

	September 30, 2018				September 30, 2017
	Carrying Amount		Fair Value		Carrying Amount			Fair Value
Term loan A	$	360,000	$	357,840	$	380,000		$	376,960
Term loan B	440,562		432,192		440,562			428,667
Revolving facility	54,000		54,000		55,000			55,000
Interest rate swap hedge assets (liabilities), net	1,807		1,807		(3,365		)	(3,365		)

Note 11. Long-Term Debt

Long-term debt consists of the following (in thousands):

	September 30, 2018							September 30, 2017
	Principal  Amount		Deferred Debt Issuance Costs			Carrying Amount		Principal  Amount		Deferred Debt Issuance Costs			Carrying Amount
Term loan A facility	$	360,000	$	(5,842	)	$	354,158	$	380,000	$	(7,562	)	$	372,438
Term loan B facility	440,562		(2,943		)	437,619		440,562		(4,162		)	436,400
Revolving facility	54,000		—			54,000		55,000		—			55,000
	854,562		(8,785		)	845,777		875,562		(11,724		)	863,838
Less: current portion	74,000		—			74,000		75,000		—			75,000
Non-current portion	$	780,562	$	(8,785	)	$	771,777	$	800,562	$	(11,724	)	$	788,838

Aggregate maturities of long-term debt as of September 30, 2018 are as follows (in thousands):

Years Ended September 30,
2019	$	74,000
2020	20,000
2021	760,562
	$	854,562

The credit agreement, dated as of December 7, 2012 (as amended, the Credit Agreement), by and among the Company, Wesco Aircraft Hardware Corp. and the lenders and agents party thereto, which governs our senior secured credit facilities, provides for (1) a $400.0 million senior secured term loan A facility (the term loan A facility), (2) a $180.0 million revolving facility (the revolving facility) and (3) a $525.0 million senior secured term loan B facility (the term loan B facility). We refer to term loan A facility, the revolving facility and the term loan B facility, together, as the “Credit Facilities.” On November 2, 2017, we entered into the Sixth Amendment to the Credit Agreement (the Sixth Amendment). For additional information about the Sixth Amendment, see “—Sixth Amendment to Senior Secured Credit Facilities” below.

As of September 30, 2018, our outstanding indebtedness under our Credit Facilities was $854.6 million, which consisted of (1) $360.0 million of indebtedness under the term loan A facility, (2) $54 million of indebtedness under the revolving facility, and (3) $440.6 million of indebtedness under the term loan B facility. As of September 30, 2018, $126.0

68

million was available for borrowing under the revolving facility to fund our operating and investing activities without breaching any covenants contained in the Credit Agreement.

During the year ended September 30, 2018, we borrowed $67.5 million under the revolving facility, and made our required payments of $20.0 million under the term loan A facility and voluntary prepayments totaling $68.5 million on our borrowings under the revolving facility.

The interest rate for the term loan A facility is based on our Consolidated Total Leverage Ratio (as such term is defined in the Credit Agreement) as determined in the most recently delivered financial statements, with the respective margins ranging from 2.00% to 3.00% for Eurocurrency loans and 1.00% to 2.00% for ABR loans. The term loan A facility amortizes in equal quarterly installments of 1.25% of the original principal amount of $400.0 million with the balance due on the earlier of (i) 90 days before the maturity of the term loan B facility, and (ii) October 4, 2021. As of September 30, 2018, the interest rate for borrowings under the term loan A facility was 5.25%, which approximated the effective interest rate.

The interest rate for the term loan B facility has a margin of 2.50% per annum for Eurocurrency loans (subject to a minimum Eurocurrency rate floor of 0.75% per annum) or 1.50% per annum for ABR loans (subject to a minimum ABR floor of 1.75% per annum). The term loan B facility amortizes in equal quarterly installments of 0.25% of the original principal amount of $525.0 million, with the balance due at maturity on February 28, 2021. We have paid in advance all the required quarterly installments until the term loan B reaches its maturity. As of September 30, 2018, the interest rate for borrowings under the term loan B facility was 4.75%, which approximated the effective interest rate. We have three interest rate swap agreements relating to this indebtedness, which are described in greater detail in Note 12 below.

The interest rate for the revolving facility is based on our Consolidated Total Leverage Ratio as determined in the most recently delivered financial statements, with the respective margins ranging from 2.00% to 3.00% for Eurocurrency loans and 1.00% to 2.00% for ABR loans. The revolving facility expires on the earlier of (i) 90 days before the maturity of the term loan B facility, and (ii) October 4, 2021. As of September 30, 2018, the weighted-average interest rate for borrowings under the revolving facility was 5.15%.

Our borrowings under the Credit Facilities are guaranteed by us and all of our direct and indirect, wholly-owned, domestic restricted subsidiaries (subject to certain exceptions) and a first lien on substantially all of our assets and the assets of our guarantor subsidiaries, including capital stock of the subsidiaries (in each case, subject to certain exceptions), has been granted to the lenders under the Credit Facilities.

The Credit Agreement contains customary negative covenants, including restrictions on our and our restricted subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness or enter into transactions with affiliates. As disclosed below in the description of the Sixth Amendment, our borrowings under the Credit Facilities are subject to a financial covenant based upon our Consolidated Total Leverage Ratio, with the maximum ratio set at 6.00 for the quarter ending September 30, 2018. As of September 30, 2018, we were in compliance with all of the foregoing covenants, and our Consolidated Total Leverage Ratio was 4.18. Based on our current covenants and forecasts, we expect to be in compliance for the one year period after November 15, 2018. For additional information about our Consolidated Total Leverage Ratio, including an overview of the applicable step-down schedule, see “—Sixth Amendment to Senior Secured Credit Facilities” below.

Sixth Amendment to Senior Secured Credit Facilities

The Sixth Amendment modified the Credit Agreement to increase the Excess Cash Flow Percentage (as such term is defined in the Credit Agreement) to 75%, provided that the Excess Cash Flow Percentage shall be reduced to (i) 50%, if the Consolidated Total Leverage Ratio is less than 4.00 but greater than or equal to 3.00, (ii) 25%, if the Consolidated Total Leverage Ratio is less than 3.00 but greater than or equal to 2.50 and (iii) 0%, if the Consolidated Total Leverage Ratio is less than 2.50.

The Sixth Amendment further modified the Credit Agreement to reduce the maximum amount permitted to be incurred under the Capped Incremental Facility (as such term is defined in the Credit Agreement) to zero, unless the Consolidated Total Leverage Ratio (as such term is defined in the Credit Agreement), after giving effect to the incurrence of any incremental loans or commitments and the use of proceeds thereof, on a pro forma basis, would be (i) less than 4.00 but greater than or equal to 3.50, in which case the Capped Incremental Facility would be increased to $75.0 million or (ii) less than 3.50, in which case the Capped Incremental Facility would be increased to $150.0 million.

69

The Sixth Amendment also modified the Credit Agreement to increase the Consolidated Total Leverage Ratio levels in the financial covenant set forth in the Credit Agreement to a maximum 6.25 for the quarters ending September 30, 2017, December 31, 2017 and March 31, 2018, with step-downs to 6.00 for the quarters ending June 30, 2018 and September 30, 2018; 5.75 for the quarter ending December 31, 2018; 5.50 for the quarter ending March 31, 2019; 5.25 for the quarter ending June 30, 2019; 4.75 for the quarters ending September 30, 2019, December 31, 2019 and March 31, 2020; 4.00 for the quarters ending June 30, 2020, September 30, 2020, December 31, 2020 and March 31, 2021; and 3.00 for the quarter ending June 30, 2021 and thereafter.

As a result of the Sixth Amendment, we incurred $1.9 million in fees that were capitalized and will be amortized over the remaining life of the related debt, $1.3 million of which was related to the term loan A facility and $0.6 million of which was related to the revolving facility. Pursuant to GAAP, the Sixth Amendment is accounted for as a debt modification. As a result, the unamortized deferred debt issuance costs related to the term loan A and the revolving facility prior to the Sixth Amendment were added to the $1.9 million of deferred debt issuance costs related to the Sixth Amendment and will be amortized over the remaining life of the term loan A and the revolving facility. The following table summarizes the total deferred debt issuance costs for the term loan A facility, the term loan B facility and the revolving facility, which will be amortized over their remaining terms.

	Term Loan A Facility			Term Loan B Facility			Revolving Facility			Total
Deferred debt issuance costs as of September 30, 2017	$	7,562		$	4,162		$	3,676		$	15,400
Deferred debt issuance costs for the Sixth Amendment	1,291			—			609			1,900
Amortization of deferred debt issuance costs	(3,011		)	(1,219		)	(1,458		)	(5,688		)
Deferred debt issuance costs as of September 30, 2018	$	5,842		$	2,943		$	2,827		$	11,612

UK Line of Credit

Our subsidiary, Wesco Aircraft EMEA, has a £5.0 million ($6.5 million based on the September 30, 2018 exchange rate) line of credit that automatically renews annually on October 1. The line of credit bears interest based on the base rate plus an applicable margin of 1.65%. As of September 30, 2018, the full £5.0 million was available for borrowing under the UK line of credit without breaching any covenants contained in the agreements governing our indebtedness.

Note 12. Derivative Financial Instruments

We use derivative instruments primarily to manage exposures to foreign currency exchange rates and interest rates. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with fluctuations in foreign exchange rates and changes in interest rates. Our derivatives expose us to credit risk to the extent that the counter-parties may be unable to meet the terms of the agreement. We, however, seek to mitigate such risks by limiting our counter-parties to major financial institutions. In addition, the potential risk of loss with any one counter-party resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counter-parties.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We have three interest rate swap agreements outstanding, which we have designated as a cash flow hedge, in order to reduce our exposure to variability in cash flows related to interest payments on a portion of our outstanding debt. The first interest rate swap agreement (the "First Swap Agreement") has an amortizing notional amount, which was $275.0 million through September 30, 2018, and matures on September 30, 2019, giving us the contractual right to pay a fixed interest rate of 2.2625% plus the applicable margin under the term loan B facility (see Note 11 for the applicable margin). The remaining two interest rate swap agreements (the “Remaining Swap Agreements”), entered into on May 14, 2018, have variable notional amounts which initially will increase in an amount approximately equal to amortization of the notional amount of the First Swap Agreement and then amortize thereafter. The Remaining Swap Agreements totaled $160.8 million as of

70

September 30, 2018, and mature on February 26, 2021, giving us the contractual right to pay a fixed interest rate of 2.79% plus the applicable margin under the term loan B facility (see Note 11 for the applicable margin).

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended September 30, 2018, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized immediately in earnings. During the year ended September 30, 2018, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. No portion of our interest rate swap agreements is excluded from the assessment of hedge effectiveness.

Amounts reported in AOCI related to derivatives and the related deferred tax are reclassified to interest expense as interest payments are made on our variable-rate debt. As of September 30, 2018, we expected to reclassify approximately $0.2 million from accumulated other comprehensive loss to earnings as an increase to interest expense over the next 12 months when the underlying hedged item impacts earnings.

Non-Designated Derivatives

From time to time, we enter into foreign currency forward contracts to partially reduce our exposure to foreign currency fluctuations for a subsidiary's net monetary assets, which are denominated in a foreign currency. The derivatives are not designated as a hedging instrument. The change in their fair value is recognized as periodic gain or loss in the other income, net line of our consolidated statement of earnings and comprehensive income. We did not have foreign currency forward contracts as of September 30, 2018 and 2017.

The following table summarizes the notional principal amounts at September 30, 2018 and 2017 of our interest rate swap agreements discussed above (in thousands). We did not have foreign exchange forward contracts as of September 30, 2018 and 2017.

	Derivative Notional
	September 30, 2018		September 30, 2017
Instruments designated as accounting hedges:
Interest rate contracts	$	435,800	$	375,000

The following table provides the location and fair value amounts of our hedge instruments, which are reported in our consolidated balance sheets as of September 30, 2018 and 2017 (in thousands). We did not have foreign exchange forward contracts as of September 30, 2018 and 2017.

		Fair Value as of September 30,
Liability Derivatives	Balance Sheet Locations	2018		2017
Instruments designated as accounting hedges:
Interest rate swap contracts	Other current assets	$	1,045	$	—
Interest rate swap contracts	Other assets	1,051		—
Interest rate swap contracts	Accrued expenses	289		2,462
Interest rate swap contracts	Other liabilities	—		903

 The following table provides the losses of our cash flow hedging instruments (net of income tax benefit), which were transferred from accumulated other comprehensive loss to our consolidated statement of comprehensive income (loss) for the years ended September 30, 2018, 2017 and 2016 (in thousands).

71

	Location in Consolidated Statement	Years Ended September 30,
Cash Flow Derivatives	Of Comprehensive Income (Loss)	2018			2017			2016
Interest rate swap contracts	Interest income (expense), net	$	1,163		$	385		$	1,344
Total interest expense, net presented in the consolidated statements of earnings and comprehensive income in which the above effects of cash flow hedges are recorded		$	(48,880	)	$	(39,821	)	$	(36,901	)

The following table provides the effective portion of the income (loss) of our cash flow hedge instruments which is recognized (net of income taxes) in other comprehensive income (loss) for the years ended September 30, 2018, 2017 and 2016 (in thousands).

	Years Ended September 30,
Cash Flow Derivatives	2018		2017		2016
Interest rate swap contracts	$	2,774	$	1,688	$	(2,973	)

The following table provides a summary of changes to our accumulated other comprehensive loss related to our cash flow hedging instruments (net of income taxes) during the years ended September 30, 2018 and 2017.

	Years Ended September 30,
AOCI - Unrealized Gain (Loss) on Hedging Instruments	2018			2017
Balance at beginning of period	$	(2,133	)	$	(4,206	)
Change in fair value of hedging instruments	2,774			1,688
Amounts reclassified to earnings	1,163			385
Net current period other comprehensive income	3,937			2,073
Effect of adoption of accounting standard	$	(429	)	$	—
Balance at end of period	$	1,375		$	(2,133	)

The following table provides the pretax effect of our derivative instruments not designated as hedging instruments on our consolidated earnings and comprehensive income for the years ended September 30, 2018, 2017 and 2016 (in thousands).

Instruments Not Designated As Hedging Instruments	Location in Consolidated Statement of Comprehensive Income	Years Ended September 30,
		2018		2017			2016
Foreign exchange contract	Other income, net	$	—	$	(1,843	)	(5,606	)

Note 13. Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) and related tax effects for each period were as follows (dollars in thousands):

	Year Ended September 30, 2018									Year Ended September 30, 2017									Year Ended September 30, 2016
	Before Tax			Tax			After Tax			Before Tax			Tax			After Tax			Before Tax			Tax			After Tax
Change in unrealized holding losses on derivatives	3,645			(871		)	2,774			2,692			(1,004		)	1,688			(4,716		)	1,743			(2,973		)
Less: adjustment for losses on derivatives included in net income	1,528			(365		)	1,163			615			(230		)	385			2,132			(788		)	1,344
Change in net foreign currency translation adjustment	(1,862		)	—			(1,862		)	(5,959		)	(1,179		)	(7,138		)	(39,211		)	—			(39,211		)
Other comprehensive income (loss)	$	3,311		$	(1,236	)	$	2,075		$	(2,652	)	$	(2,413	)	$	(5,065	)	$	(41,795	)	$	955		$	(40,840	)

See Note 12 for the amounts of losses on derivatives reclassified out of accumulated other comprehensive loss into the consolidated statements of income, with presentation location, for each period.

72

The changes in accumulated other comprehensive loss by component and related tax effects for each period were as follows (in thousands):

	Foreign Currency Translation Adjustments			Unrealized (Loss) income on Derivative Instruments			Total
Balance at September 30, 2015	$	(36,144	)	$	(2,577	)	$	(38,721	)
Other comprehensive loss before reclassifications	(39,211		)	(4,716		)	(43,927		)
Amounts reclassified out of accumulated other loss	—			2,132			2,132
Tax effect	—			955			955
Other comprehensive loss	(39,211		)	(1,629		)	(40,840		)
Balance at September 30, 2016	$	(75,355	)	$	(4,206	)	$	(79,561	)
Other comprehensive (loss) income before reclassifications	(5,959		)	2,692			(3,267		)
Amounts reclassified out of accumulated other comprehensive loss	—			615			615
Tax effect	(1,179		)	(1,234		)	(2,413		)
Other comprehensive (loss) income	(7,138		)	2,073			(5,065		)
Balance at September 30, 2017	(82,493		)	(2,133		)	(84,626		)
Other comprehensive (loss) income before reclassifications	(1,862		)	3,645			1,783
Amounts reclassified out of accumulated other comprehensive loss	—			1,528			1,528
Tax effect	—			(1,236		)	(1,236		)
Other comprehensive (loss) income	(1,862		)	3,937			2,075
Effect of adoption of accounting standards	—			(429		)	(429		)
Balance at September 30, 2018	$	(84,355	)	$	1,375		$	(82,980	)

Note 14.  Net Income (Loss) Per Share

The following table presents net income (loss) per share and related information (dollars in thousands):

	Years Ended September 30,
	2018		2017			2016
Net income (loss)	$	32,654	$	(237,346	)	$	91,378
Basic weighted average shares outstanding	99,156,998		98,700,879			97,634,155
Dilutive effect of stock options and restricted shares	343,479		—			531,701
Dilutive weighted average shares outstanding	99,500,477		98,700,879			98,165,856
Basic net income (loss) per share	$	0.33	$	(2.40	)	$	0.94
Diluted net income (loss) per share	$	0.33	$	(2.40	)	$	0.93

Shares of common stock equivalents of 2.8 million, 3.7 million, and 2.0 million for the years ended September 30, 2018, 2017 and 2016, respectively, were excluded from the diluted calculation because their effect would be anti-dilutive or the performance condition for the award had not been satisfied. 

Note 15. Income Taxes

Income (loss) before benefit or provision for income taxes for the years ended September 30, 2018, 2017 and 2016 was as follows (in thousands):

73

	2018		2017			2016
U.S. income (loss)	$	29,854	$	(261,594	)	$	63,614
Foreign income	30,758		13,347			61,976
Total	$	60,612	$	(248,247	)	$	125,590

The components of our income tax provision (benefit) for the years ended September 30, 2018, 2017 and 2016 were as follows (in thousands):

	2018			2017			2016
Current provision
Federal	$	10,263		$	(2,536	)	$	7,315
State and local	729			(591		)	1,134
Foreign	7,717			12,999			12,482
Subtotal	18,709			9,872			20,931
Deferred (benefit) provision
Federal	11,390			(14,730		)	10,979
State and local	(3,206		)	(2,738		)	1,108
Foreign	1,065			(3,305		)	1,194
Subtotal	9,249			(20,773		)	13,281
Provision (benefit)for income taxes	$	27,958		$	(10,901	)	$	34,212

The tax impact associated with the exercise of employee stock options and vesting of restricted stock units for the year ended September 30, 2018 will be recognized in the current tax return. For the year ended September 30, 2018, $0.1 million of tax provision was recorded as an increase to our provision for income tax due to the adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, as discussed in Note 3. For the years ended September 30, 2017 and 2016, $0.9 million and $1.1 million of tax benefit was recorded as a decrease to our provision for income tax.

A reconciliation of our (benefit) provision for income taxes to the U.S. federal statutory rate is as follows for the years ended September 30, 2018, 2017 and 2016 (in thousands):

	2018					2017					2016
Provision (benefit) for income taxes at statutory rate	$	14,867		24.53	%	$	(84,404	)	34.00	%	$	43,956		35.00	%
State taxes, net of tax benefit	742			1.22	%	(4,559		)	1.84	%	1,458			1.16	%
Deemed foreign dividends	1,301			2.15	%	6,099			(2.46	)%	3,963			3.16	%
Nondeductible items	658			1.09	%	283			(0.11	)%	(1,912		)	(1.52	)%
Impact of foreign operations	(92		)	(0.15	)%	(3,526		)	1.42	%	(8,015		)	(6.38	)%
Impact of Tax Act	8,423			13.90	%	—			—	%	—			—	%
Foreign tax credit	(18,275		)	(30.15	)%	(6,197		)	2.50	%	(4,313		)	(3.43	)%
Valuation allowance	19,098			31.51	%	15,057			(6.07	)%	—			—	%
Non-deductible goodwill impairment	—			—	%	23,644			(9.52	)%	—			—	%
Unremitted earnings of foreign subsidiaries	463			0.76	%	37,537			(15.12	)%	—			—	%
Tax contingencies	492			0.81	%	4,123			(1.66	)%	(674		)	(0.54	)%
Other	281			0.46	%	1,042			(0.43	)%	(251		)	(0.21	)%
Actual provision (benefit) for income taxes	$	27,958		46.13	%	$	(10,901	)	4.39	%	$	34,212		27.24	%

During the year ended September 30, 2017, the Company reassessed the potential need to repatriate foreign earnings and determined it was likely that we would, in the future, repatriate certain unremitted foreign earnings. Accordingly, we recorded a deferred tax liability of $38.7 million after taking into account the federal tax benefit of state taxes. For the year ended September 30, 2018, we recorded as a result of the Tax Act a $38.2 million tax benefit related to the reversal of the deferred tax liability for these foreign earnings. Following the enactment of the Tax Act, no federal taxes would be imposed

74

upon the repatriation of these foreign earnings. The Company intends to permanently reinvest $27.2 million of foreign earnings for which no state, local or foreign withholding taxes have been provided and the state, local and foreign withholding taxes associated with the repatriation of such earnings would be between $0.5 million and $1.0 million.

For the three months ended December 31, 2017, the Company recorded a provisional $9.1 million charge to the tax expense related to the imposition of a one-time repatriation tax on accumulated earnings of our foreign subsidiaries (the Transition Tax). For the three months ended September 30, 2018, we recorded $0.8 million of additional tax expense related to the Transition Tax, taking into account current legislation regarding the U.S taxation of deemed foreign dividends in the year ended September 30, 2018. The current legislation may be amended or eliminated in future legislation. If such legislation is enacted, we will record the impact of the legislation in the quarter of enactment. The determination of the impact of the income tax effects of the items reflected as provisional amounts may change, possibly materially, following refinement of calculations, modifications of assumptions and further interpretation of the Tax Act based on U.S. Treasury regulations and guidance from the Internal Revenue Service. The Company will complete its review and report final amounts in accordance with SAB 118 for the three months ending December 31, 2018.

As of September 30, 2018 and 2017, the components of deferred income tax assets (liabilities) were as follows (in thousands):

	2018			2017
Deferred tax assets - Non-current
Inventories	$	55,977		$	92,711
Reserves and other accruals	1,217			1,692
Compensation accruals	2,965			2,308
Goodwill and intangible assets	3,412			20,101
Stock options	2,377			3,197
Net operating losses and tax credits	42,664			19,345
Other	674			2,611
Total deferred tax assets	109,286			141,965
Deferred tax (liabilities) - Non-current
Property and equipment	(1,568		)	(3,505		)
Unremitted earnings of foreign subsidiaries	(185		)	(40,009		)
Other	(7,281		)	(7,008		)
Total deferred tax liabilities - non-current	(9,034		)	(50,522		)
Valuation allowance	(37,920		)	(18,602		)
Net deferred tax assets (liabilities)	$	62,332		$	72,841

As of September 30, 2018, we had a federal net operating loss carryforward of $16.2 million, which will not expire, and state net operating loss carryforwards of $13.8 million, which will begin to expire in 2022, and foreign net operating loss carryforwards of $8.5 million which will begin to expire in 2021. As of September 30, 2018, we had U.S. foreign tax credit carryforwards of $36.1 million which will begin to expire in 2021.

We are subject to U.S. federal income tax as well as income taxes in various state and foreign jurisdictions. The earliest tax year still subject to examination by a significant taxing jurisdiction is September 30, 2012.

We determine whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify gross interest and penalties and unrecognized tax benefits as non-current liabilities in the consolidated balance sheets. As of September 30, 2018, the total amount of gross unrecognized tax benefits was $7.0 million, including $1.0 million of interest and $0.3 million of penalties, all of which would impact the effective tax rate if recognized. It is reasonably possible that within the next twelve months, $0.1 million of benefit may be recognized as a result of the lapsing of the statute of limitations.

75

The unrecognized tax benefits, which exclude interest and penalties, for the years ended September 30, 2018, 2017 and September 30, 2016 are as follows (in thousands):

	2018			2017			2016
Beginning balance	$	5,232		$	2,166		$	2,725
Increases related to tax positions taken during a prior year	—			3,250			—
Decreases related to tax positions taken during a prior year	—			—			—
Increases related to tax positions taken during the current year	490			—			—
Decreases related to settlements with taxing authorities	—			—			(579		)
Decreases related to expiration of statute of limitations	(55		)	(51		)	(113		)
Changes due to translation of foreign currencies	—			(133		)	133
Ending balance	$	5,667		$	5,232		$	2,166

We determine whether it is more likely than not that some or all of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which temporary differences become deductible or includible in taxable income. We consider projected future taxable income and tax planning strategies in our assessment. Based upon the level of historical income and projections for future taxable income, we believe it is more likely than not that we will not realize the benefits of the temporary differences related to certain Haas foreign tax credits and Haas foreign net operating losses. Therefore, a valuation allowance has been recorded against these deferred tax assets (in thousands).

	Beginning Balance		Valuation Allowance Recorded During The Period			Ending Balance
Valuation allowance for deferred tax assets:
Year ended September 30, 2018	$	18,602	$	19,318		$	37,920
Year ended September 30, 2017	5,548		13,054			18,602
Year ended September 30, 2016	5,961		(413		)	5,548

Note 16. Stock-Based and Other Compensation Arrangements

On January 27, 2015, our stockholders approved the 2014 Plan, which amended and restated our 2011 Equity Incentive Award Plan and authorized the issuance of a total of 5,717,584 shares. As of September 30, 2018, there were 2,341,594 shares remaining available for issuance under the 2014 Plan.

Stock Options

Our stock options are eligible to vest over three years in three equal annual installments, subject to continued employment on each vesting date. Vested options are exercisable at any time until 10 years from the date of the option grant, subject to earlier expirations under certain terminations of service and other conditions. The stock options granted have an exercise price equal to the closing stock price of our common stock on the grant date.

Continuous Employment Conditions

At September 30, 2018, we have outstanding 366,541 unvested time-based stock options under the 2014 Plan or our prior equity incentive plans (collectively, the Plans), which will vest on the basis of continuous employment. All of the time-based options vest ratably during the period of service.

76

The following table sets forth the summary of options activity under the Plans (dollars in thousands except per share data):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value(1)
Options outstanding at September 30, 2017	2,462,810		$	14.92	6.99	$	79
Granted	454,546		9.51
Exercised	(13,541	)	5.79
Forfeited options	(495,688	)	12.96
Options outstanding at September 30, 2018	2,408,127		$	14.35	6.36	$	643
Options exercisable at September 30, 2018	2,041,586		$	14.98	5.95	$	211

(1) Aggregate intrinsic value is calculated based on the difference between our closing stock price at year end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised all their options on the fiscal year end date.

The total intrinsic value of options exercised during the years ended September 30, 2018, 2017 and 2016 was $0.1 million, $6.0 million and $4.5 million, respectively. For the years ended September 30, 2018, 2017 and 2016, we recorded $1.4 million, $2.6 million and $3.2 million, respectively, of stock-based compensation expense related to these options that is included within selling, general and administrative expenses. At September 30, 2018, the unrecognized stock-based compensation related to these options was $1.7 million and is expected to be recognized over a weighted-average period of 1.4 years. Cash received from the exercise of stock options by us during the years ended September 30, 2018, 2017 and 2016 was $0.1 million, $2.7 million and $6.3 million, respectively.

Restricted Stock Units and Restricted Stock

In the year ended September 30, 2018, we granted 1,307,383 shares of restricted common stock to employees. These shares are eligible to vest over three years in three equal annual installments, subject to continued employment on each vesting date. During the years ended September 30, 2018, 2017 and 2016, we granted 104,663, 68,493 and 57,759, respectively, of restricted common shares to our directors. During fiscal year 2018, we also granted performance-related restricted stock units (PSUs) to certain executives. The PSUs vest after three years based on the achievement of certain predetermined goals, and are payable in shares of our common stock. One of the goals is based on our achieving a certain level of return on invested capital (ROIC) and the other goal is based on our total shareholder return (TSR) relative to certain peer companies over the three-year performance period. The actual number of shares to be issued for these PSUs is subject to final achievement of these goals and can range from 0% to 200% of the target shares set at the time of grant. Stock-based compensation expense for the PSUs is recognized on a straight-line basis over the performance period based upon the value determined using the intrinsic value method for the ROIC portion of the PSUs and using the Monte Carlo valuation method for the TSR portion of the PSUs. Stock-based compensation expense for the ROIC portion of the PSUs is cumulatively adjusted based upon the expected achievement of ROIC, which is assessed by management quarterly until vesting. Stock-based compensation expense for the TSR portion of the PSUs is recognized over the performance period regardless of the TSR performance.

For the years ended September 30, 2018, 2017 and 2016, we recorded $7.8 million, $3.8 million and $5.3 million, respectively, of stock-based compensation expense related to restricted stock that is included within selling, general and administrative expenses. The restricted stock awards do not contain any redemption provisions that are not within our control. Accordingly, these restricted stock awards have been accounted for as our stockholders’ equity. At September 30, 2018, the unrecognized stock-based compensation related to restricted stock awards was $8.6 million and is expected to be recognized over a weighted-average period of 1.5 years.

77

Restricted share activity during the year ended September 30, 2018 was as follows:

	Shares		Weighted Average Fair Value
Outstanding at September 30, 2017	797,562		$	12.21
Granted(1)	1,412,046		8.10
Vested	(502,555	)	11.30
Forfeited	(245,963	)	10.18
Outstanding at September 30, 2018	1,461,090		$	8.89

(1) Under the terms of their respective restricted stock award agreements, holders of restricted stock have the same voting rights as common stock shareholders; such rights exist even if the shares of restricted stock have not vested.

Fair value of our restricted shares is based on our closing stock price on the date of grant. The fair value of shares that were vested during the years ended September 30, 2018, 2017 and 2016 was $5.7 million, $5.3 million and $3.5 million, respectively. The fair value of shares that were granted during the years ended September 30, 2018, 2017 and 2016 was $11.4 million, $11.1 million and $6.9 million, respectively. The weighted average fair value at the grant date for restricted shares issued during the years ended September 30, 2018, 2017 and 2016 was $8.10, $12.63 and $12.29, respectively.

Due to tax deductions associated with option exercises and restricted share activities, we realized tax benefits of $0.1 million, $0.9 million and $1.1 million for the years ended September 30, 2018, 2017 and 2016, respectively. The realized 2018 and 2017 tax benefits were recorded as a reduction to our provision for income tax allowed by ASU 2016-09 which we early adopted on October 1, 2016 (see more discussion on ASU 2016-09 in Note 3 of the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended September 30, 2017 filed with the Securities and Exchange Commission (SEC) on November 28, 2017), and the realized 2016 tax benefits were recorded to the additional paid in capital account in our stockholders’ equity.

Stock-Based Compensation

We use the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, risk-free interest rate and expected dividends.

We estimated expected volatility based on historical data of the price of our common stock over the expected term of the options. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on guidelines provided in U.S. SEC Staff Accounting Bulletin No. 110 and represents the average of the vesting tranches and contractual terms. The risk-free rate assumed in valuing the options is based on the U.S. Treasury rate in effect at the time of grant for the expected term of the option. We do not anticipate paying any cash dividends in the foreseeable future and, therefore, used an expected dividend yield of zero in the option pricing model. Compensation expense is recognized only for those options expected to vest with forfeitures estimated based on our historical experience and future expectations. Stock-based compensation awards are amortized on a straight-line basis over a three-year period.

The weighted average assumptions used to value the option grants are as follows:

	2018		2017		2016
Expected life (in years)	6.00		6.00		6.00
Volatility	33.85	%	30.94	%	35.00	%
Risk free interest rate	2.07	%	1.33	%	1.55	%
Dividend yield	—		—		—

The weighted average fair value per option at the grant date for options issued during the years ended September 30, 2018, 2017, and 2016 was $3.46, $4.37 and $4.38, respectively.

78

Note 17. Employee Benefit Plan

We maintain a 401(k) defined contribution plan and a retirement saving plan for the benefit of our eligible employees. All U.S. full-time employees who have completed at least one full month of service and are at least 20 years of age are eligible to participate in the plans. Eligible employees may elect to contribute up to 60% of their eligible compensation. We made contributions of $2.4 million, $2.4 million and $2.4 million to this plan during the years ended September 30, 2018, 2017 and 2016, respectively. Certain non-US employees of the Company participate in other defined contribution retirement plans with varying vesting and contribution provisions.

Note 18. Supplemental Cash Flow Information

	Years Ended September 30,
	2018		2017		2016
	(in thousands)
Cash payments for:
Interest	$	42,659	$	33,386	$	33,349
Income taxes	7,160		10,287		37,193
Schedule of non-cash investing and financing activities:
Property and equipment acquired pursuant to capital leases	$	2,816	$	3,891	$	1,780

Note 19. Quarterly Financial Data (unaudited)

Summarized unaudited quarterly financial data for quarters ended December 31, 2016 through September 30, 2018 is as follows (in thousands except per share data):

Quarters Ended:	September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017
Net sales	$	406,817	$	410,359	$	390,183	$	363,091
Gross profit	98,800		104,197		105,735		94,424
Net income (loss)	7,274		10,754		15,000		(374		)
Basic net income (loss) per share (1)	$	0.07	$	0.11	$	0.15	$	—
Diluted net income (loss) per share (1)	$	0.07	$	0.11	$	0.15	$	—

Quarters Ended:	September 30, 2017			June 30, 2017			March 31, 2017		December 31, 2016
Net sales	$	361,552		$	363,907		$	364,599	$	339,371
Gross profit	87,487			90,208			94,755		89,457
Net (loss) income (2)	(38,287		)	(229,608		)	17,442		13,107
Basic net (loss) income per share (1)	$	(0.39	)	$	(2.32	)	$	0.18	$	0.13
Diluted net (loss) income per share (1)	$	(0.39	)	$	(2.32	)	$	0.18	$	0.13

1. Net income (loss) per share calculations for each quarter are based on the weighted average basic and diluted shares outstanding for that quarter and may not total to the full year amount.

2. During the three months ended June 30, 2017, we recorded a non-cash goodwill impairment charge of $311.1 million. See Note 2, Note 5 and Note 8 for additional information.

Note 20. Segment Reporting

We evaluate segment performance based on segment income or loss from operations. Each segment reports its results of operations and makes requests for capital expenditures and acquisition funding to our chief operating decision-maker (CODM). Our chief executive officer serves as our CODM.

79

We organize our businesses under three geographic-based segments: the Americas, EMEA and APAC. Our CODM reviews segment results on this basis for purposes of allocating resources and assessing performance. Each segment’s results reflect the results of our subsidiaries within that geographic region. Revenues reported by a segment reflect the customer contracts held by that segment, regardless of the geographic location of that customer. Some segments incur expenses for the benefit of the group or other segments, however these expenses are not allocated. We present corporate expenses related to public company reporting costs and other costs that would not be required by the segments if they were operating on a standalone basis as unallocated corporate costs.

The following table presents net sales and other financial information by business segment (in thousands):

	Year Ended September 30, 2018
	Americas		EMEA		APAC		Unallocated Corporate Costs			Consolidated
Net sales (1)	$	1,271,893	$	262,087	$	36,470	$	—		$	1,570,450
Income (loss) from operations (2)	128,908		17,926		2,017		(39,383		)	109,468
Interest expense, net	43,499		5,281		100		—			48,880
Capital expenditures	4,917		533		216		—			5,666
Depreciation and amortization	25,458		3,484		314		—			29,256
Total assets	1,485,453		248,937		55,086		—			1,789,476
Goodwill	204,183		51,190		11,271		—			266,644

(1) For fiscal 2018, approximately 11% of our total net sales were derived from one individual customer, which was reported under the Americas, EMEA and APAC segments.

(2) Unallocated corporate costs for fiscal 2018 consisted of payroll and personnel costs of $10.3 million, stock-based compensation expenses of $5.7 million, professional fees of $22.2 million and other corporate expenses of $1.2 million.

	Year Ended September 30, 2017
	Americas			EMEA		APAC			Unallocated Corporate Costs			Consolidated
Net sales (1)	$	1,142,366		$	258,072	$	28,991		$	—		$	1,429,429
Income (loss) from operations (2) (3)	(213,501		)	25,138		(172		)	(20,260		)	(208,795		)
Interest expense, net	35,936			3,786		99			—			39,821
Capital expenditures	5,659			3,165		99			—			8,923
Depreciation and amortization	24,765			3,321		266			—			28,352
Total assets	1,436,840			275,445		41,822			—			1,754,107
Goodwill (3)	204,183			51,190		11,271						266,644

(1) For fiscal 2017, nearly 11% of our total net sales were derived from one individual customer, which was reported under the Americas, EMEA and APAC segments.

(2) Unallocated corporate costs for fiscal 2017 consisted of payroll and personnel costs of $10.1 million, stock-based compensation expenses of $3.4 million, and professional fees and other corporate expenses of $6.8 million.

(3) Changes in the goodwill balance for fiscal 2017 included a non-cash impairment charge of $311.1 million, of which $308.4 million was related to the Americas segment and $2.7 million was related to the APAC segment. See Note 8 for further information.

80

	Year Ended September 30, 2016
	Americas		EMEA		APAC			Unallocated Corporate Costs			Consolidated
Net sales	$	1,177,496	$	274,952	$	24,918		$	—		$	1,477,366
Income (loss) from operations (1)	134,159		43,881		1,196			(20,486		)	158,750
Interest expense, net	32,595		4,309		(3		)	—			36,901
Capital expenditures	12,728		1,143		121						13,992
Depreciation and amortization	24,412		3,289		279			—			27,980

(1) Unallocated corporate costs for fiscal 2016 consisted of payroll and personnel costs of $6.7 million, stock-based compensation expenses of $5.3 million, and professional fees and other corporate expenses of $8.5 million.

Geographic Information

We operated principally in the United States, United Kingdom and other foreign geographic areas in Americas, Europe and emerging markets, such as Asia, Pacific Rim and the Middle East.

Net sales by geographic area, for the years ended September 30, 2018, 2017, and 2016, were as follows (dollars in thousands):

	Years Ended September 30,
	2018				2017				2016
	Sales		% of Total Sales		Sales		% of Total Sales		Sales		% of Total Sales
United States of America	$	1,173,429	74.7	%	$	1,062,523	74.3	%	$	1,087,691	73.6	%
United Kingdom	182,124		11.6	%	179,160		12.5	%	195,473		13.2	%
Other foreign countries	214,897		13.7	%	187,746		13.2	%	194,202		13.2	%
All foreign countries	397,021		25.3	%	366,906		25.7	%	389,675		26.4	%
Total	$	1,570,450	100.0	%	$	1,429,429	100.0	%	$	1,477,366	100.0	%

We determine the geographic area based on the origin of the sale.

Our long-lived assets consist of property and equipment, net, intangible assets, net and investment in joint ventures. Long-lived assets by geographic area, for the years ended September 30, 2018 and 2017, were as follows (in thousands):

	Years Ended September 30
	2018		2017
United States of America	$	169,377	$	185,438
All foreign countries	48,832		54,109
	$	218,209	$	239,547

81

Product and Services Information

Net sales by product categories, for the years ended September 30, 2018, 2017 and 2016 were as follows (dollars in thousands):

	Years Ended September 30
	2018				2017				2016
	Sales		% of Total Sales		Sales		% of Total Sales		Sales		% of Total Sales
Hardware	$	732,892	46.7	%	$	665,224	46.6	%	$	711,177	48.2	%
Chemicals	656,959		41.8	%	602,039		42.1	%	600,124		40.6	%
Electronic components	114,875		7.3	%	100,160		7.0	%	105,207		7.1	%
Bearings	36,212		2.3	%	34,566		2.4	%	34,662		2.3	%
Machined parts and other	29,512		1.9	%	27,440		1.9	%	26,196		1.8	%
Total	$	1,570,450	100.0	%	$	1,429,429	100.0	%	$	1,477,366	100.0	%

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined in Rule 13a‑15(e) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-K. Based upon their evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2018.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; and providing reasonable assurance regarding the prevention or timely detection of the unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Under the supervision and with the participation of our chief executive officer and chief financial officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective at the reasonable assurance level as of September 30, 2018.

The effectiveness of our internal control over financial reporting has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their attestation report which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of September 30, 2018.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.  OTHER INFORMATION

None.

PART III

In accordance with General Instruction G.(3) of Form 10-K certain information required by this Part III will either be incorporated into this Annual Report on Form 10-K by reference to our definitive proxy statement for our 2019 annual meeting of stockholders (2019 Proxy Statement) filed within 120 days after September 30, 2018 or will be included in an amendment to this Annual Report on Form 10-K filed within 120 days after September 30, 2018. To the extent such information is included in our 2019 Proxy Statement within 120 days after September 30, 2018, it is expected to be incorporated by reference to the sections of our 2019 Proxy Statement specified below.

82

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information appearing in our 2019 Proxy Statement under the following headings is incorporated herein by reference:

• “Proposal 1—Election of Directors,”

• “Executive Officers,”

• “Section 16(a) Beneficial Ownership Reporting Compliance” and

• “General Information Concerning the Board of Directors, Its Committees and the Company’s Corporate Governance.”

ITEM 11.  EXECUTIVE COMPENSATION

The information appearing in our 2019 Proxy Statement under the following headings is incorporated herein by reference:

• “Compensation Discussion and Analysis,”

• “General Information Concerning the Board of Directors, Its Committees and the Company’s Corporate Governance” and

• “Compensation Committee Report.”

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information appearing in our 2019 Proxy Statement under the following heading is incorporated herein by reference:

• “Security Ownership of Certain Beneficial Owners and Management” and

• “Compensation Discussion and Analysis.”

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information appearing in our 2019 Proxy Statement under the following headings is incorporated herein by reference:

• “Certain Relationships and Related Party Transactions” and

• “General Information Concerning the Board of Directors, Its Committees and the Company’s Corporate Governance.”

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

The information appearing in our 2019 Proxy Statement under the following heading is incorporated herein by reference:

• “Proposal 4—Ratification of Appointment of Independent Auditors.”

83

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report on Form 10-K:

(1) Financial Statements.  The financial statements listed in the “Index to Consolidated Financial Statements” under Part II, Item 8. “Financial Statements and Supplementary Data,” which index is incorporated herein by reference.

(2) Financial Statement Schedules.  Financial statement schedules have been omitted because either they are not applicable, not required or the information is included in the financial statements or the notes thereto.

(3) Exhibits.  The attached list of exhibits in the “Exhibit Index” immediately preceding the exhibits to this Annual Report on Form 10-K, which index is incorporated herein by reference.

ITEM 16. FORM 10-K SUMMARY

None.

84

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		WESCO AIRCRAFT HOLDINGS, INC.
Dated:	November 15, 2018	By:	/s/ Todd S. Renehan
			Todd S. Renehan Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ TODD S. RENEHAN	Chief Executive Officer and Director
Todd S. Renehan	(principal executive officer)	November 15, 2018
/s/ KERRY A. SHIBA	Executive Vice President and Chief Financial
Kerry A. Shiba	Officer (principal financial officer)	November 15, 2018
/s/ HOWARD D. ROSEN	Vice President and Corporate Controller
Howard D. Rosen	(principal accounting officer)	November 15, 2018
/s/ RANDY J. SNYDER
Randy J. Snyder	Chairman of the Board of Directors	November 15, 2018
/s/ DAYNE A. BAIRD
Dayne A. Baird	Director	November 15, 2018
/s/ THOMAS M. BANCROFT
Thomas M. Bancroft	Director	November 15, 2018
/s/ PAUL E. FULCHINO
Paul E. Fulchino	Director	November 15, 2018
/s/ JAY L. HABERLAND
Jay L. Haberland	Director	November 15, 2018
/s/ SCOTT E. KUECHLE
Scott E. Kuechle	Director	November 15, 2018
/s/ ADAM J. PALMER
Adam J. Palmer	Director	November 15, 2018

85

/s/ ROBERT D. PAULSON
Robert D. Paulson	Director	November 15, 2018
/s/ JENNIFER M. POLLINO
Jennifer M. Pollino	Director	November 15, 2018
/s/ NORTON A. SCHWARTZ
Norton A. Schwartz	Director	November 15, 2018

86

Exhibit Index

Exhibit Number	Description
2.1	Agreement and Plan of Merger, by and among Wesco Aircraft Holdings, Inc., Flyer Acquisition Corp. and Haas Group Inc., dated as of January 30, 2014 (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated January 31, 2014 (File No. 001-35253))
3.1	Amended and Restated Certificate of Incorporation of Wesco Aircraft Holdings, Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q, dated August 17, 2011 (File No. 001-35253))
3.2	Amended and Restated Bylaws of Wesco Aircraft Holdings, Inc. (Incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q, dated August 17, 2011 (File No. 001-35253))
4.1	Form of Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1/A dated June 6, 2011 (Registration No. 333-173381))
10.1	Credit Agreement, by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp., Barclays Bank PLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc., RBC Capital Markets, KeyBank National Association, Sumitomo Mitsui Banking Corporation, Union Bank, N.A., BBVA Compass Bank, PNC Bank, National Association, Raymond James Bank, N.A. and the lenders party thereto, dated as of December 7, 2012 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q dated February 8, 2013 (Registration No. 001-35253))
10.2	First Amendment to Credit Agreement, by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp., Barclays Bank PLC and the lenders party thereto, dated February 28, 2014 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February 28, 2014 (File No. 001-35253))
10.3	Third Amendment to Credit Agreement, by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp., Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto, dated as of March 24, 2016 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 24, 2016 (File No. 001-35253))
10.4	Fourth Amendment to Credit Agreement by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp., the other subsidiaries party thereto, Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto, dated as of October 4, 2016 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 4, 2016 (File No. 001-35253))
10.5	Fifth Amendment to Credit Agreement by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp., the other subsidiaries party thereto, Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 28, 2017 (File No. 001-35253))
10.6	Sixth Amendment to Credit Agreement, by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp., the other subsidiaries party thereto, Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto, dated November 2, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 2, 2017 (File No. 001-35253))
10.7	Guarantee and Collateral Agreement, by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp., Barclays Bank PLC and the subsidiary guarantors party thereto, dated as of December 7, 2012 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q dated February 8, 2013 (Registration No. 001-35253))
10.8	Executive Severance Agreement between Todd Renehan and Wesco Aircraft Hardware Corp., dated February 6, 2017 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016 (File No. 001-35253))
10.9	Executive Severance Agreement between Kerry A. Shiba and Wesco Aircraft Hardware Corp., dated September 15, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 18, 2017 (File No. 001-35253))

87

Exhibit Number	Description
10.10	Form of Executive Severance Agreement (Incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014 (File No. 001-35253))
10.11	Separation Agreement, by and among Wesco Aircraft Holdings, Inc., Wesco Aircraft Hardware Corp. and Dan Snow, dated as of September 15, 2017 (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated September 18, 2017 (File No. 001-35253))
10.12	Wesco Aircraft Holdings, Inc. 2011 Equity Incentive Award Plan (Incorporated by reference to Exhibit 10.23 to the Registrant’s Registration Statement on Form S-1/A dated June 27, 2011 (Registration No. 333- 173381))
10.13	Wesco Aircraft Holdings, Inc. 2014 Incentive Award Plan (Incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement dated December 18, 2014 (File No. 001-35253))
10.14	Form of Restricted Stock Agreement (Incorporated by reference to Exhibit 10.24 to the Registrant’s Registration Statement on Form S-1/A dated June 27, 2011 (Registration No. 333- 173381))
10.15	Form of Restricted Stock Unit Agreement (Incorporated by reference to Exhibit 10.25 to the Registrant’s Registration Statement on Form S-1/A dated June 27, 2011 (Registration No. 333-173381))
10.16	Form of Stock Option Agreement (Incorporated by reference to Exhibit 10.26 to the Registrant’s Registration Statement on Form S-1/A dated June 27, 2011 (Registration No. 333-173381))
10.17	Form of Performance Stock Unit Agreement (Incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015 (File No. 001-35253))
10.18	Form of Performance Stock Unit Agreement (fiscal 2017 grant) (Incorporated by reference to Exhibit 10.27 to the Registration's Annual Report on Form 10-K dated November 28, 2017 (File No. 001-35253))
10.19	Wesco Aircraft Holdings, Inc. Amended and Restated Management Incentive Plan (Filed herewith)
10.20	Amended and Restated Management Agreement between Wesco Aircraft Holdings, Inc. and Carlyle Investment Management, L.L.C. (Incorporated by reference to Exhibit 10.14 to the Registrant’s Quarterly Report on Form 10-Q, dated August 17, 2011 (File No. 001-35253))
10.21	Amended and Restated Stockholders Agreement of Wesco Aircraft Holdings, Inc. (Incorporated by reference to Exhibit 10.20 to the Registrant’s Quarterly Report on Form 10-Q, dated August 17, 2011 (File No. 001-35253))
10.22	Form of Wesco Aircraft Holdings, Inc. Indemnification Agreement (Incorporated by reference to Exhibit 10.27 to the Registrant’s Registration Statement on Form S-1/A dated June 6, 2011 (Registration No. 333- 173381))

88

Exhibit Number	Description
10.23	Lease Agreement between Wesco Aircraft Hardware Corp. and Avenue Scott, LLC, dated as of October 1, 2004 (Incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1/A dated May 12, 2011 (Registration No. 333-173381))
10.24	Lease Agreement between Wesco Aircraft Hardware Corp. and WATX Properties, LLC, dated as of January 1, 2004 (Incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1/A dated May 12, 2011 (Registration No. 333-173381))
10.25	Lease Agreement between Wesco Aircraft Europe Ltd. and Snyder Family Living Trust, dated as of January 1, 2006 (Incorporated by reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1/A dated May 12, 2011 (Registration No. 333-173381))
21.1	List of Subsidiaries (Filed herewith)
23.1	Consent of Independent Registered Public Accounting Firm (Filed herewith)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a- 14(a)/15d-14a and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Rule 13a- 14(a)/15d-14a and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
32.1	Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Furnished herewith)
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

89

EX-10.19

Exhibit 10.19

WESCO AIRCRAFT HOLDINGS, INC.

AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN

PURPOSE:

The compensation strategy of WESCO Aircraft (“Company”) is to reward its managers and key employees in a manner that permits the Company to attract, retain and motivate outstanding individuals.

The Management Incentive Plan (“MIP”) is designed under the Company’s shareholder approved Incentive Award Plan to compensate managers and key employees of the Company for achieving annual Company performance objectives, as well as for individual contributions towards accomplishing these objectives.  The MIP is intended to align the interests of the Company’s managers and key employees with the objectives and goals of the Company and its shareholders.

ELIGIBILITY:

Eligibility for the MIP is limited to those employees approved by the Company’s Board of Directors Compensation Committee and will typically include those positions which have a significant effect on the Company’s growth and financial results.  Eligible positions and target incentive amounts will be reviewed and determined each year by the Company and may change from year to year.  Participants must be full time employees of the Company in order to participate or receive payments under the MIP.  A participant in the MIP will not be eligible to participate in the Employee Incentive Plan.

TARGET INCENTIVE:

For each MIP participant, there will be a target incentive (“Target Incentive”) equal to an established percentage (“Target Incentive Percentage”) of each participant’s base salary (“Base Salary”).  Actual payouts will be awarded upon the achievement of external audit-confirmed and Board-approved financial targets.  Actual payouts (if any) may be higher or lower than the calculated Target Incentive, based on whether the Company’s performance is above or below its financial targets and the individual’s performance during the year.  A participant’s Base Salary for Target Incentive Award purposes is the participant’s salary on (i) January 1, or (ii) the date that the participant is admitted as a participant in the MIP.  All awards under the MIP are granted under and subject to the terms, conditions and limitations of the Company’s shareholder approved Incentive Award Plan as then in effect.  The final determination of any incentive payments must be approved by the Compensation Committee, except as otherwise provided herein.

BONUS POOL:

Each year, the Company plans for a 100% payout of the Target Incentive Award for each individual if target goals are attained.  At the conclusion of the year, the CEO will propose to the Board a total pool of funds to be made available for payout of individual bonuses (“Bonus Pool”).  The total Bonus Pool will be based upon the achievement of the Company’s ‘EBITDA’ and ‘Cash Flow from Operations less Capital Expenditures’ targets as well as individual performance determinations.  The Company may not distribute funds in excess of the Board-approved Bonus Pool.  The Target Incentive Award components are described below.

INCENTIVE COMPONENTS:

There are three components to the MIP:

COMPONENT A:EBITDA            Weight 40%

A “target goal” for Company EBITDA is established annually by the Compensation Committee. There are several milestone goals both below and above the target goal that will qualify the MIP participant for an incentive award. However, an established baseline goal for must be achieved before any payout for Component A can occur.  Payouts for this Component can range from 0-200% of the target goal based on actual company results.

COMPONENT B:CASH FLOW FROM OPERATIONS LESS CAPITAL

EXPENDITURES            Weight 40%

1

A target goal for the Company to increase Cash Flow from Operations less Capital Expenditures is established annually by the Compensation Committee. There are several milestone goals below and above the target goal that will qualify the MIP participant for an incentive award. However, an established baseline goal must be achieved before any payout for Component B can occur. Payouts for this Component can range from 0-200% of the target goal based on actual company results.

COMPONENT C:INDIVIDUAL PERFORMANCE            Weight 20%

Individual performance considerations will vary by participant and may be a more subjective measure of the contributions of the participant to the overall success of the organization.  As a measure of this component, departmental objectives or individual goals may be established.  The executive leadership team may have Individual Goals, which will be approved by the Compensation Committee, in consultation with the CEO. Assessment of actual achievement levels for participants below the executive leadership team will be reviewed by the EVP and/or CEO who have the discretion to adjust (increase or decrease) the payout for each individual based upon his or her contributions to the Company’s performance.  Assessment of actual achievement levels for the executive leadership team will be reviewed by the Compensation Committee (who may consult with the CEO), which has the discretion to adjust (increase or decrease) the payout for each individual based upon his or her contributions to the Company’s performance. Although achievement of individual performance is normally established at 100%, payouts for this Component can range from 0-200% of the target goal.

The components of the MIP and/or the weightings of each component may change in future years.

DETERMINATION OF AWARDS:

After receipt of the audited financial statements for the fiscal year ending September 30 the Company’s CEO will submit to the Compensation Committee an evaluation of the bonus earnings of each participant in the plan and the Compensation Committee shall make the final determination as to the amount of bonus that may be received by each participant.  When a question arises regarding extraordinary gains or losses, for example, the impact of an acquisition (which would not have been included in the target calculation), or the operation (gain or loss) of a particular division, the Compensation Committee will have sole discretion in making any adjustments to any bonus amount.

PAYOUTS AND NEW EMPLOYEES:

Bonus awards will be paid no later than thirty (30) days following approval, which follows the completion of the fiscal year-end review.  A participant must be on active payroll and a full-time employee of the Company during the year AND at the time awards are distributed in order to be eligible to receive an incentive award payout.  Prior to actual payment of a bonus award, no bonus will be earned under the MIP.  A participant who is promoted within the fiscal year will be entitled to receive a pro-rated incentive award based upon the time spent in each position, unless otherwise determined at the time of the promotion or upon payout.

GENERAL:

Participants will be notified that they are a participant in the MIP and their participation shall continue unless the employee is terminated or transferred to other jobs not covered by the MIP.  Notice of participation in the MIP shall not restrict the Company’s rights to transfer participants to other jobs or terminate their employment.

Forfeiture and Clawback Policy:

All awards under the MIP (including any proceeds, gains or other economic benefit actually or constructively received by a participant upon any receipt of any award) shall be subject to the provisions of the Wesco Aircraft Holdings, Inc. Clawback Policy (the “Company Clawback Policy”), whether or not the Company Clawback Policy was in place at the time of grant of an award, to the extent set forth in the Company Clawback Policy.

DISABILITY, DEATH OR SPECIAL CIRCUMSTANCES:

In the event of disability, death or special circumstances affecting a participant, the Company may, but has no obligation to, approve partial or prorated awards.

ADMINISTRATION:

2

The Company reserves the right to change or cancel the MIP at any time.  The Company, through its Board or its delegate(s) shall have all powers and discretion necessary or appropriate to administer the MIP and to control its operation.  All determinations and decisions made by the Company shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.

DISCLAIMER:

The Company is an “at will” employer and participation in the MIP is not to be construed in any way as an employment contract or agreement and does not in any way guarantee continued employment.

3

EX-21.1

Exhibit 21.1

List of Subsidiaries

Name	State or Country of Organization
AVIC Haas Chemical (Tianjin) Co., Ltd.	China
Fasteq Limited	United Kingdom
Flintbrook Limited	United Kingdom
Haas Chemical Management of Mexico, Inc.	Pennsylvania
Haas Chemical Materials Distribution and Trading Limited Liability Company	Turkey
Haas Corporation of Canada	Pennsylvania
Haas Corporation of China	Pennsylvania
Haas Do Brasil Total Gerenciamento De Productos Quimicos Ltda.	Brazil
Haas FineChem (Shanghai) Co. Ltd.	China
Haas Group Australia Pty Limited	Australia
Haas Group Canada Inc.	Canada
Haas Group, LLC	Delaware
Haas Group International France	France
Haas Group International, LLC	Pennsylvania
Haas Group International Philippines, Inc.	Philippines
Haas Group International SCM Ireland Limited	Ireland
Haas Group International SCM Limited	United Kingdom
Haas Group International Sp. z o.o.	Poland
Haas Holdings, LLC	Delaware
Haas International Corporation	Pennsylvania
Haas of Delaware LLC	Delaware
Haas SCM Srl	Italy
Haas TCM China Holdings Limited	Hong Kong
Haas TCM de Mexico S de RL de CV	Mexico
Haas TCM Group of the UK Limited	United Kingdom
Haas TCM Industries LLC	Delaware
Haas TCM Malaysia SDN. BHD.	Malaysia
Haas TCM of Israel Inc.	Delaware
Haas TCM of Luxembourg 3, SARL	Luxembourg
Haas TCM of Luxembourg 4, SARL	Luxembourg
Interfast USA Holdings Inc.	Delaware
NetMRO, LLC	Florida
RD Taylor & Co. Limited	United Kingdom
WA SF Cayman, Ltd	Cayman Islands
Wesco Aircraft Canada Inc.	Canada
Wesco Aircraft Canada, LLC	Delaware
Wesco Aircraft Canada LP	Canada
Wesco Aircraft EMEA, Ltd	United Kingdom
Wesco Aircraft Europe, Ltd	United Kingdom
Wesco Aircraft France SAS	France
Wesco Aircraft Germany GmbH	Germany
Wesco Aircraft Hardware Corp.	California

Wesco Aircraft Hardware Corporation (China)	China
Wesco Aircraft Hardware India Private Limited	India
Wesco Aircraft International Holdings, Ltd	United Kingdom
Wesco Aircraft Israel Ltd	Israel
Wesco Aircraft Japan G.K.	Japan
Wesco Aircraft Korea Co., Ltd.	Korea
Wesco Aircraft LLC	Oman
Wesco Aircraft Malaysia Sd. Bhd.	Malaysia
Wesco Aircraft Mexico S.A. de C.V.	Mexico
Wesco Aircraft NEW Limited	Hong Kong
Wesco Aircraft SEA Pte. Ltd.	Singapore
Wesco Aircraft SF, LLC	Delaware
Wesco LLC 1	Delaware
Wesco LLC 2	Delaware
Wesco 1 LLP	United Kingdom
Wesco 2 LLP	United Kingdom

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (333-218427 and 333-188518) and Form S-8 (Nos. 333-176016 and 333-201991) of Wesco Aircraft Holdings, Inc. of our report dated November 15, 2018 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
Los Angeles, California
November 15, 2018

EX-31.1

Exhibit 31.1

MANAGEMENT CERTIFICATION

I, Todd S. Renehan, certify that:

1. I have reviewed this annual report on Form 10-K of Wesco Aircraft Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	November 15, 2018
/s/ TODD S. RENEHAN
Name:	Todd S. Renehan
Title:	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

MANAGEMENT CERTIFICATION

I, Kerry A. Shiba, certify that:

1. I have reviewed this annual report on Form 10-K of Wesco Aircraft Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	November 15, 2018
/s/ KERRY A. SHIBA
Name:	Kerry A. Shiba
Title:	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Wesco Aircraft Holdings, Inc. (the “Company”) on Form 10-K for the year ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Todd S. Renehan, Chief Executive Officer of the Company, and Kerry A. Shiba, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350 as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	November 15, 2018
/s/ TODD S. RENEHAN
Todd S. Renehan
Chief Executive Officer
(Principal Executive Officer)
Dated:	November 15, 2018
/s/ KERRY A. SHIBA
Kerry A. Shiba
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

XML

Document and Entity Information - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Nov. 08, 2018	Mar. 29, 2018
Document and Entity Information
Entity Registrant Name	Wesco Aircraft Holdings, Inc
Entity Central Index Key	0001378718
Document Type	10-K
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 669,796
Entity Common Stock, Shares Outstanding		99,557,885
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Current assets:
Cash and cash equivalents	$ 46,222	$ 61,625
Accounts receivable, net of allowance for doubtful accounts of $2,877 and $3,109 at September 30, 2018 and 2017, respectively	283,775	256,301
Inventories	884,212	827,870
Prepaid expenses and other current assets	15,291	13,733
Income taxes receivable	2,017	3,617
Total current assets	1,231,517	1,163,146
Property and equipment, net	44,205	50,355
Deferred debt issuance costs, net	2,827	3,676
Goodwill	266,644	266,644
Intangible assets, net	163,438	178,292
Deferred tax assets	65,135	76,038
Other assets	15,710	15,956
Total assets	1,789,476	1,754,107
Current liabilities:
Accounts payable	180,494	184,273
Accrued expenses and other current liabilities	42,767	35,329
Income taxes payable	2,295	3,290
Capital lease obligations, current portion	2,205	2,952
Short-term borrowings and current portion of long-term debt	74,000	75,000
Total current liabilities	301,761	300,844
Capital lease obligations, less current portion	2,329	2,013
Long-term debt, less current portion	771,777	788,838
Deferred income taxes	2,803	3,197
Other liabilities	18,337	9,484
Total liabilities	1,097,007	1,104,376
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share: 50,000,000 shares authorized; no shares issued and outstanding	0	0
Common stock, class A, $0.001 par value, 950,000,000 shares authorized, 99,557,885 and 99,450,902 shares issued and outstanding at September 30, 2018 and 2017, respectively	99	99
Additional paid-in capital	444,531	436,522
Accumulated other comprehensive loss	(82,980)	(84,626)
Retained earnings	330,819	297,736
Total stockholders’ equity	692,469	649,731
Total liabilities and stockholders’ equity	$ 1,789,476	$ 1,754,107

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 2,877	$ 3,109
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	950,000,000	950,000,000
Common stock, shares issued (in shares)	99,557,885	99,450,902
Common stock, shares outstanding (in shares)	99,557,885	99,450,902

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Net sales	$ 1,570,450	$ 1,429,429	$ 1,477,366
Cost of sales	1,167,294	1,067,522	1,083,674
Gross profit	403,156	361,907	393,692
Selling, general and administrative expenses	293,688	259,588	234,942
Goodwill impairment charge	0	311,114	0
Income (loss) from operations	109,468	(208,795)	158,750
Interest expense, net	(48,880)	(39,821)	(36,901)
Other income, net	24	369	3,741
Income (loss) before income taxes	60,612	(248,247)	125,590
(Provision) benefit for income taxes	(27,958)	10,901	(34,212)
Net income (loss)	32,654	(237,346)	91,378
Change in net foreign currency translation adjustment	(1,862)	(7,138)	(39,211)
Change in net unrealized holding losses on derivatives	3,937	2,073	(1,629)
Other comprehensive income (loss), net of income taxes	2,075	(5,065)	(40,840)
Comprehensive income (loss)	$ 34,729	$ (242,411)	$ 50,538
Net income (loss) per share:
Basic (in dollars per share)	$ 0.33	$ (2.40)	$ 0.94
Diluted (in dollars per share)	$ 0.33	$ (2.40)	$ 0.93
Weighted average shares outstanding:
Basic (in shares)	99,156,998	98,700,879	97,634,155
Diluted (in shares)	99,500,477	98,700,879	98,165,856

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Retained Earnings
Common stock, shares issued, beginning balance (in shares) at Sep. 30, 2015		97,538,124
Total stockholders' equity, beginning balance at Sep. 30, 2015	$ 817,573	$ 98	$ 412,492	$ (38,721)	$ 443,704
Increase (Decrease) in Stockholders' Equity
Issuance of common stock (in shares)		1,076,784
Issuance of common stock	6,073	$ 1	6,072
Settlement on restricted stock tax withholding	(857)		(857)
Excess tax benefit related to restricted stock units and stock options exercised	1,098		1,098
Stock-based compensation expense	8,490		8,490
Net income (loss)	91,378				91,378
Other comprehensive income (loss)	(40,840)			(40,840)
Total stockholders' equity, ending balance at Sep. 30, 2016	882,915	$ 99	427,295	(79,561)	535,082
Common stock, shares issued, ending balance (in shares) at Sep. 30, 2016		98,614,908
Increase (Decrease) in Stockholders' Equity
Issuance of common stock (in shares)		835,994
Issuance of common stock	2,964	$ 0	2,964
Settlement on restricted stock tax withholding	(1,072)		(1,072)
Excess tax benefit related to restricted stock units and stock options exercised	900
Stock-based compensation expense	7,335		7,335
Net income (loss)	(237,346)				(237,346)
Other comprehensive income (loss)	(5,065)			(5,065)
Total stockholders' equity, ending balance at Sep. 30, 2017	$ 649,731	$ 99	436,522	(84,626)	297,736
Common stock, shares issued, ending balance (in shares) at Sep. 30, 2017	99,450,902	99,450,902
Increase (Decrease) in Stockholders' Equity
Issuance of common stock (in shares)		106,983
Issuance of common stock	$ 78	$ 0	78
Settlement on restricted stock tax withholding	(1,321)		(1,321)
Excess tax benefit related to restricted stock units and stock options exercised	100
Stock-based compensation expense	9,252		9,252
Net income (loss)	32,654				32,654
Other comprehensive income (loss)	2,075			2,075
Total stockholders' equity, ending balance at Sep. 30, 2018	$ 692,469	$ 99	$ 444,531	(82,980)	330,819
Common stock, shares issued, ending balance (in shares) at Sep. 30, 2018	99,557,885	99,557,885
Increase (Decrease) in Stockholders' Equity
Effect of adoption of accounting standards				$ (429)	$ 429

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Operating activities
Net income (loss)	$ 32,654	$ (237,346)	$ 91,378
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	29,256	28,352	27,980
Amortization of deferred debt issuance costs	5,688	6,143	4,627
Bad debt and sales return reserve	220	225	(810)
Stock-based compensation expense	9,252	7,335	8,490
Inventory provision	16,780	12,900	14,615
Goodwill impairment charge	0	311,114	0
Deferred income taxes	9,172	(21,070)	13,212
Other non-cash items	(615)	1,434	(4,102)
Subtotal	102,407	109,087	155,390
Changes in assets and liabilities:
Accounts receivable	(28,393)	(8,531)	(4,077)
Income tax receivable	1,544	(2,159)	(1,269)
Inventories	(73,106)	(129,772)	(41,798)
Prepaid expenses and other assets	365	(5,989)	(1,204)
Accounts payable	(3,430)	2,201	34,657
Accrued expenses and other liabilities	19,252	11,761	(11,008)
Income tax payable	(771)	(3,526)	(13,236)
Net cash provided by (used in) operating activities	17,868	(26,928)	117,455
Investing activities
Purchase of property and equipment	(5,666)	(8,923)	(13,992)
Proceeds from sales of assets	0	0	2,000
Net cash used in investing activities	(5,666)	(8,923)	(11,992)
Financing activities
Proceeds from short-term borrowings	67,500	77,000	0
Repayments of short-term borrowings	(68,500)	(22,000)	0
Repayments of long-term debt	(20,000)	(21,344)	(111,000)
Debt issuance costs	(1,900)	(12,796)	(2,126)
Repayments of capital lease obligations	(3,001)	(2,107)	(1,309)
Excess tax benefit related to stock-based incentive plans	0	0	1,098
Net proceeds from exercise of stock options	78	2,964	6,073
Settlement on restricted stock tax withholding	(1,321)	(1,072)	(857)
Net cash (used in) provided by financing activities	(27,144)	20,645	(108,121)
Effect of foreign currency exchange rate on cash and cash equivalents	(461)	(230)	(3,147)
Net decrease in cash and cash equivalents	(15,403)	(15,436)	(5,805)
Cash and cash equivalents, beginning of period	61,625	77,061	82,866
Cash and cash equivalents, end of period	$ 46,222	$ 61,625	$ 77,061

XML

Organization and Business

12 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Business

Organization and Business

Our company, Wesco Aircraft Holdings, Inc., is a distributor and provider of comprehensive supply chain management services to the global aerospace industry. Our services range from traditional distribution to the management of supplier relationships, quality assurance, kitting, just-in-time (JIT) delivery, chemical management services, third-party logistics or fourth-party logistics programs and point-of-use inventory management.

In addition to the central stocking facilities, we use a network of forward-stocking locations to service customers in a JIT and or ad hoc manner. There are 56 administrative, sales and/or stocking facilities around the world with concentrations in North America and Europe. In addition to product fulfillment, we also provide comprehensive supply chain management services for selected customers. These services include procurement and JIT inventory management and delivery services.

XML

Basis of Presentation and Summary of Significant Accounting Policies

12 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of majority-owned and controlled subsidiaries. All intercompany accounts, transactions and profits have been eliminated. When we do not have a controlling interest in an entity, but exert significant influence over the entity, we apply the equity method of accounting. Our financial statements have been prepared under the assumption that our Company will continue as a going concern.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, receivable valuations and allowance for sales returns, inventory valuations of excess and obsolescence (E&O) inventories, the useful lives of long-lived assets including property, equipment and intangible assets, annual goodwill impairment assessment, stock-based compensation, income taxes and contingencies. Actual results could differ from such estimates.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities from date of purchase of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable consist of amounts owed to us by customers. We perform periodic credit evaluations of the financial condition of our customers, monitor collections and payments from customers, and generally do not require collateral. Accounts receivable are generally due within 30 to 60 days. We provide for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. We reserve for an account when we doubt whether it is collectible. We estimate our allowance for doubtful accounts based on historical experience, aging of accounts receivable and information regarding the creditworthiness of our customers. To date, losses have been within the range of management’s expectations. If the estimated allowance for doubtful accounts subsequently proves to be insufficient, additional allowances may be required.

Our allowance for doubtful accounts activity consists of the following (in thousands):

Allowance for Doubtful Accounts	Balance at Beginning of Period		Charges to Cost and Expenses			Write-offs			Balance at End of Period
Year ended September 30, 2018	$	3,109	$	(27	)	$	(205	)	$	2,877
Year ended September 30, 2017	3,846		(133		)	(604		)	3,109
Year ended September 30, 2016	5,892		(846		)	(1,200		)	3,846

Inventories

Inventories are stated at the lower of cost or net realizable value. The method by which amounts are removed from inventory and relieved to Cost of Sales is the weighted average cost for all inventory, except for chemical products for which the first-in, first-out method is used. In-bound freight-related costs of $1.2 million, $1.5 million and $1.9 million as of September 30, 2018, 2017, and 2016, respectively, are included as part of the cost of inventory held for resale.

We record E&O provisions, as appropriate, to write-down inventory to estimated net realizable value. The components of our inventory are subject to different risks of E&O. Our hardware inventory, which does not decay or have a pre-determined shelf life, bears a higher risk of having excess quantities than becoming obsolete due to spoilage. Our hardware inventory E&O assessment requires the use of subjective judgments and estimates including the forecasted demand for each part. The forecasted demand considers a number of factors, including historical sales trends, current and forecasted customer demand, including customer liability provisions based on selected contractual rights, consideration of available sales channels and the time horizon over which we expect the hardware part to be sold. A full E&O write-down is recorded for on-hand quantities in excess of this forecasted demand. Our chemical inventory, which has a limited shelf-life, becomes obsolete when it has aged past its shelf-life and cannot be recertified and is no longer usable or able to be sold. Therefore, we typically maintain lower on-hand quantities of chemical products. A full E&O write-down is recorded for on-hand quantities which cannot be sold due to expiration or quantities in excess of forecasted demand. During the years ended September 30, 2018, 2017 and 2016, we recorded a provision of $16.8 million, $12.9 million and $14.6 million, respectively, to write down E&O inventory to net realizable value.

Property and Equipment

Property and equipment are stated at cost, less accumulated amortization and depreciation, computed using the straight-line method over the estimated useful life of each asset. Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the assets. Expenditures for repair and maintenance costs are expensed as incurred, and expenditures for major renewals and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts and any gain or loss is reflected in the consolidated statements of comprehensive income. The useful lives for depreciable assets are as follows:

Buildings and improvements	2 - 39.5 years
Machinery and equipment	5 - 7 years
Furniture and fixtures	7 years
Vehicles	5 years
Computer hardware and software	3 - 7 years

Impairment of Long-Lived Assets

We assess potential impairments of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Factors we consider include, but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. We have determined that our asset group for impairment testing comprises assets and liabilities of each of our reporting units, which consist of the Americas, Europe, Middle-East and Africa (EMEA) and Asia Pacific (APAC) reporting units (see change in our reporting units discussed under "Goodwill and Indefinite-Lived Intangible Assets" below). We have identified customer relationships as the primary asset because it is the principal asset from which the reporting units derive their cash flow generating capacity and has the longest remaining useful life. Recoverability is assessed by comparing the carrying value of the asset group to the undiscounted cash flows expected to be generated by these assets. Impairment losses are measured as the amount by which the carrying values of the primary assets exceed their fair values.

Deferred Debt Issuance Costs

Deferred debt issuance costs are amortized using the straight-line method, which approximates the effective interest method, over the term of the related credit arrangement; such amortization is included in interest expense in the consolidated statements of comprehensive income. Amortization of deferred debt issuance costs was $5.7 million, $6.1 million and $4.6 million for the years ended September 30, 2018, 2017 and 2016, respectively. As of September 30, 2018 and 2017, the remaining unamortized deferred debt issuance costs are $11.6 million and $15.4 million, respectively, of which $8.8 million and $11.7 million, respectively, was offset against the long-term debt.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill, which represents the excess of the consideration paid over the fair value of the net assets acquired in a business combination, and other acquired intangible assets with indefinite lives are not amortized, but are tested for impairment at least annually or more frequently when an event occurs or circumstances change such that it is more likely than not that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy, or disposition of a reporting unit or a portion thereof. Goodwill and indefinite-lived intangibles asset impairment testing is performed at the reporting unit level on July 1 of each year. We have one operating unit under each of the three operating segments, Americas, EMEA and APAC.

We test goodwill for impairment by performing a qualitative process, or a two-step quantitative assessment process. The first step of the quantitative process involves comparing the carrying value of net assets, including goodwill, to the fair value of the reporting unit. If the fair value exceeds its carrying amount, goodwill is not considered impaired and the second step of the process is unnecessary. If the carrying amount of a reporting unit’s goodwill exceeds its fair value, the second step measures the impairment loss, if any.

The fair value of our reporting units is determined using a combination of a discounted cash flow analysis (income approach) and market earnings multiples (market approach). These fair value approaches require significant management judgment and estimate. The determination of fair value using a discounted cash flow analysis requires the use of key judgments, estimates and assumptions including revenue growth rates, projected operating margins, changes in working capital, terminal values, and discount rates. We develop these key estimates and assumptions by considering our recent financial performance and trends, industry growth projections, and current sales pipeline based on existing customer contracts and the timing and amount of future contract renewals. The determination of fair value using market earnings multiples requires the use of key judgments, estimates and assumptions related to projected earnings and applying those amounts to earnings multiples using appropriate peer companies. We develop our projected earnings using the same judgments, estimates, and assumptions used in the discounted cash flow analysis.

The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The implied fair value of the reporting unit’s goodwill is calculated by creating a hypothetical balance sheet as if the reporting unit had just been acquired. This balance sheet contains all assets and liabilities recorded at fair value (including any intangible assets that may not have any corresponding carrying value in our balance sheet). The implied value of the reporting unit’s goodwill is calculated by subtracting the fair value of the net assets from the fair value of the reporting unit. If the carrying value of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. We performed our goodwill impairment tests during the year ended September 30, 2017, which resulted in an interim goodwill impairment charge of $311.1 million. Refer to Note 8 for additional information.

Indefinite-lived intangibles consist of a trademark, for which we estimate fair value and compare such fair value to the carrying amount. If the carrying amount of the trademark exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, we primarily utilize reported market transactions and discounted cash flow analysis. We use a three-tier fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels whereby the highest priority is given to Level 1 inputs and the lowest to Level 3 inputs. The three broad categories are:

Level 1:	Quoted prices in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
Level 3:	Unobservable inputs for the asset or liability.

The definition of fair value includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterparty or us) will not be fulfilled. For financial assets traded in an active market (Level 1), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have been adjusted accordingly.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

We use observable market-based inputs to calculate fair value of our interest rate swap agreements and outstanding debt instruments, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.

Where available, we utilize quoted market prices or observable inputs rather than unobservable inputs to determine fair value.

Derivative Financial Instruments

We periodically enter into cash flow derivative transactions, such as interest rate swap agreements, to hedge exposure to various risks related to interest rates. We recognize all derivatives at their fair value as either assets or liabilities. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the changes in fair value of the derivative contract are recorded in accumulated other comprehensive loss, net of taxes, and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Derivatives not qualifying as cash flow hedges will default to a mark-to-market accounting treatment and will be recorded directly to the income statement. We present derivative instruments in operating, investing, or financing activities in our consolidated statements of cash flows consistent with the cash flows of the hedged item.

Comprehensive Income or Loss

Comprehensive income or loss generally represents all changes in stockholders’ equity, except those resulting from investments by or distributions to stockholders. Our comprehensive income or loss consists of net income or loss, foreign currency translation adjustments and fair value adjustments for cash flow hedges.

Revenue Recognition

We recognize product and service revenue when (1) persuasive evidence of an arrangement exists, (2) title transfers to the customer, (3) the sales price charged is fixed or determinable, and (4) collection is reasonably assured. In instances where title does not pass to the customer upon shipment, we recognize revenue upon delivery or customer acceptance, depending on the terms of the sales contract.

In connection with the sales of our products, we often provide certain supply chain management services to our JIT customers. These services include the timely replenishment of products at the customer site, while also minimizing the customer’s on-hand inventory. We provide these services contemporaneously with the delivery of the product, and as such, once the product is delivered, we do not have a post-delivery obligation to provide services to the customer. Accordingly, the price of such services is generally included in the price of the products delivered to the customer, and revenue is recognized upon delivery of the product, at which point we have satisfied our obligations to the customer. We do not account for these services as a separate element, as the services do not have stand-alone value and cannot be separated from the product element of the arrangement. Additionally, we do not present service revenues apart from product revenues, as the service revenues represent less than 10% of our consolidated net sales.

We report revenue on a gross or net basis, based on management’s assessment of whether we act as a principal or agent in the transaction, in our presentation of net sales and costs of sales. If we are the principal in the transaction and have the risks and rewards of ownership, the transactions are recorded as gross in the consolidated statements of comprehensive income. If we do not act as a principal in the transaction, the transactions are recorded on a net basis in the consolidated statements of comprehensive income. The majority of our revenue is recorded on a gross basis with the exception of certain gas, energy and chemical manager service contracts that are recorded as net revenue.

We also enter into sales rebates and profit-sharing arrangements. Such customer incentives are accounted for as a reduction to gross sales and recorded based upon estimates at the time products are sold. These estimates are based upon historical experience for similar programs and products. We review such rebates and profit-sharing arrangements on an ongoing basis and accruals are adjusted, if necessary, as additional information becomes available.

We provide allowances for credits and returns based on historic experience and adjust such allowances as considered necessary. To date, such provisions have been within the range of our expectations and the allowance established. Sales tax collected from customers is excluded from net sales in the consolidated statements of comprehensive income.

In connection with our JIT supply chain management programs, at times, we assume customer inventory on a consignment basis. This consigned inventory remains the property of the customer but is managed and distributed by us. We earn a fixed fee per unit on each shipment of the consigned inventory; such amounts represent less than 1% of consolidated net sales.

Shipping and Handling Costs

We record revenue for shipping and handling billed to our customers. Shipping and handling revenues were $3.9 million, $4.6 million and $5.1 million for the years ended September 30, 2018, 2017 and 2016, respectively.

Shipping and handling costs are primarily included in cost of sales. Total shipping and handling costs were $33.5 million, $31.4 million and $28.0 million for the years ended September 30, 2018, 2017 and 2016, respectively.

Income Taxes

We recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is established, when necessary, to reduce net deferred tax assets to the amount expected to be realized. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which temporary differences become deductible or includible in taxable income. We consider projected future taxable income and tax planning strategies in our assessment. Our foreign subsidiaries are taxed in local jurisdictions at local statutory rates. The Company includes interest and penalties related to income taxes, including unrecognized tax benefits, within income tax expense.

Concentration of Credit Risk and Significant Vendors and Customers

We maintain our cash and cash equivalents in bank deposit accounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts and do not believe we are exposed to any significant credit risk from cash and cash equivalents.

We purchase our products on credit terms from vendors located throughout North America and Europe. For the years ended September 30, 2018, 2017 and 2016, we made 12%, 13%, and 12%, respectively, of our purchases from Precision Castparts Corp. and the amounts payable to this supplier were 4% and 6% of total accounts payable at September 30, 2018 and 2017, respectively. Additionally, for the years ended September 30, 2018, 2017 and 2016, we made 8%, 9%, and 8%, respectively, of our purchases from Arconic and the amounts payable to this supplier were 6% and 6% of total accounts payable at September 30, 2018 and 2017, respectively. The majority of the products we sell are available through multiple channels and, therefore, this reduces the risk related to any vendor relationship.

For the years ended September 30, 2018 and 2017, we derived approximately 11% of our total net sales from one individual customer. For the year ended September 30, 2016, we did not derive 10% or more of our total net sales from any individual customer. Government sales, which were derived from various military parts procurement agencies such as the U.S. Defense Logistics Agency, or from defense contractors buying on their behalf, comprised 14%, 16% and 15% of our net sales during fiscal 2018, 2017 and 2016, respectively.

Foreign Currency Translation and Transactions

The financial statements of foreign subsidiaries and affiliates where the local currency is the functional currency are translated into U.S. dollars using exchange rates in effect at each period-end for assets and liabilities and average exchange rates during the period for results of operations. The adjustment resulting from translating the financial statements of such foreign subsidiaries is reflected as a separate component of stockholders’ equity. Foreign currency transaction gains and losses are reported as other income (expense), net in the consolidated statements of comprehensive income. For the years ended

September 30, 2018, 2017 and 2016, realized foreign currency transaction gains were $0.3 million, $0.1 million and $3.2 million, respectively.

Stock-Based Compensation

We recognize all stock-based awards to employees and directors as stock-based compensation expense based upon their fair values on the date of grant.

We estimate the fair value of stock-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as an expense during the requisite service periods. We have estimated the fair value for each option award as of the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model considers, among other factors, the expected life of the award and the expected volatility of our stock price. We recognize the stock-based compensation expense over the requisite service period (generally a vesting term of three years) using the graded vesting method for performance condition awards and the straight-line method for service condition only awards, which is generally a vesting term of three years. Stock options typically have a contractual term of 10 years. The stock options granted have an exercise price equal to the closing stock price of our common stock on the grant date. Compensation expense for restricted stock units and awards are based on the market price of the shares underlying the awards on the grant date. Compensation expense for performance based awards reflects the estimated probability that the performance condition will be met. Compensation expense for awards with total stockholder return performance metrics reflects the fair value calculated using the Monte Carlo simulation model, which incorporates stock price correlation and other variables over the time horizons matching the performance periods.

Net Income or Net Loss Per Share

Basic net income or net loss per share is computed by dividing net income or net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income or net loss per share includes the dilutive effect of both outstanding stock options and restricted shares, calculated using the treasury stock method.

XML

Recent Accounting Pronouncements

12 Months Ended

Sep. 30, 2018

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Changes to generally accepted accounting principles in the United States (GAAP) are established by the Financial Accounting Standards Board (FASB), in the form of Accounting Standards Update, to the FASB’s Accounting Standards Codification.

We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

New Accounting Standards Updates

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which specifies the modification accounting applicable to any entity that changes the terms or conditions of a share-based payment award. ASU 2017-09 is effective for the Company in fiscal year 2019. Early adoption is permitted. We do not anticipate the adoption of ASU 2017-09 will have a significant impact on our consolidated financial statements.

 In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the current requirements for testing goodwill for impairment by eliminating the second step of the two-step impairment test to measure the amount of an impairment loss. ASU 2017-04 is effective for the Company in fiscal year 2021, including interim reporting periods within that reporting period, and all annual and interim reporting periods thereafter. Early adoption is permitted. We do not anticipate the adoption of ASU 2017-04 will have a significant impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is amended by ASU2018-01, ASU 2018-10 and ASU 2018-11 that were issued by FASB in January 2018, July 2018 and July 2018, respectively (collectively, the amended ASU 2016-02). The amended ASU 2016-02 requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. The amended ASU 2016-02 retains a distinction between finance leases (i.e. capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amended ASU 2016-02 also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach shall be used when adopting ASU 2016-02, which includes a number of optional practical expedients that entities may elect to apply. The amended ASU 2016-02 is effective for the Company in fiscal year 2020 and interim periods therein, with early application permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. As of September 30, 2018, total future minimum payments under our operating leases amounted to $50.8 million.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which affects the accounting for equity investments (excluding investments recorded under the equity method), financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective for the Company in fiscal year 2019, with early adoption permitted for certain provisions. We do not anticipate the adoption of ASU 2016-01 will have a significant impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-10, ASU 2017-13 and ASU 2017-14, which the FASB issued in August 2015, March 2016, April 2016, May 2016, May 2016, December 2016, May 2017, September 2017 and November 2017, respectively (collectively, the amended ASU 2014-09). The amended ASU 2014-09 provides a single comprehensive model for the recognition of revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It requires an entity to recognize revenue when the entity transfers 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. The amended ASU 2014-09 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) with the customer, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The amended ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date for the amended ASU 2014-09 for the Company is fiscal year 2019, including interim reporting periods within that reporting period.

To assess the impact of this new standard, the Company established an implementation project team, identified its revenue streams and contracts with customers across our businesses and applied the principles of the new standard against a selection of contracts to assist in the determination of potential revenue accounting differences. Based on our assessment, we do not anticipate that the adoption of this revised guidance will have a significant impact on our financial position, results of operations or cash flows. Our hardware product revenues will continue to be recognized as shipments are made and control transfers to the customer. Revenues for products and services provided under our chemical management service contracts will be recognized over time as control transfers to the customer. The Company has designed and implemented internal controls, policies and processes to comply with the new standard. We adopted Topic 606 in the first quarter of fiscal 2019 using the modified retrospective method of adoption, which resulted in no changes to the opening consolidated balance sheet as of October 1, 2018.

Adopted Accounting Standards Updates

Effective July 1, 2018, we early adopted ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify from AOCI to retained earnings stranded tax effects resulting from the enactment of the Tax Act. ASU 2018-02 was enacted on December 22, 2017 and requires certain disclosures about the stranded tax effects. An entity has the option of applying the new guidance at the beginning of the period of adoption or retrospectively to each period (or periods) in which the tax effects related to items remaining in accumulated other comprehensive income are recognized. We elected not to reclassify prior periods. Adoption of this standard resulted in an increase of $0.4 million to retained earnings as of July 1, 2018 due to the reclassification of the stranded tax effects as a result of the Tax Act from AOCI to retained earnings. This reclassification is reflected in the "Effect of adoption of accounting standard" line in the consolidated statements of stockholders' equity.

Effective April 1, 2018, we early adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 expands the eligibility of hedging strategies that qualify for hedge accounting, changes the assessment of hedge effectiveness and modifies the presentation and disclosure of hedging activities. The adoption of ASU 2017-12 did not have a material impact on our consolidated financial statements.

Effective October 1, 2017, we early adopted ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. ASU 2016-07 eliminates the requirement that when an investment subsequently qualifies for use of the equity method as a result of an increase in level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. ASU 2016-07 requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and to adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. In addition, ASU 2016-07 requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The adoption of ASU 2016-07 did not have a material impact on our consolidated financial statements.

Effective October 1, 2017, we adopted ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires an entity to measure inventory at the lower of cost or net realizable value and eliminates current GAAP options for measuring market value. ASU 2015-11 defines realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of ASU 2015-11 did not have a material impact on our consolidated financial statements.

XML

Commitments and Contingencies

12 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Operating Leases

We lease office and warehouse facilities (certain of which are from related parties) and warehouse equipment under various non-concealable operating leases that expire at various dates through May 31, 2027. Certain leases contain escalation clauses based on the Consumer Price Index. We are also committed under the terms of certain of these operating lease agreements to pay property taxes, insurance, utilities and maintenance costs.

Future minimum rental payments under operating leases as of September 30, 2018 are as follows (dollars in thousands):

	Third Party		Related Party		Total
Years Ended September 30,
2019	$	10,575	$	1,864	$	12,439
2020	9,364		317		9,681
2021	7,583		170		7,753
2022	6,382		283		6,665
2023	5,539		278		5,817
Thereafter	8,160		270		8,430
	$	47,603	$	3,182	$	50,785

Total rent expense for the years ended September 30, 2018, 2017 and 2016 was $13.4 million, $12.6 million and $11.9 million, respectively.

Capital Lease Commitments

We lease certain equipment under capital lease agreements that require minimum monthly payments that expire at various dates through February 29, 2024. The gross amount of these leases at September 30, 2018 and September 30, 2017 are $4.8 million and $5.3 million, respectively.

Future minimum lease payments under capital lease agreements as of September 30, 2018 are as follows (in thousands):

Years Ended September 30,
2019	$	2,311
2020	1,292
2021	474
2022	401
2023	215
Thereafter	66
	4,759
Less: Interest	(226		)
Total	$	4,533

Indemnifications

In the normal course of business, we provide indemnifications to our customers with regard to certain products and enter into contracts and agreements that may contain representations and warranties and provide for general indemnifications. Our maximum exposure under many of these agreements is not quantifiable as we have a limited history of prior indemnification claims and payments. Payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, we could incur costs in the future as a result of indemnification obligations.

Litigation

We are involved in various legal matters that arise in the ordinary course of business. Management, after consulting with outside legal counsel, believes that the ultimate outcome of such matters will not have a material adverse effect on our financial position, results of operations or cash flows. There can be no assurance, however, that such actions will not be material or adversely affect our business, financial position and results of operations or cash flows.

XML

Inventory

12 Months Ended

Sep. 30, 2018

Inventory Disclosure [Abstract]

Inventory

Inventory

Our inventory is comprised solely of finished goods.

Charges to cost of sales for E&O provisions and related items were $16.8 million, $12.9 million and $14.6 million in the years ended September 30, 2018, 2017 and 2016, respectively. We believe that these amounts appropriately write-down E&O inventory to its net realizable value.

XML

Related Party Transactions

12 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

We entered into a management agreement with The Carlyle Group to provide certain financial, strategic advisory and consultancy services. Under this management agreement, we are obligated to pay The Carlyle Group, or a designee thereof, an annual management fee of $1.0 million (paid quarterly) plus fees and expenses associated with company-related meetings. The management fee was waived by an entity affiliated with The Carlyle Group for fiscal 2018 and the third and fourth quarters of fiscal 2017. We incurred expense of $0.1 million, $0.6 million and $1.3 million for the years ended September 30, 2018, 2017 and 2016, respectively, related to this management agreement. These amounts were paid to The Carlyle Group during the years endedSeptember 30, 2018,2017and2016.

We lease several office and warehouse facilities under operating lease agreements from entities controlled by our former chief executive officer, who is also our Chairman of the Board. Rent expense on these facilities was $1.9 million, $1.6 million and $1.8 million for the years ended September 30, 2018, 2017 and 2016, respectively (see Note 4).

XML

Property and Equipment, net

12 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and Equipment, net

Property and equipment, net, consists of the following at September 30 (in thousands):

	2018			2017
Land, buildings and improvements	$	31,966		$	31,202
Machinery and equipment	22,321			21,265
Furniture and fixtures	7,930			8,011
Vehicles	859			942
Computer hardware and software	56,643			50,395
Construction in progress	3,684			4,300
	123,403			116,115
Less: accumulated depreciation	(79,198		)	(65,760		)
Property and equipment, net	$	44,205		$	50,355

At September 30, 2018 and 2017, property and equipment included assets of $18.4 million, and $15.6 million respectively, acquired under capital lease arrangements. Accumulated amortization of assets acquired under capital leases was $11.3 million and $7.9 million as of September 30, 2018 and 2017, respectively.

Depreciation and amortization expense for property and equipment was $14.4 million, $13.4 million and $12.1 million during the years ended September 30, 2018, 2017 and 2016, respectively (including amortization expense of $3.4 million, $2.5 million and $1.5 million on assets acquired under capital leases for the years ended September 30, 2018, 2017 and 2016, respectively).

XML

Goodwill and Intangible Assets, net

12 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, net

Goodwill and Intangible Assets, net

Goodwill

A reconciliation of our goodwill balance is as follows (in thousands):

	Americas September 30,						EMEA September 30,					APAC September 30,						Consolidated September 30,
	2018			2017			2018		2017			2018			2017			2018			2017
Beginning balance, gross	$	773,384		$	773,384		$	51,190	$	53,297		$	16,955		$	16,955		$	841,529		$	843,636
Accumulated impairment	(569,201		)	(260,798		)	—		—			(5,684		)	(2,973		)	(574,885		)	(263,771		)
Beginning balance, net	$	204,183		$	512,586		$	51,190	$	53,297		$	11,271		$	13,982		$	266,644		$	579,865
Foreign currency translation	—			—			—		(2,107		)	—			—			—			(2,107		)
Goodwill impairment	—			(308,403		)	—		—			—			(2,711		)	—			(311,114		)
Ending balance, gross	$	773,384		$	773,384		$	51,190	$	51,190		$	16,955		$	16,955		$	841,529		$	841,529
Accumulated impairment	(569,201		)	(569,201		)	—		—			(5,684		)	(5,684		)	(574,885		)	(574,885		)
Ending balance, net	$	204,183		$	204,183		$	51,190	$	51,190		$	11,271		$	11,271		$	266,644		$	266,644

We performed our annual Step 1 goodwill impairment tests on July 1, 2018. The results of these tests indicated that the estimated fair values of our reporting units exceeded their carrying values.

As previously disclosed, as of June 30, 2017, we performed a two-step quantitative assessment on goodwill impairment on all our reporting units, which was triggered by events identified in our quarterly Step 0 qualitative assessment. As a result, we recognized a total impairment charge of $311.1 million. We also performed our fiscal year 2017 annual goodwill impairment test as of July 1, 2017, concurrent with our restructuring of our reporting units, which indicated no impairment for any of the three new reporting units, Americas, EMEA and APAC. Out of the $311.1 million goodwill impairment charge, $308.4 million was assigned to the Americas reporting unit and $2.7 million was assigned to the APAC reporting unit based on their relative fair value as of July 1, 2018. See Note 8 of the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended September 30, 2017 for additional information.

Intangible Assets

As of September 30, 2018 and 2017, the gross amounts and accumulated amortization of intangible assets is as follows (in thousands):

	2018					2017
	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
Customer relationships (12 to 20 year life)	$	172,603	$	(75,102	)	$	172,603	$	(64,319	)
Trademarks (5 years to indefinite life)	52,930		(4,583		)	52,930		(3,610		)
Backlog (2 year life)	4,327		(4,327		)	4,327		(4,327		)
Non-compete agreements (3 to 4 year life)	1,457		(1,457		)	1,457		(1,457		)
Technology (10 year life)	32,260		(14,670		)	32,260		(11,572		)
Total intangible assets	$	263,577	$	(100,139	)	$	263,577	$	(85,285	)

Estimated future intangible amortization expense as of September 30, 2018 is as follows (in thousands):

2019	$	14,855
2020	14,721
2021	14,317
2022	14,317
2023	14,317
Thereafter	53,078
	$	125,605

Amortization expense included in the statements of comprehensive income (loss) for the years ended September 30, 2018, 2017 and 2016 was $14.9 million, $14.9 million and $15.8 million, respectively. In addition to amortizing intangibles, we assigned an indefinite life to the Wesco Aircraft trademark. As of September 30, 2018 and 2017, the trademark had a carrying value of $37.8 million.

XML

Accrued Expenses and Other Current Liabilities

12 Months Ended

Sep. 30, 2018

Accrued Liabilities, Current [Abstract]

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30,
	2018		2017
Accrued compensation and related expenses	$	18,590	$	16,271
Accrual for professional fees	951		951
Accrued customer rebates	5,604		4,240
Accrued taxes (property, sales and use)	1,083		2,083
Deferred revenue	971		301
Accrual for severance and other expenses	1,203		354
Interest rate swap	289		2,462
Other accruals	14,076		8,667
Accrued expenses and other current liabilities	$	42,767	$	35,329

XML

Fair Value of Financial Instruments

12 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, accounts receivable and payable, accrued and other current liabilities and a revolving facility. The carrying amounts of these instruments approximate fair value because of their short-term maturities. The fair value of interest rate swap agreements is determined using pricing models that use observable market inputs as of the balance sheet date, a Level 2 measurement. The fair value of the long-term debt instruments is determined using current applicable rates for similar instruments as of the balance sheet date, a Level 2 measurement.

The carrying amounts and fair values of the debt instruments and interest rate swap hedge instrument were as follows (in thousands):

	September 30, 2018				September 30, 2017
	Carrying Amount		Fair Value		Carrying Amount			Fair Value
Term loan A	$	360,000	$	357,840	$	380,000		$	376,960
Term loan B	440,562		432,192		440,562			428,667
Revolving facility	54,000		54,000		55,000			55,000
Interest rate swap hedge assets (liabilities), net	1,807		1,807		(3,365		)	(3,365		)

XML

Long-Term Debt

12 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Long-term debt consists of the following (in thousands):

	September 30, 2018							September 30, 2017
	Principal  Amount		Deferred Debt Issuance Costs			Carrying Amount		Principal  Amount		Deferred Debt Issuance Costs			Carrying Amount
Term loan A facility	$	360,000	$	(5,842	)	$	354,158	$	380,000	$	(7,562	)	$	372,438
Term loan B facility	440,562		(2,943		)	437,619		440,562		(4,162		)	436,400
Revolving facility	54,000		—			54,000		55,000		—			55,000
	854,562		(8,785		)	845,777		875,562		(11,724		)	863,838
Less: current portion	74,000		—			74,000		75,000		—			75,000
Non-current portion	$	780,562	$	(8,785	)	$	771,777	$	800,562	$	(11,724	)	$	788,838

Aggregate maturities of long-term debt as of September 30, 2018 are as follows (in thousands):

Years Ended September 30,
2019	$	74,000
2020	20,000
2021	760,562
	$	854,562

The credit agreement, dated as of December 7, 2012 (as amended, the Credit Agreement), by and among the Company, Wesco Aircraft Hardware Corp. and the lenders and agents party thereto, which governs our senior secured credit facilities, provides for (1) a $400.0 million senior secured term loan A facility (the term loan A facility), (2) a $180.0 million revolving facility (the revolving facility) and (3) a $525.0 million senior secured term loan B facility (the term loan B facility). We refer to term loan A facility, the revolving facility and the term loan B facility, together, as the “Credit Facilities.” On November 2, 2017, we entered into the Sixth Amendment to the Credit Agreement (the Sixth Amendment). For additional information about the Sixth Amendment, see “—Sixth Amendment to Senior Secured Credit Facilities” below.

As of September 30, 2018, our outstanding indebtedness under our Credit Facilities was $854.6 million, which consisted of (1) $360.0 million of indebtedness under the term loan A facility, (2) $54 million of indebtedness under the revolving facility, and (3) $440.6 million of indebtedness under the term loan B facility. As of September 30, 2018, $126.0 million was available for borrowing under the revolving facility to fund our operating and investing activities without breaching any covenants contained in the Credit Agreement.

During the year ended September 30, 2018, we borrowed $67.5 million under the revolving facility, and made our required payments of $20.0 million under the term loan A facility and voluntary prepayments totaling $68.5 million on our borrowings under the revolving facility.

The interest rate for the term loan A facility is based on our Consolidated Total Leverage Ratio (as such term is defined in the Credit Agreement) as determined in the most recently delivered financial statements, with the respective margins ranging from 2.00% to 3.00% for Eurocurrency loans and 1.00% to 2.00% for ABR loans. The term loan A facility amortizes in equal quarterly installments of 1.25% of the original principal amount of $400.0 million with the balance due on the earlier of (i) 90 days before the maturity of the term loan B facility, and (ii) October 4, 2021. As of September 30, 2018, the interest rate for borrowings under the term loan A facility was 5.25%, which approximated the effective interest rate.

The interest rate for the term loan B facility has a margin of 2.50% per annum for Eurocurrency loans (subject to a minimum Eurocurrency rate floor of 0.75% per annum) or 1.50% per annum for ABR loans (subject to a minimum ABR floor of 1.75% per annum). The term loan B facility amortizes in equal quarterly installments of 0.25% of the original principal amount of $525.0 million, with the balance due at maturity on February 28, 2021. We have paid in advance all the required quarterly installments until the term loan B reaches its maturity. As of September 30, 2018, the interest rate for borrowings under the term loan B facility was 4.75%, which approximated the effective interest rate. We have three interest rate swap agreements relating to this indebtedness, which are described in greater detail in Note 12 below.

The interest rate for the revolving facility is based on our Consolidated Total Leverage Ratio as determined in the most recently delivered financial statements, with the respective margins ranging from 2.00% to 3.00% for Eurocurrency loans and 1.00% to 2.00% for ABR loans. The revolving facility expires on the earlier of (i) 90 days before the maturity of the term loan B facility, and (ii) October 4, 2021. As of September 30, 2018, the weighted-average interest rate for borrowings under the revolving facility was 5.15%.

Our borrowings under the Credit Facilities are guaranteed by us and all of our direct and indirect, wholly-owned, domestic restricted subsidiaries (subject to certain exceptions) and a first lien on substantially all of our assets and the assets of our guarantor subsidiaries, including capital stock of the subsidiaries (in each case, subject to certain exceptions), has been granted to the lenders under the Credit Facilities.

The Credit Agreement contains customary negative covenants, including restrictions on our and our restricted subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness or enter into transactions with affiliates. As disclosed below in the description of the Sixth Amendment, our borrowings under the Credit Facilities are subject to a financial covenant based upon our Consolidated Total Leverage Ratio, with the maximum ratio set at 6.00 for the quarter ending September 30, 2018. As of September 30, 2018, we were in compliance with all of the foregoing covenants, and our Consolidated Total Leverage Ratio was 4.18. Based on our current covenants and forecasts, we expect to be in compliance for the one year period after November 15, 2018. For additional information about our Consolidated Total Leverage Ratio, including an overview of the applicable step-down schedule, see “—Sixth Amendment to Senior Secured Credit Facilities” below.

Sixth Amendment to Senior Secured Credit Facilities

The Sixth Amendment modified the Credit Agreement to increase the Excess Cash Flow Percentage (as such term is defined in the Credit Agreement) to 75%, provided that the Excess Cash Flow Percentage shall be reduced to (i) 50%, if the Consolidated Total Leverage Ratio is less than 4.00 but greater than or equal to 3.00, (ii) 25%, if the Consolidated Total Leverage Ratio is less than 3.00 but greater than or equal to 2.50 and (iii) 0%, if the Consolidated Total Leverage Ratio is less than 2.50.

The Sixth Amendment further modified the Credit Agreement to reduce the maximum amount permitted to be incurred under the Capped Incremental Facility (as such term is defined in the Credit Agreement) to zero, unless the Consolidated Total Leverage Ratio (as such term is defined in the Credit Agreement), after giving effect to the incurrence of any incremental loans or commitments and the use of proceeds thereof, on a pro forma basis, would be (i) less than 4.00 but greater than or equal to 3.50, in which case the Capped Incremental Facility would be increased to $75.0 million or (ii) less than 3.50, in which case the Capped Incremental Facility would be increased to $150.0 million.

The Sixth Amendment also modified the Credit Agreement to increase the Consolidated Total Leverage Ratio levels in the financial covenant set forth in the Credit Agreement to a maximum 6.25 for the quarters ending September 30, 2017, December 31, 2017 and March 31, 2018, with step-downs to 6.00 for the quarters ending June 30, 2018 and September 30, 2018; 5.75 for the quarter ending December 31, 2018; 5.50 for the quarter ending March 31, 2019; 5.25 for the quarter ending June 30, 2019; 4.75 for the quarters ending September 30, 2019, December 31, 2019 and March 31, 2020; 4.00 for the quarters ending June 30, 2020, September 30, 2020, December 31, 2020 and March 31, 2021; and 3.00 for the quarter ending June 30, 2021 and thereafter.

As a result of the Sixth Amendment, we incurred $1.9 million in fees that were capitalized and will be amortized over the remaining life of the related debt, $1.3 million of which was related to the term loan A facility and $0.6 million of which was related to the revolving facility. Pursuant to GAAP, the Sixth Amendment is accounted for as a debt modification. As a result, the unamortized deferred debt issuance costs related to the term loan A and the revolving facility prior to the Sixth Amendment were added to the $1.9 million of deferred debt issuance costs related to the Sixth Amendment and will be amortized over the remaining life of the term loan A and the revolving facility. The following table summarizes the total deferred debt issuance costs for the term loan A facility, the term loan B facility and the revolving facility, which will be amortized over their remaining terms.

	Term Loan A Facility			Term Loan B Facility			Revolving Facility			Total
Deferred debt issuance costs as of September 30, 2017	$	7,562		$	4,162		$	3,676		$	15,400
Deferred debt issuance costs for the Sixth Amendment	1,291			—			609			1,900
Amortization of deferred debt issuance costs	(3,011		)	(1,219		)	(1,458		)	(5,688		)
Deferred debt issuance costs as of September 30, 2018	$	5,842		$	2,943		$	2,827		$	11,612

UK Line of Credit

Our subsidiary, Wesco Aircraft EMEA, has a £5.0 million ($6.5 million based on the September 30, 2018 exchange rate) line of credit that automatically renews annually on October 1. The line of credit bears interest based on the base rate plus an applicable margin of 1.65%. As of September 30, 2018, the full £5.0 million was available for borrowing under the UK line of credit without breaching any covenants contained in the agreements governing our indebtedness.

XML

Derivative Financial Instruments

12 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

We use derivative instruments primarily to manage exposures to foreign currency exchange rates and interest rates. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with fluctuations in foreign exchange rates and changes in interest rates. Our derivatives expose us to credit risk to the extent that the counter-parties may be unable to meet the terms of the agreement. We, however, seek to mitigate such risks by limiting our counter-parties to major financial institutions. In addition, the potential risk of loss with any one counter-party resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counter-parties.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We have three interest rate swap agreements outstanding, which we have designated as a cash flow hedge, in order to reduce our exposure to variability in cash flows related to interest payments on a portion of our outstanding debt. The first interest rate swap agreement (the "First Swap Agreement") has an amortizing notional amount, which was $275.0 million through September 30, 2018, and matures on September 30, 2019, giving us the contractual right to pay a fixed interest rate of 2.2625% plus the applicable margin under the term loan B facility (see Note 11 for the applicable margin). The remaining two interest rate swap agreements (the “Remaining Swap Agreements”), entered into on May 14, 2018, have variable notional amounts which initially will increase in an amount approximately equal to amortization of the notional amount of the First Swap Agreement and then amortize thereafter. The Remaining Swap Agreements totaled $160.8 million as of September 30, 2018, and mature on February 26, 2021, giving us the contractual right to pay a fixed interest rate of 2.79% plus the applicable margin under the term loan B facility (see Note 11 for the applicable margin).

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended September 30, 2018, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized immediately in earnings. During the year ended September 30, 2018, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. No portion of our interest rate swap agreements is excluded from the assessment of hedge effectiveness.

Amounts reported in AOCI related to derivatives and the related deferred tax are reclassified to interest expense as interest payments are made on our variable-rate debt. As of September 30, 2018, we expected to reclassify approximately $0.2 million from accumulated other comprehensive loss to earnings as an increase to interest expense over the next 12 months when the underlying hedged item impacts earnings.

Non-Designated Derivatives

From time to time, we enter into foreign currency forward contracts to partially reduce our exposure to foreign currency fluctuations for a subsidiary's net monetary assets, which are denominated in a foreign currency. The derivatives are not designated as a hedging instrument. The change in their fair value is recognized as periodic gain or loss in the other income, net line of our consolidated statement of earnings and comprehensive income. We did not have foreign currency forward contracts as of September 30, 2018 and 2017.

The following table summarizes the notional principal amounts at September 30, 2018 and 2017 of our interest rate swap agreements discussed above (in thousands). We did not have foreign exchange forward contracts as of September 30, 2018 and 2017.

	Derivative Notional
	September 30, 2018		September 30, 2017
Instruments designated as accounting hedges:
Interest rate contracts	$	435,800	$	375,000

The following table provides the location and fair value amounts of our hedge instruments, which are reported in our consolidated balance sheets as of September 30, 2018 and 2017 (in thousands). We did not have foreign exchange forward contracts as of September 30, 2018 and 2017.

		Fair Value as of September 30,
Liability Derivatives	Balance Sheet Locations	2018		2017
Instruments designated as accounting hedges:
Interest rate swap contracts	Other current assets	$	1,045	$	—
Interest rate swap contracts	Other assets	1,051		—
Interest rate swap contracts	Accrued expenses	289		2,462
Interest rate swap contracts	Other liabilities	—		903

 The following table provides the losses of our cash flow hedging instruments (net of income tax benefit), which were transferred from accumulated other comprehensive loss to our consolidated statement of comprehensive income (loss) for the years ended September 30, 2018, 2017 and 2016 (in thousands).

	Location in Consolidated Statement	Years Ended September 30,
Cash Flow Derivatives	Of Comprehensive Income (Loss)	2018			2017			2016
Interest rate swap contracts	Interest income (expense), net	$	1,163		$	385		$	1,344
Total interest expense, net presented in the consolidated statements of earnings and comprehensive income in which the above effects of cash flow hedges are recorded		$	(48,880	)	$	(39,821	)	$	(36,901	)

The following table provides the effective portion of the income (loss) of our cash flow hedge instruments which is recognized (net of income taxes) in other comprehensive income (loss) for the years ended September 30, 2018, 2017 and 2016 (in thousands).

	Years Ended September 30,
Cash Flow Derivatives	2018		2017		2016
Interest rate swap contracts	$	2,774	$	1,688	$	(2,973	)

The following table provides a summary of changes to our accumulated other comprehensive loss related to our cash flow hedging instruments (net of income taxes) during the years ended September 30, 2018 and 2017.

	Years Ended September 30,
AOCI - Unrealized Gain (Loss) on Hedging Instruments	2018			2017
Balance at beginning of period	$	(2,133	)	$	(4,206	)
Change in fair value of hedging instruments	2,774			1,688
Amounts reclassified to earnings	1,163			385
Net current period other comprehensive income	3,937			2,073
Effect of adoption of accounting standard	$	(429	)	$	—
Balance at end of period	$	1,375		$	(2,133	)

The following table provides the pretax effect of our derivative instruments not designated as hedging instruments on our consolidated earnings and comprehensive income for the years ended September 30, 2018, 2017 and 2016 (in thousands).

Instruments Not Designated As Hedging Instruments	Location in Consolidated Statement of Comprehensive Income	Years Ended September 30,
		2018		2017			2016
Foreign exchange contract	Other income, net	$	—	$	(1,843	)	(5,606	)

XML

Other Comprehensive Income (Loss)

12 Months Ended

Sep. 30, 2018

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) and related tax effects for each period were as follows (dollars in thousands):

	Year Ended September 30, 2018									Year Ended September 30, 2017									Year Ended September 30, 2016
	Before Tax			Tax			After Tax			Before Tax			Tax			After Tax			Before Tax			Tax			After Tax
Change in unrealized holding losses on derivatives	3,645			(871		)	2,774			2,692			(1,004		)	1,688			(4,716		)	1,743			(2,973		)
Less: adjustment for losses on derivatives included in net income	1,528			(365		)	1,163			615			(230		)	385			2,132			(788		)	1,344
Change in net foreign currency translation adjustment	(1,862		)	—			(1,862		)	(5,959		)	(1,179		)	(7,138		)	(39,211		)	—			(39,211		)
Other comprehensive income (loss)	$	3,311		$	(1,236	)	$	2,075		$	(2,652	)	$	(2,413	)	$	(5,065	)	$	(41,795	)	$	955		$	(40,840	)

See Note 12 for the amounts of losses on derivatives reclassified out of accumulated other comprehensive loss into the consolidated statements of income, with presentation location, for each period.

The changes in accumulated other comprehensive loss by component and related tax effects for each period were as follows (in thousands):

	Foreign Currency Translation Adjustments			Unrealized (Loss) income on Derivative Instruments			Total
Balance at September 30, 2015	$	(36,144	)	$	(2,577	)	$	(38,721	)
Other comprehensive loss before reclassifications	(39,211		)	(4,716		)	(43,927		)
Amounts reclassified out of accumulated other loss	—			2,132			2,132
Tax effect	—			955			955
Other comprehensive loss	(39,211		)	(1,629		)	(40,840		)
Balance at September 30, 2016	$	(75,355	)	$	(4,206	)	$	(79,561	)
Other comprehensive (loss) income before reclassifications	(5,959		)	2,692			(3,267		)
Amounts reclassified out of accumulated other comprehensive loss	—			615			615
Tax effect	(1,179		)	(1,234		)	(2,413		)
Other comprehensive (loss) income	(7,138		)	2,073			(5,065		)
Balance at September 30, 2017	(82,493		)	(2,133		)	(84,626		)
Other comprehensive (loss) income before reclassifications	(1,862		)	3,645			1,783
Amounts reclassified out of accumulated other comprehensive loss	—			1,528			1,528
Tax effect	—			(1,236		)	(1,236		)
Other comprehensive (loss) income	(1,862		)	3,937			2,075
Effect of adoption of accounting standards	—			(429		)	(429		)
Balance at September 30, 2018	$	(84,355	)	$	1,375		$	(82,980	)

XML

Net Income (Loss) Per Share

12 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

Net Income (Loss) Per Share

The following table presents net income (loss) per share and related information (dollars in thousands):

	Years Ended September 30,
	2018		2017			2016
Net income (loss)	$	32,654	$	(237,346	)	$	91,378
Basic weighted average shares outstanding	99,156,998		98,700,879			97,634,155
Dilutive effect of stock options and restricted shares	343,479		—			531,701
Dilutive weighted average shares outstanding	99,500,477		98,700,879			98,165,856
Basic net income (loss) per share	$	0.33	$	(2.40	)	$	0.94
Diluted net income (loss) per share	$	0.33	$	(2.40	)	$	0.93

Shares of common stock equivalents of 2.8 million, 3.7 million, and 2.0 million for the years ended September 30, 2018, 2017 and 2016, respectively, were excluded from the diluted calculation because their effect would be anti-dilutive or the performance condition for the award had not been satisfied.

XML

Income Taxes

12 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (loss) before benefit or provision for income taxes for the years ended September 30, 2018, 2017 and 2016 was as follows (in thousands):

	2018		2017			2016
U.S. income (loss)	$	29,854	$	(261,594	)	$	63,614
Foreign income	30,758		13,347			61,976
Total	$	60,612	$	(248,247	)	$	125,590

The components of our income tax provision (benefit) for the years ended September 30, 2018, 2017 and 2016 were as follows (in thousands):

	2018			2017			2016
Current provision
Federal	$	10,263		$	(2,536	)	$	7,315
State and local	729			(591		)	1,134
Foreign	7,717			12,999			12,482
Subtotal	18,709			9,872			20,931
Deferred (benefit) provision
Federal	11,390			(14,730		)	10,979
State and local	(3,206		)	(2,738		)	1,108
Foreign	1,065			(3,305		)	1,194
Subtotal	9,249			(20,773		)	13,281
Provision (benefit)for income taxes	$	27,958		$	(10,901	)	$	34,212

The tax impact associated with the exercise of employee stock options and vesting of restricted stock units for the year ended September 30, 2018 will be recognized in the current tax return. For the year ended September 30, 2018, $0.1 million of tax provision was recorded as an increase to our provision for income tax due to the adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, as discussed in Note 3. For the years ended September 30, 2017 and 2016, $0.9 million and $1.1 million of tax benefit was recorded as a decrease to our provision for income tax.

A reconciliation of our (benefit) provision for income taxes to the U.S. federal statutory rate is as follows for the years ended September 30, 2018, 2017 and 2016 (in thousands):

	2018					2017					2016
Provision (benefit) for income taxes at statutory rate	$	14,867		24.53	%	$	(84,404	)	34.00	%	$	43,956		35.00	%
State taxes, net of tax benefit	742			1.22	%	(4,559		)	1.84	%	1,458			1.16	%
Deemed foreign dividends	1,301			2.15	%	6,099			(2.46	)%	3,963			3.16	%
Nondeductible items	658			1.09	%	283			(0.11	)%	(1,912		)	(1.52	)%
Impact of foreign operations	(92		)	(0.15	)%	(3,526		)	1.42	%	(8,015		)	(6.38	)%
Impact of Tax Act	8,423			13.90	%	—			—	%	—			—	%
Foreign tax credit	(18,275		)	(30.15	)%	(6,197		)	2.50	%	(4,313		)	(3.43	)%
Valuation allowance	19,098			31.51	%	15,057			(6.07	)%	—			—	%
Non-deductible goodwill impairment	—			—	%	23,644			(9.52	)%	—			—	%
Unremitted earnings of foreign subsidiaries	463			0.76	%	37,537			(15.12	)%	—			—	%
Tax contingencies	492			0.81	%	4,123			(1.66	)%	(674		)	(0.54	)%
Other	281			0.46	%	1,042			(0.43	)%	(251		)	(0.21	)%
Actual provision (benefit) for income taxes	$	27,958		46.13	%	$	(10,901	)	4.39	%	$	34,212		27.24	%

During the year ended September 30, 2017, the Company reassessed the potential need to repatriate foreign earnings and determined it was likely that we would, in the future, repatriate certain unremitted foreign earnings. Accordingly, we recorded a deferred tax liability of $38.7 million after taking into account the federal tax benefit of state taxes. For the year ended September 30, 2018, we recorded as a result of the Tax Act a $38.2 million tax benefit related to the reversal of the deferred tax liability for these foreign earnings. Following the enactment of the Tax Act, no federal taxes would be imposed upon the repatriation of these foreign earnings. The Company intends to permanently reinvest $27.2 million of foreign earnings for which no state, local or foreign withholding taxes have been provided and the state, local and foreign withholding taxes associated with the repatriation of such earnings would be between $0.5 million and $1.0 million.

For the three months ended December 31, 2017, the Company recorded a provisional $9.1 million charge to the tax expense related to the imposition of a one-time repatriation tax on accumulated earnings of our foreign subsidiaries (the Transition Tax). For the three months ended September 30, 2018, we recorded $0.8 million of additional tax expense related to the Transition Tax, taking into account current legislation regarding the U.S taxation of deemed foreign dividends in the year ended September 30, 2018. The current legislation may be amended or eliminated in future legislation. If such legislation is enacted, we will record the impact of the legislation in the quarter of enactment. The determination of the impact of the income tax effects of the items reflected as provisional amounts may change, possibly materially, following refinement of calculations, modifications of assumptions and further interpretation of the Tax Act based on U.S. Treasury regulations and guidance from the Internal Revenue Service. The Company will complete its review and report final amounts in accordance with SAB 118 for the three months ending December 31, 2018.

As of September 30, 2018 and 2017, the components of deferred income tax assets (liabilities) were as follows (in thousands):

	2018			2017
Deferred tax assets - Non-current
Inventories	$	55,977		$	92,711
Reserves and other accruals	1,217			1,692
Compensation accruals	2,965			2,308
Goodwill and intangible assets	3,412			20,101
Stock options	2,377			3,197
Net operating losses and tax credits	42,664			19,345
Other	674			2,611
Total deferred tax assets	109,286			141,965
Deferred tax (liabilities) - Non-current
Property and equipment	(1,568		)	(3,505		)
Unremitted earnings of foreign subsidiaries	(185		)	(40,009		)
Other	(7,281		)	(7,008		)
Total deferred tax liabilities - non-current	(9,034		)	(50,522		)
Valuation allowance	(37,920		)	(18,602		)
Net deferred tax assets (liabilities)	$	62,332		$	72,841

As of September 30, 2018, we had a federal net operating loss carryforward of $16.2 million, which will not expire, and state net operating loss carryforwards of $13.8 million, which will begin to expire in 2022, and foreign net operating loss carryforwards of $8.5 million which will begin to expire in 2021. As of September 30, 2018, we had U.S. foreign tax credit carryforwards of $36.1 million which will begin to expire in 2021.

We are subject to U.S. federal income tax as well as income taxes in various state and foreign jurisdictions. The earliest tax year still subject to examination by a significant taxing jurisdiction is September 30, 2012.

We determine whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify gross interest and penalties and unrecognized tax benefits as non-current liabilities in the consolidated balance sheets. As of September 30, 2018, the total amount of gross unrecognized tax benefits was $7.0 million, including $1.0 million of interest and $0.3 million of penalties, all of which would impact the effective tax rate if recognized. It is reasonably possible that within the next twelve months, $0.1 million of benefit may be recognized as a result of the lapsing of the statute of limitations.

The unrecognized tax benefits, which exclude interest and penalties, for the years ended September 30, 2018, 2017 and September 30, 2016 are as follows (in thousands):

	2018			2017			2016
Beginning balance	$	5,232		$	2,166		$	2,725
Increases related to tax positions taken during a prior year	—			3,250			—
Decreases related to tax positions taken during a prior year	—			—			—
Increases related to tax positions taken during the current year	490			—			—
Decreases related to settlements with taxing authorities	—			—			(579		)
Decreases related to expiration of statute of limitations	(55		)	(51		)	(113		)
Changes due to translation of foreign currencies	—			(133		)	133
Ending balance	$	5,667		$	5,232		$	2,166

We determine whether it is more likely than not that some or all of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which temporary differences become deductible or includible in taxable income. We consider projected future taxable income and tax planning strategies in our assessment. Based upon the level of historical income and projections for future taxable income, we believe it is more likely than not that we will not realize the benefits of the temporary differences related to certain Haas foreign tax credits and Haas foreign net operating losses. Therefore, a valuation allowance has been recorded against these deferred tax assets (in thousands).

	Beginning Balance		Valuation Allowance Recorded During The Period			Ending Balance
Valuation allowance for deferred tax assets:
Year ended September 30, 2018	$	18,602	$	19,318		$	37,920
Year ended September 30, 2017	5,548		13,054			18,602
Year ended September 30, 2016	5,961		(413		)	5,548

XML

Stock-Based and Other Compensation Arrangements

12 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based and Other Compensation Arrangements

Stock-Based and Other Compensation Arrangements

On January 27, 2015, our stockholders approved the 2014 Plan, which amended and restated our 2011 Equity Incentive Award Plan and authorized the issuance of a total of 5,717,584 shares. As of September 30, 2018, there were 2,341,594 shares remaining available for issuance under the 2014 Plan.

Stock Options

Our stock options are eligible to vest over three years in three equal annual installments, subject to continued employment on each vesting date. Vested options are exercisable at any time until 10 years from the date of the option grant, subject to earlier expirations under certain terminations of service and other conditions. The stock options granted have an exercise price equal to the closing stock price of our common stock on the grant date.

Continuous Employment Conditions

At September 30, 2018, we have outstanding 366,541 unvested time-based stock options under the 2014 Plan or our prior equity incentive plans (collectively, the Plans), which will vest on the basis of continuous employment. All of the time-based options vest ratably during the period of service.

The following table sets forth the summary of options activity under the Plans (dollars in thousands except per share data):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value(1)
Options outstanding at September 30, 2017	2,462,810		$	14.92	6.99	$	79
Granted	454,546		9.51
Exercised	(13,541	)	5.79
Forfeited options	(495,688	)	12.96
Options outstanding at September 30, 2018	2,408,127		$	14.35	6.36	$	643
Options exercisable at September 30, 2018	2,041,586		$	14.98	5.95	$	211

(1) Aggregate intrinsic value is calculated based on the difference between our closing stock price at year end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised all their options on the fiscal year end date.

The total intrinsic value of options exercised during the years ended September 30, 2018, 2017 and 2016 was $0.1 million, $6.0 million and $4.5 million, respectively. For the years ended September 30, 2018, 2017 and 2016, we recorded $1.4 million, $2.6 million and $3.2 million, respectively, of stock-based compensation expense related to these options that is included within selling, general and administrative expenses. At September 30, 2018, the unrecognized stock-based compensation related to these options was $1.7 million and is expected to be recognized over a weighted-average period of 1.4 years. Cash received from the exercise of stock options by us during the years ended September 30, 2018, 2017 and 2016 was $0.1 million, $2.7 million and $6.3 million, respectively.

Restricted Stock Units and Restricted Stock

In the year ended September 30, 2018, we granted 1,307,383 shares of restricted common stock to employees. These shares are eligible to vest over three years in three equal annual installments, subject to continued employment on each vesting date. During the years ended September 30, 2018, 2017 and 2016, we granted 104,663, 68,493 and 57,759, respectively, of restricted common shares to our directors. During fiscal year 2018, we also granted performance-related restricted stock units (PSUs) to certain executives. The PSUs vest after three years based on the achievement of certain predetermined goals, and are payable in shares of our common stock. One of the goals is based on our achieving a certain level of return on invested capital (ROIC) and the other goal is based on our total shareholder return (TSR) relative to certain peer companies over the three-year performance period. The actual number of shares to be issued for these PSUs is subject to final achievement of these goals and can range from 0% to 200% of the target shares set at the time of grant. Stock-based compensation expense for the PSUs is recognized on a straight-line basis over the performance period based upon the value determined using the intrinsic value method for the ROIC portion of the PSUs and using the Monte Carlo valuation method for the TSR portion of the PSUs. Stock-based compensation expense for the ROIC portion of the PSUs is cumulatively adjusted based upon the expected achievement of ROIC, which is assessed by management quarterly until vesting. Stock-based compensation expense for the TSR portion of the PSUs is recognized over the performance period regardless of the TSR performance.

For the years ended September 30, 2018, 2017 and 2016, we recorded $7.8 million, $3.8 million and $5.3 million, respectively, of stock-based compensation expense related to restricted stock that is included within selling, general and administrative expenses. The restricted stock awards do not contain any redemption provisions that are not within our control. Accordingly, these restricted stock awards have been accounted for as our stockholders’ equity. At September 30, 2018, the unrecognized stock-based compensation related to restricted stock awards was $8.6 million and is expected to be recognized over a weighted-average period of 1.5 years.

Restricted share activity during the year ended September 30, 2018 was as follows:

	Shares		Weighted Average Fair Value
Outstanding at September 30, 2017	797,562		$	12.21
Granted(1)	1,412,046		8.10
Vested	(502,555	)	11.30
Forfeited	(245,963	)	10.18
Outstanding at September 30, 2018	1,461,090		$	8.89

(1) Under the terms of their respective restricted stock award agreements, holders of restricted stock have the same voting rights as common stock shareholders; such rights exist even if the shares of restricted stock have not vested.

Fair value of our restricted shares is based on our closing stock price on the date of grant. The fair value of shares that were vested during the years ended September 30, 2018, 2017 and 2016 was $5.7 million, $5.3 million and $3.5 million, respectively. The fair value of shares that were granted during the years ended September 30, 2018, 2017 and 2016 was $11.4 million, $11.1 million and $6.9 million, respectively. The weighted average fair value at the grant date for restricted shares issued during the years ended September 30, 2018, 2017 and 2016 was $8.10, $12.63 and $12.29, respectively.

Due to tax deductions associated with option exercises and restricted share activities, we realized tax benefits of $0.1 million, $0.9 million and $1.1 million for the years ended September 30, 2018, 2017 and 2016, respectively. The realized 2018 and 2017 tax benefits were recorded as a reduction to our provision for income tax allowed by ASU 2016-09 which we early adopted on October 1, 2016 (see more discussion on ASU 2016-09 in Note 3 of the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended September 30, 2017 filed with the Securities and Exchange Commission (SEC) on November 28, 2017), and the realized 2016 tax benefits were recorded to the additional paid in capital account in our stockholders’ equity.

Stock-Based Compensation

We use the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, risk-free interest rate and expected dividends.

We estimated expected volatility based on historical data of the price of our common stock over the expected term of the options. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on guidelines provided in U.S. SEC Staff Accounting Bulletin No. 110 and represents the average of the vesting tranches and contractual terms. The risk-free rate assumed in valuing the options is based on the U.S. Treasury rate in effect at the time of grant for the expected term of the option. We do not anticipate paying any cash dividends in the foreseeable future and, therefore, used an expected dividend yield of zero in the option pricing model. Compensation expense is recognized only for those options expected to vest with forfeitures estimated based on our historical experience and future expectations. Stock-based compensation awards are amortized on a straight-line basis over a three-year period.

The weighted average assumptions used to value the option grants are as follows:

	2018		2017		2016
Expected life (in years)	6.00		6.00		6.00
Volatility	33.85	%	30.94	%	35.00	%
Risk free interest rate	2.07	%	1.33	%	1.55	%
Dividend yield	—		—		—

The weighted average fair value per option at the grant date for options issued during the years ended September 30, 2018, 2017, and 2016 was $3.46, $4.37 and $4.38, respectively.

XML

Employee Benefit Plan

12 Months Ended

Sep. 30, 2018

Retirement Benefits [Abstract]

Employee Benefit Plan

Employee Benefit Plan

We maintain a 401(k) defined contribution plan and a retirement saving plan for the benefit of our eligible employees. All U.S. full-time employees who have completed at least one full month of service and are at least 20 years of age are eligible to participate in the plans. Eligible employees may elect to contribute up to 60% of their eligible compensation. We made contributions of $2.4 million, $2.4 million and $2.4 million to this plan during the years ended September 30, 2018, 2017 and 2016, respectively. Certain non-US employees of the Company participate in other defined contribution retirement plans with varying vesting and contribution provisions.

XML

Supplemental Cash Flow Information

12 Months Ended

Sep. 30, 2018

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

	Years Ended September 30,
	2018		2017		2016
	(in thousands)
Cash payments for:
Interest	$	42,659	$	33,386	$	33,349
Income taxes	7,160		10,287		37,193
Schedule of non-cash investing and financing activities:
Property and equipment acquired pursuant to capital leases	$	2,816	$	3,891	$	1,780

XML

Quarterly Financial Data (unaudited)

12 Months Ended

Sep. 30, 2018

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (unaudited)

Quarterly Financial Data (unaudited)

Summarized unaudited quarterly financial data for quarters ended December 31, 2016 through September 30, 2018 is as follows (in thousands except per share data):

Quarters Ended:	September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017
Net sales	$	406,817	$	410,359	$	390,183	$	363,091
Gross profit	98,800		104,197		105,735		94,424
Net income (loss)	7,274		10,754		15,000		(374		)
Basic net income (loss) per share (1)	$	0.07	$	0.11	$	0.15	$	—
Diluted net income (loss) per share (1)	$	0.07	$	0.11	$	0.15	$	—

Quarters Ended:	September 30, 2017			June 30, 2017			March 31, 2017		December 31, 2016
Net sales	$	361,552		$	363,907		$	364,599	$	339,371
Gross profit	87,487			90,208			94,755		89,457
Net (loss) income (2)	(38,287		)	(229,608		)	17,442		13,107
Basic net (loss) income per share (1)	$	(0.39	)	$	(2.32	)	$	0.18	$	0.13
Diluted net (loss) income per share (1)	$	(0.39	)	$	(2.32	)	$	0.18	$	0.13

1. Net income (loss) per share calculations for each quarter are based on the weighted average basic and diluted shares outstanding for that quarter and may not total to the full year amount.

2. During the three months ended June 30, 2017, we recorded a non-cash goodwill impairment charge of $311.1 million. See Note 2, Note 5 and Note 8 for additional information.

XML

Segment Reporting

12 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

We evaluate segment performance based on segment income or loss from operations. Each segment reports its results of operations and makes requests for capital expenditures and acquisition funding to our chief operating decision-maker (CODM). Our chief executive officer serves as our CODM.

We organize our businesses under three geographic-based segments: the Americas, EMEA and APAC. Our CODM reviews segment results on this basis for purposes of allocating resources and assessing performance. Each segment’s results reflect the results of our subsidiaries within that geographic region. Revenues reported by a segment reflect the customer contracts held by that segment, regardless of the geographic location of that customer. Some segments incur expenses for the benefit of the group or other segments, however these expenses are not allocated. We present corporate expenses related to public company reporting costs and other costs that would not be required by the segments if they were operating on a standalone basis as unallocated corporate costs.

The following table presents net sales and other financial information by business segment (in thousands):

	Year Ended September 30, 2018
	Americas		EMEA		APAC		Unallocated Corporate Costs			Consolidated
Net sales (1)	$	1,271,893	$	262,087	$	36,470	$	—		$	1,570,450
Income (loss) from operations (2)	128,908		17,926		2,017		(39,383		)	109,468
Interest expense, net	43,499		5,281		100		—			48,880
Capital expenditures	4,917		533		216		—			5,666
Depreciation and amortization	25,458		3,484		314		—			29,256
Total assets	1,485,453		248,937		55,086		—			1,789,476
Goodwill	204,183		51,190		11,271		—			266,644

(1) For fiscal 2018, approximately 11% of our total net sales were derived from one individual customer, which was reported under the Americas, EMEA and APAC segments.

(2) Unallocated corporate costs for fiscal 2018 consisted of payroll and personnel costs of $10.3 million, stock-based compensation expenses of $5.7 million, professional fees of $22.2 million and other corporate expenses of $1.2 million.

	Year Ended September 30, 2017
	Americas			EMEA		APAC			Unallocated Corporate Costs			Consolidated
Net sales (1)	$	1,142,366		$	258,072	$	28,991		$	—		$	1,429,429
Income (loss) from operations (2) (3)	(213,501		)	25,138		(172		)	(20,260		)	(208,795		)
Interest expense, net	35,936			3,786		99			—			39,821
Capital expenditures	5,659			3,165		99			—			8,923
Depreciation and amortization	24,765			3,321		266			—			28,352
Total assets	1,436,840			275,445		41,822			—			1,754,107
Goodwill (3)	204,183			51,190		11,271						266,644

(1) For fiscal 2017, nearly 11% of our total net sales were derived from one individual customer, which was reported under the Americas, EMEA and APAC segments.

(2) Unallocated corporate costs for fiscal 2017 consisted of payroll and personnel costs of $10.1 million, stock-based compensation expenses of $3.4 million, and professional fees and other corporate expenses of $6.8 million.

(3) Changes in the goodwill balance for fiscal 2017 included a non-cash impairment charge of $311.1 million, of which $308.4 million was related to the Americas segment and $2.7 million was related to the APAC segment. See Note 8 for further information.

	Year Ended September 30, 2016
	Americas		EMEA		APAC			Unallocated Corporate Costs			Consolidated
Net sales	$	1,177,496	$	274,952	$	24,918		$	—		$	1,477,366
Income (loss) from operations (1)	134,159		43,881		1,196			(20,486		)	158,750
Interest expense, net	32,595		4,309		(3		)	—			36,901
Capital expenditures	12,728		1,143		121						13,992
Depreciation and amortization	24,412		3,289		279			—			27,980

(1) Unallocated corporate costs for fiscal 2016 consisted of payroll and personnel costs of $6.7 million, stock-based compensation expenses of $5.3 million, and professional fees and other corporate expenses of $8.5 million.

Geographic Information

We operated principally in the United States, United Kingdom and other foreign geographic areas in Americas, Europe and emerging markets, such as Asia, Pacific Rim and the Middle East.

Net sales by geographic area, for the years ended September 30, 2018, 2017, and 2016, were as follows (dollars in thousands):

	Years Ended September 30,
	2018				2017				2016
	Sales		% of Total Sales		Sales		% of Total Sales		Sales		% of Total Sales
United States of America	$	1,173,429	74.7	%	$	1,062,523	74.3	%	$	1,087,691	73.6	%
United Kingdom	182,124		11.6	%	179,160		12.5	%	195,473		13.2	%
Other foreign countries	214,897		13.7	%	187,746		13.2	%	194,202		13.2	%
All foreign countries	397,021		25.3	%	366,906		25.7	%	389,675		26.4	%
Total	$	1,570,450	100.0	%	$	1,429,429	100.0	%	$	1,477,366	100.0	%

We determine the geographic area based on the origin of the sale.

Our long-lived assets consist of property and equipment, net, intangible assets, net and investment in joint ventures. Long-lived assets by geographic area, for the years ended September 30, 2018 and 2017, were as follows (in thousands):

	Years Ended September 30
	2018		2017
United States of America	$	169,377	$	185,438
All foreign countries	48,832		54,109
	$	218,209	$	239,547

Product and Services Information

Net sales by product categories, for the years ended September 30, 2018, 2017 and 2016 were as follows (dollars in thousands):

	Years Ended September 30
	2018				2017				2016
	Sales		% of Total Sales		Sales		% of Total Sales		Sales		% of Total Sales
Hardware	$	732,892	46.7	%	$	665,224	46.6	%	$	711,177	48.2	%
Chemicals	656,959		41.8	%	602,039		42.1	%	600,124		40.6	%
Electronic components	114,875		7.3	%	100,160		7.0	%	105,207		7.1	%
Bearings	36,212		2.3	%	34,566		2.4	%	34,662		2.3	%
Machined parts and other	29,512		1.9	%	27,440		1.9	%	26,196		1.8	%
Total	$	1,570,450	100.0	%	$	1,429,429	100.0	%	$	1,477,366	100.0	%

XML

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of majority-owned and controlled subsidiaries. All intercompany accounts, transactions and profits have been eliminated. When we do not have a controlling interest in an entity, but exert significant influence over the entity, we apply the equity method of accounting. Our financial statements have been prepared under the assumption that our Company will continue as a going concern.

Use of Estimates in Preparation of Financial Statements

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, receivable valuations and allowance for sales returns, inventory valuations of excess and obsolescence (E&O) inventories, the useful lives of long-lived assets including property, equipment and intangible assets, annual goodwill impairment assessment, stock-based compensation, income taxes and contingencies. Actual results could differ from such estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities from date of purchase of three months or less to be cash equivalents.

Accounts Receivable

Accounts Receivable

Accounts receivable consist of amounts owed to us by customers. We perform periodic credit evaluations of the financial condition of our customers, monitor collections and payments from customers, and generally do not require collateral. Accounts receivable are generally due within 30 to 60 days. We provide for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. We reserve for an account when we doubt whether it is collectible. We estimate our allowance for doubtful accounts based on historical experience, aging of accounts receivable and information regarding the creditworthiness of our customers. To date, losses have been within the range of management’s expectations. If the estimated allowance for doubtful accounts subsequently proves to be insufficient, additional allowances may be required.

Inventories

Inventories

Inventories are stated at the lower of cost or net realizable value. The method by which amounts are removed from inventory and relieved to Cost of Sales is the weighted average cost for all inventory, except for chemical products for which the first-in, first-out method is used. In-bound freight-related costs of $1.2 million, $1.5 million and $1.9 million as of September 30, 2018, 2017, and 2016, respectively, are included as part of the cost of inventory held for resale.

We record E&O provisions, as appropriate, to write-down inventory to estimated net realizable value. The components of our inventory are subject to different risks of E&O. Our hardware inventory, which does not decay or have a pre-determined shelf life, bears a higher risk of having excess quantities than becoming obsolete due to spoilage. Our hardware inventory E&O assessment requires the use of subjective judgments and estimates including the forecasted demand for each part. The forecasted demand considers a number of factors, including historical sales trends, current and forecasted customer demand, including customer liability provisions based on selected contractual rights, consideration of available sales channels and the time horizon over which we expect the hardware part to be sold. A full E&O write-down is recorded for on-hand quantities in excess of this forecasted demand. Our chemical inventory, which has a limited shelf-life, becomes obsolete when it has aged past its shelf-life and cannot be recertified and is no longer usable or able to be sold. Therefore, we typically maintain lower on-hand quantities of chemical products. A full E&O write-down is recorded for on-hand quantities which cannot be sold due to expiration or quantities in excess of forecasted demand. During the years ended September 30, 2018, 2017 and 2016, we recorded a provision of $16.8 million, $12.9 million and $14.6 million, respectively, to write down E&O inventory to net realizable value.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost, less accumulated amortization and depreciation, computed using the straight-line method over the estimated useful life of each asset. Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the assets. Expenditures for repair and maintenance costs are expensed as incurred, and expenditures for major renewals and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts and any gain or loss is reflected in the consolidated statements of comprehensive income.

Impairment of Long Lived Assets

Impairment of Long-Lived Assets

We assess potential impairments of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Factors we consider include, but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. We have determined that our asset group for impairment testing comprises assets and liabilities of each of our reporting units, which consist of the Americas, Europe, Middle-East and Africa (EMEA) and Asia Pacific (APAC) reporting units (see change in our reporting units discussed under "Goodwill and Indefinite-Lived Intangible Assets" below). We have identified customer relationships as the primary asset because it is the principal asset from which the reporting units derive their cash flow generating capacity and has the longest remaining useful life. Recoverability is assessed by comparing the carrying value of the asset group to the undiscounted cash flows expected to be generated by these assets. Impairment losses are measured as the amount by which the carrying values of the primary assets exceed their fair values.

Deferred Financing Costs

Deferred Debt Issuance Costs

Deferred debt issuance costs are amortized using the straight-line method, which approximates the effective interest method, over the term of the related credit arrangement; such amortization is included in interest expense in the consolidated statements of comprehensive income.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and Indefinite-Lived Intangible Assets

Goodwill, which represents the excess of the consideration paid over the fair value of the net assets acquired in a business combination, and other acquired intangible assets with indefinite lives are not amortized, but are tested for impairment at least annually or more frequently when an event occurs or circumstances change such that it is more likely than not that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy, or disposition of a reporting unit or a portion thereof. Goodwill and indefinite-lived intangibles asset impairment testing is performed at the reporting unit level on July 1 of each year. We have one operating unit under each of the three operating segments, Americas, EMEA and APAC.

We test goodwill for impairment by performing a qualitative process, or a two-step quantitative assessment process. The first step of the quantitative process involves comparing the carrying value of net assets, including goodwill, to the fair value of the reporting unit. If the fair value exceeds its carrying amount, goodwill is not considered impaired and the second step of the process is unnecessary. If the carrying amount of a reporting unit’s goodwill exceeds its fair value, the second step measures the impairment loss, if any.

The fair value of our reporting units is determined using a combination of a discounted cash flow analysis (income approach) and market earnings multiples (market approach). These fair value approaches require significant management judgment and estimate. The determination of fair value using a discounted cash flow analysis requires the use of key judgments, estimates and assumptions including revenue growth rates, projected operating margins, changes in working capital, terminal values, and discount rates. We develop these key estimates and assumptions by considering our recent financial performance and trends, industry growth projections, and current sales pipeline based on existing customer contracts and the timing and amount of future contract renewals. The determination of fair value using market earnings multiples requires the use of key judgments, estimates and assumptions related to projected earnings and applying those amounts to earnings multiples using appropriate peer companies. We develop our projected earnings using the same judgments, estimates, and assumptions used in the discounted cash flow analysis.

The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The implied fair value of the reporting unit’s goodwill is calculated by creating a hypothetical balance sheet as if the reporting unit had just been acquired. This balance sheet contains all assets and liabilities recorded at fair value (including any intangible assets that may not have any corresponding carrying value in our balance sheet). The implied value of the reporting unit’s goodwill is calculated by subtracting the fair value of the net assets from the fair value of the reporting unit. If the carrying value of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. We performed our goodwill impairment tests during the year ended September 30, 2017, which resulted in an interim goodwill impairment charge of $311.1 million. Refer to Note 8 for additional information.

Indefinite-lived intangibles consist of a trademark, for which we estimate fair value and compare such fair value to the carrying amount. If the carrying amount of the trademark exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, we primarily utilize reported market transactions and discounted cash flow analysis. We use a three-tier fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels whereby the highest priority is given to Level 1 inputs and the lowest to Level 3 inputs. The three broad categories are:

Level 1:	Quoted prices in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
Level 3:	Unobservable inputs for the asset or liability.

The definition of fair value includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterparty or us) will not be fulfilled. For financial assets traded in an active market (Level 1), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have been adjusted accordingly.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

We use observable market-based inputs to calculate fair value of our interest rate swap agreements and outstanding debt instruments, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.

Where available, we utilize quoted market prices or observable inputs rather than unobservable inputs to determine fair value.

Derivative Financial Instruments

Derivative Financial Instruments

We periodically enter into cash flow derivative transactions, such as interest rate swap agreements, to hedge exposure to various risks related to interest rates. We recognize all derivatives at their fair value as either assets or liabilities. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the changes in fair value of the derivative contract are recorded in accumulated other comprehensive loss, net of taxes, and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Derivatives not qualifying as cash flow hedges will default to a mark-to-market accounting treatment and will be recorded directly to the income statement. We present derivative instruments in operating, investing, or financing activities in our consolidated statements of cash flows consistent with the cash flows of the hedged item.

Comprehensive Income or Loss

Comprehensive Income or Loss

Comprehensive income or loss generally represents all changes in stockholders’ equity, except those resulting from investments by or distributions to stockholders. Our comprehensive income or loss consists of net income or loss, foreign currency translation adjustments and fair value adjustments for cash flow hedges.

Revenue Recognition

Revenue Recognition

We recognize product and service revenue when (1) persuasive evidence of an arrangement exists, (2) title transfers to the customer, (3) the sales price charged is fixed or determinable, and (4) collection is reasonably assured. In instances where title does not pass to the customer upon shipment, we recognize revenue upon delivery or customer acceptance, depending on the terms of the sales contract.

In connection with the sales of our products, we often provide certain supply chain management services to our JIT customers. These services include the timely replenishment of products at the customer site, while also minimizing the customer’s on-hand inventory. We provide these services contemporaneously with the delivery of the product, and as such, once the product is delivered, we do not have a post-delivery obligation to provide services to the customer. Accordingly, the price of such services is generally included in the price of the products delivered to the customer, and revenue is recognized upon delivery of the product, at which point we have satisfied our obligations to the customer. We do not account for these services as a separate element, as the services do not have stand-alone value and cannot be separated from the product element of the arrangement. Additionally, we do not present service revenues apart from product revenues, as the service revenues represent less than 10% of our consolidated net sales.

We report revenue on a gross or net basis, based on management’s assessment of whether we act as a principal or agent in the transaction, in our presentation of net sales and costs of sales. If we are the principal in the transaction and have the risks and rewards of ownership, the transactions are recorded as gross in the consolidated statements of comprehensive income. If we do not act as a principal in the transaction, the transactions are recorded on a net basis in the consolidated statements of comprehensive income. The majority of our revenue is recorded on a gross basis with the exception of certain gas, energy and chemical manager service contracts that are recorded as net revenue.

We also enter into sales rebates and profit-sharing arrangements. Such customer incentives are accounted for as a reduction to gross sales and recorded based upon estimates at the time products are sold. These estimates are based upon historical experience for similar programs and products. We review such rebates and profit-sharing arrangements on an ongoing basis and accruals are adjusted, if necessary, as additional information becomes available.

We provide allowances for credits and returns based on historic experience and adjust such allowances as considered necessary. To date, such provisions have been within the range of our expectations and the allowance established. Sales tax collected from customers is excluded from net sales in the consolidated statements of comprehensive income.

In connection with our JIT supply chain management programs, at times, we assume customer inventory on a consignment basis. This consigned inventory remains the property of the customer but is managed and distributed by us. We earn a fixed fee per unit on each shipment of the consigned inventory; such amounts represent less than 1% of consolidated net sales.

Shipping and Handling Costs

Shipping and Handling Costs

We record revenue for shipping and handling billed to our customers. Shipping and handling revenues were $3.9 million, $4.6 million and $5.1 million for the years ended September 30, 2018, 2017 and 2016, respectively.

Shipping and handling costs are primarily included in cost of sales. Total shipping and handling costs were $33.5 million, $31.4 million and $28.0 million for the years ended September 30, 2018, 2017 and 2016, respectively.

Income Taxes

Income Taxes

We recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is established, when necessary, to reduce net deferred tax assets to the amount expected to be realized. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which temporary differences become deductible or includible in taxable income. We consider projected future taxable income and tax planning strategies in our assessment. Our foreign subsidiaries are taxed in local jurisdictions at local statutory rates. The Company includes interest and penalties related to income taxes, including unrecognized tax benefits, within income tax expense.

Concentration of Credit Risk and Significant Vendors and Customers

Concentration of Credit Risk and Significant Vendors and Customers

We maintain our cash and cash equivalents in bank deposit accounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts and do not believe we are exposed to any significant credit risk from cash and cash equivalents.

We purchase our products on credit terms from vendors located throughout North America and Europe. For the years ended September 30, 2018, 2017 and 2016, we made 12%, 13%, and 12%, respectively, of our purchases from Precision Castparts Corp. and the amounts payable to this supplier were 4% and 6% of total accounts payable at September 30, 2018 and 2017, respectively. Additionally, for the years ended September 30, 2018, 2017 and 2016, we made 8%, 9%, and 8%, respectively, of our purchases from Arconic and the amounts payable to this supplier were 6% and 6% of total accounts payable at September 30, 2018 and 2017, respectively. The majority of the products we sell are available through multiple channels and, therefore, this reduces the risk related to any vendor relationship.

For the years ended September 30, 2018 and 2017, we derived approximately 11% of our total net sales from one individual customer. For the year ended September 30, 2016, we did not derive 10% or more of our total net sales from any individual customer. Government sales, which were derived from various military parts procurement agencies such as the U.S. Defense Logistics Agency, or from defense contractors buying on their behalf, comprised 14%, 16% and 15% of our net sales during fiscal 2018, 2017 and 2016, respectively.

Foreign Currency Translation and Transactions

Foreign Currency Translation and Transactions

The financial statements of foreign subsidiaries and affiliates where the local currency is the functional currency are translated into U.S. dollars using exchange rates in effect at each period-end for assets and liabilities and average exchange rates during the period for results of operations. The adjustment resulting from translating the financial statements of such foreign subsidiaries is reflected as a separate component of stockholders’ equity. Foreign currency transaction gains and losses are reported as other income (expense), net in the consolidated statements of comprehensive income.

Stock-Based Compensation

Stock-Based Compensation

We recognize all stock-based awards to employees and directors as stock-based compensation expense based upon their fair values on the date of grant.

We estimate the fair value of stock-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as an expense during the requisite service periods. We have estimated the fair value for each option award as of the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model considers, among other factors, the expected life of the award and the expected volatility of our stock price. We recognize the stock-based compensation expense over the requisite service period (generally a vesting term of three years) using the graded vesting method for performance condition awards and the straight-line method for service condition only awards, which is generally a vesting term of three years. Stock options typically have a contractual term of 10 years. The stock options granted have an exercise price equal to the closing stock price of our common stock on the grant date. Compensation expense for restricted stock units and awards are based on the market price of the shares underlying the awards on the grant date. Compensation expense for performance based awards reflects the estimated probability that the performance condition will be met. Compensation expense for awards with total stockholder return performance metrics reflects the fair value calculated using the Monte Carlo simulation model, which incorporates stock price correlation and other variables over the time horizons matching the performance periods.

Net Loss or Net Income Per Share

Net Income or Net Loss Per Share

Basic net income or net loss per share is computed by dividing net income or net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income or net loss per share includes the dilutive effect of both outstanding stock options and restricted shares, calculated using the treasury stock method.

New Accounting Standards Update

New Accounting Standards Updates

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which specifies the modification accounting applicable to any entity that changes the terms or conditions of a share-based payment award. ASU 2017-09 is effective for the Company in fiscal year 2019. Early adoption is permitted. We do not anticipate the adoption of ASU 2017-09 will have a significant impact on our consolidated financial statements.

 In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the current requirements for testing goodwill for impairment by eliminating the second step of the two-step impairment test to measure the amount of an impairment loss. ASU 2017-04 is effective for the Company in fiscal year 2021, including interim reporting periods within that reporting period, and all annual and interim reporting periods thereafter. Early adoption is permitted. We do not anticipate the adoption of ASU 2017-04 will have a significant impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is amended by ASU2018-01, ASU 2018-10 and ASU 2018-11 that were issued by FASB in January 2018, July 2018 and July 2018, respectively (collectively, the amended ASU 2016-02). The amended ASU 2016-02 requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. The amended ASU 2016-02 retains a distinction between finance leases (i.e. capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amended ASU 2016-02 also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach shall be used when adopting ASU 2016-02, which includes a number of optional practical expedients that entities may elect to apply. The amended ASU 2016-02 is effective for the Company in fiscal year 2020 and interim periods therein, with early application permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements. As of September 30, 2018, total future minimum payments under our operating leases amounted to $50.8 million.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which affects the accounting for equity investments (excluding investments recorded under the equity method), financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective for the Company in fiscal year 2019, with early adoption permitted for certain provisions. We do not anticipate the adoption of ASU 2016-01 will have a significant impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-10, ASU 2017-13 and ASU 2017-14, which the FASB issued in August 2015, March 2016, April 2016, May 2016, May 2016, December 2016, May 2017, September 2017 and November 2017, respectively (collectively, the amended ASU 2014-09). The amended ASU 2014-09 provides a single comprehensive model for the recognition of revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It requires an entity to recognize revenue when the entity transfers 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. The amended ASU 2014-09 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) with the customer, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The amended ASU 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date for the amended ASU 2014-09 for the Company is fiscal year 2019, including interim reporting periods within that reporting period.

To assess the impact of this new standard, the Company established an implementation project team, identified its revenue streams and contracts with customers across our businesses and applied the principles of the new standard against a selection of contracts to assist in the determination of potential revenue accounting differences. Based on our assessment, we do not anticipate that the adoption of this revised guidance will have a significant impact on our financial position, results of operations or cash flows. Our hardware product revenues will continue to be recognized as shipments are made and control transfers to the customer. Revenues for products and services provided under our chemical management service contracts will be recognized over time as control transfers to the customer. The Company has designed and implemented internal controls, policies and processes to comply with the new standard. We adopted Topic 606 in the first quarter of fiscal 2019 using the modified retrospective method of adoption, which resulted in no changes to the opening consolidated balance sheet as of October 1, 2018.

Adopted Accounting Standards Updates

Effective July 1, 2018, we early adopted ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify from AOCI to retained earnings stranded tax effects resulting from the enactment of the Tax Act. ASU 2018-02 was enacted on December 22, 2017 and requires certain disclosures about the stranded tax effects. An entity has the option of applying the new guidance at the beginning of the period of adoption or retrospectively to each period (or periods) in which the tax effects related to items remaining in accumulated other comprehensive income are recognized. We elected not to reclassify prior periods. Adoption of this standard resulted in an increase of $0.4 million to retained earnings as of July 1, 2018 due to the reclassification of the stranded tax effects as a result of the Tax Act from AOCI to retained earnings. This reclassification is reflected in the "Effect of adoption of accounting standard" line in the consolidated statements of stockholders' equity.

Effective April 1, 2018, we early adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 expands the eligibility of hedging strategies that qualify for hedge accounting, changes the assessment of hedge effectiveness and modifies the presentation and disclosure of hedging activities. The adoption of ASU 2017-12 did not have a material impact on our consolidated financial statements.

Effective October 1, 2017, we early adopted ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. ASU 2016-07 eliminates the requirement that when an investment subsequently qualifies for use of the equity method as a result of an increase in level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. ASU 2016-07 requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and to adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. In addition, ASU 2016-07 requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The adoption of ASU 2016-07 did not have a material impact on our consolidated financial statements.

Effective October 1, 2017, we adopted ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires an entity to measure inventory at the lower of cost or net realizable value and eliminates current GAAP options for measuring market value. ASU 2015-11 defines realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of ASU 2015-11 did not have a material impact on our consolidated financial statements.

XML

Basis of Presentation and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Schedule of the Company's allowance for doubtful accounts activity

Our allowance for doubtful accounts activity consists of the following (in thousands):

Allowance for Doubtful Accounts	Balance at Beginning of Period		Charges to Cost and Expenses			Write-offs			Balance at End of Period
Year ended September 30, 2018	$	3,109	$	(27	)	$	(205	)	$	2,877
Year ended September 30, 2017	3,846		(133		)	(604		)	3,109
Year ended September 30, 2016	5,892		(846		)	(1,200		)	3,846

Schedule of useful lives and lease terms for depreciable assets

The useful lives for depreciable assets are as follows:

Buildings and improvements	2 - 39.5 years
Machinery and equipment	5 - 7 years
Furniture and fixtures	7 years
Vehicles	5 years
Computer hardware and software	3 - 7 years

Property and equipment, net, consists of the following at September 30 (in thousands):

	2018			2017
Land, buildings and improvements	$	31,966		$	31,202
Machinery and equipment	22,321			21,265
Furniture and fixtures	7,930			8,011
Vehicles	859			942
Computer hardware and software	56,643			50,395
Construction in progress	3,684			4,300
	123,403			116,115
Less: accumulated depreciation	(79,198		)	(65,760		)
Property and equipment, net	$	44,205		$	50,355

XML

Commitments and Contingencies (Tables)

12 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of future minimum rental payments under operating leases

Future minimum rental payments under operating leases as of September 30, 2018 are as follows (dollars in thousands):

	Third Party		Related Party		Total
Years Ended September 30,
2019	$	10,575	$	1,864	$	12,439
2020	9,364		317		9,681
2021	7,583		170		7,753
2022	6,382		283		6,665
2023	5,539		278		5,817
Thereafter	8,160		270		8,430
	$	47,603	$	3,182	$	50,785

Schedule of future minimum rental payments under capital leases

Future minimum lease payments under capital lease agreements as of September 30, 2018 are as follows (in thousands):

Years Ended September 30,
2019	$	2,311
2020	1,292
2021	474
2022	401
2023	215
Thereafter	66
	4,759
Less: Interest	(226		)
Total	$	4,533

XML

Property and Equipment, net (Tables)

12 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Schedule of property and equipment, net

The useful lives for depreciable assets are as follows:

Buildings and improvements	2 - 39.5 years
Machinery and equipment	5 - 7 years
Furniture and fixtures	7 years
Vehicles	5 years
Computer hardware and software	3 - 7 years

Property and equipment, net, consists of the following at September 30 (in thousands):

	2018			2017
Land, buildings and improvements	$	31,966		$	31,202
Machinery and equipment	22,321			21,265
Furniture and fixtures	7,930			8,011
Vehicles	859			942
Computer hardware and software	56,643			50,395
Construction in progress	3,684			4,300
	123,403			116,115
Less: accumulated depreciation	(79,198		)	(65,760		)
Property and equipment, net	$	44,205		$	50,355

XML

Goodwill and Intangible Assets, net (Tables)

12 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

A reconciliation of our goodwill balance is as follows (in thousands):

	Americas September 30,						EMEA September 30,					APAC September 30,						Consolidated September 30,
	2018			2017			2018		2017			2018			2017			2018			2017
Beginning balance, gross	$	773,384		$	773,384		$	51,190	$	53,297		$	16,955		$	16,955		$	841,529		$	843,636
Accumulated impairment	(569,201		)	(260,798		)	—		—			(5,684		)	(2,973		)	(574,885		)	(263,771		)
Beginning balance, net	$	204,183		$	512,586		$	51,190	$	53,297		$	11,271		$	13,982		$	266,644		$	579,865
Foreign currency translation	—			—			—		(2,107		)	—			—			—			(2,107		)
Goodwill impairment	—			(308,403		)	—		—			—			(2,711		)	—			(311,114		)
Ending balance, gross	$	773,384		$	773,384		$	51,190	$	51,190		$	16,955		$	16,955		$	841,529		$	841,529
Accumulated impairment	(569,201		)	(569,201		)	—		—			(5,684		)	(5,684		)	(574,885		)	(574,885		)
Ending balance, net	$	204,183		$	204,183		$	51,190	$	51,190		$	11,271		$	11,271		$	266,644		$	266,644

Schedule of gross amounts and accumulated amortization of intangible assets

As of September 30, 2018 and 2017, the gross amounts and accumulated amortization of intangible assets is as follows (in thousands):

	2018					2017
	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
Customer relationships (12 to 20 year life)	$	172,603	$	(75,102	)	$	172,603	$	(64,319	)
Trademarks (5 years to indefinite life)	52,930		(4,583		)	52,930		(3,610		)
Backlog (2 year life)	4,327		(4,327		)	4,327		(4,327		)
Non-compete agreements (3 to 4 year life)	1,457		(1,457		)	1,457		(1,457		)
Technology (10 year life)	32,260		(14,670		)	32,260		(11,572		)
Total intangible assets	$	263,577	$	(100,139	)	$	263,577	$	(85,285	)

Schedule of estimated future amortization expense

Estimated future intangible amortization expense as of September 30, 2018 is as follows (in thousands):

2019	$	14,855
2020	14,721
2021	14,317
2022	14,317
2023	14,317
Thereafter	53,078
	$	125,605

XML

Accrued Expenses and Other Current Liabilities (Tables)

12 Months Ended

Sep. 30, 2018

Accrued Liabilities, Current [Abstract]

Schedule of accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30,
	2018		2017
Accrued compensation and related expenses	$	18,590	$	16,271
Accrual for professional fees	951		951
Accrued customer rebates	5,604		4,240
Accrued taxes (property, sales and use)	1,083		2,083
Deferred revenue	971		301
Accrual for severance and other expenses	1,203		354
Interest rate swap	289		2,462
Other accruals	14,076		8,667
Accrued expenses and other current liabilities	$	42,767	$	35,329

XML

Fair Value of Financial Instruments (Tables)

12 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of carrying amounts and fair value of the debt instruments

The carrying amounts and fair values of the debt instruments and interest rate swap hedge instrument were as follows (in thousands):

	September 30, 2018				September 30, 2017
	Carrying Amount		Fair Value		Carrying Amount			Fair Value
Term loan A	$	360,000	$	357,840	$	380,000		$	376,960
Term loan B	440,562		432,192		440,562			428,667
Revolving facility	54,000		54,000		55,000			55,000
Interest rate swap hedge assets (liabilities), net	1,807		1,807		(3,365		)	(3,365		)

XML

Long-Term Debt (Tables)

12 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of debt

Long-term debt consists of the following (in thousands):

	September 30, 2018							September 30, 2017
	Principal  Amount		Deferred Debt Issuance Costs			Carrying Amount		Principal  Amount		Deferred Debt Issuance Costs			Carrying Amount
Term loan A facility	$	360,000	$	(5,842	)	$	354,158	$	380,000	$	(7,562	)	$	372,438
Term loan B facility	440,562		(2,943		)	437,619		440,562		(4,162		)	436,400
Revolving facility	54,000		—			54,000		55,000		—			55,000
	854,562		(8,785		)	845,777		875,562		(11,724		)	863,838
Less: current portion	74,000		—			74,000		75,000		—			75,000
Non-current portion	$	780,562	$	(8,785	)	$	771,777	$	800,562	$	(11,724	)	$	788,838

Schedule of aggregate maturities of long-term debt

Aggregate maturities of long-term debt as of September 30, 2018 are as follows (in thousands):

Years Ended September 30,
2019	$	74,000
2020	20,000
2021	760,562
	$	854,562

Schedule of Debt

The following table summarizes the total deferred debt issuance costs for the term loan A facility, the term loan B facility and the revolving facility, which will be amortized over their remaining terms.

	Term Loan A Facility			Term Loan B Facility			Revolving Facility			Total
Deferred debt issuance costs as of September 30, 2017	$	7,562		$	4,162		$	3,676		$	15,400
Deferred debt issuance costs for the Sixth Amendment	1,291			—			609			1,900
Amortization of deferred debt issuance costs	(3,011		)	(1,219		)	(1,458		)	(5,688		)
Deferred debt issuance costs as of September 30, 2018	$	5,842		$	2,943		$	2,827		$	11,612

XML

Derivative Financial Instruments (Tables)

12 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of derivative instruments

The following table summarizes the notional principal amounts at September 30, 2018 and 2017 of our interest rate swap agreements discussed above (in thousands). We did not have foreign exchange forward contracts as of September 30, 2018 and 2017.

	Derivative Notional
	September 30, 2018		September 30, 2017
Instruments designated as accounting hedges:
Interest rate contracts	$	435,800	$	375,000

Schedule of the location and fair value of our hedge instruments

The following table provides the location and fair value amounts of our hedge instruments, which are reported in our consolidated balance sheets as of September 30, 2018 and 2017 (in thousands). We did not have foreign exchange forward contracts as of September 30, 2018 and 2017.

		Fair Value as of September 30,
Liability Derivatives	Balance Sheet Locations	2018		2017
Instruments designated as accounting hedges:
Interest rate swap contracts	Other current assets	$	1,045	$	—
Interest rate swap contracts	Other assets	1,051		—
Interest rate swap contracts	Accrued expenses	289		2,462
Interest rate swap contracts	Other liabilities	—		903

Schedule of the losses of our cash flow hedge instrument to statement of comprehensive (loss) income

The following table provides the losses of our cash flow hedging instruments (net of income tax benefit), which were transferred from accumulated other comprehensive loss to our consolidated statement of comprehensive income (loss) for the years ended September 30, 2018, 2017 and 2016 (in thousands).

	Location in Consolidated Statement	Years Ended September 30,
Cash Flow Derivatives	Of Comprehensive Income (Loss)	2018			2017			2016
Interest rate swap contracts	Interest income (expense), net	$	1,163		$	385		$	1,344
Total interest expense, net presented in the consolidated statements of earnings and comprehensive income in which the above effects of cash flow hedges are recorded		$	(48,880	)	$	(39,821	)	$	(36,901	)

Schedule of cash flow hedge instrument, effect on Other Comprehensive Income (Loss)

The following table provides the effective portion of the income (loss) of our cash flow hedge instruments which is recognized (net of income taxes) in other comprehensive income (loss) for the years ended September 30, 2018, 2017 and 2016 (in thousands).

	Years Ended September 30,
Cash Flow Derivatives	2018		2017		2016
Interest rate swap contracts	$	2,774	$	1,688	$	(2,973	)

Schedule of derivative instruments, gain (loss)

The following table provides a summary of changes to our accumulated other comprehensive loss related to our cash flow hedging instruments (net of income taxes) during the years ended September 30, 2018 and 2017.

	Years Ended September 30,
AOCI - Unrealized Gain (Loss) on Hedging Instruments	2018			2017
Balance at beginning of period	$	(2,133	)	$	(4,206	)
Change in fair value of hedging instruments	2,774			1,688
Amounts reclassified to earnings	1,163			385
Net current period other comprehensive income	3,937			2,073
Effect of adoption of accounting standard	$	(429	)	$	—
Balance at end of period	$	1,375		$	(2,133	)

The following table provides the pretax effect of our derivative instruments not designated as hedging instruments on our consolidated earnings and comprehensive income for the years ended September 30, 2018, 2017 and 2016 (in thousands).

Instruments Not Designated As Hedging Instruments	Location in Consolidated Statement of Comprehensive Income	Years Ended September 30,
		2018		2017			2016
Foreign exchange contract	Other income, net	$	—	$	(1,843	)	(5,606	)

XML

Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Sep. 30, 2018

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

Schedule of components of other comprehensive loss and related tax effects

The components of other comprehensive income (loss) and related tax effects for each period were as follows (dollars in thousands):

	Year Ended September 30, 2018									Year Ended September 30, 2017									Year Ended September 30, 2016
	Before Tax			Tax			After Tax			Before Tax			Tax			After Tax			Before Tax			Tax			After Tax
Change in unrealized holding losses on derivatives	3,645			(871		)	2,774			2,692			(1,004		)	1,688			(4,716		)	1,743			(2,973		)
Less: adjustment for losses on derivatives included in net income	1,528			(365		)	1,163			615			(230		)	385			2,132			(788		)	1,344
Change in net foreign currency translation adjustment	(1,862		)	—			(1,862		)	(5,959		)	(1,179		)	(7,138		)	(39,211		)	—			(39,211		)
Other comprehensive income (loss)	$	3,311		$	(1,236	)	$	2,075		$	(2,652	)	$	(2,413	)	$	(5,065	)	$	(41,795	)	$	955		$	(40,840	)

Schedule of other comprehensive loss

The changes in accumulated other comprehensive loss by component and related tax effects for each period were as follows (in thousands):

	Foreign Currency Translation Adjustments			Unrealized (Loss) income on Derivative Instruments			Total
Balance at September 30, 2015	$	(36,144	)	$	(2,577	)	$	(38,721	)
Other comprehensive loss before reclassifications	(39,211		)	(4,716		)	(43,927		)
Amounts reclassified out of accumulated other loss	—			2,132			2,132
Tax effect	—			955			955
Other comprehensive loss	(39,211		)	(1,629		)	(40,840		)
Balance at September 30, 2016	$	(75,355	)	$	(4,206	)	$	(79,561	)
Other comprehensive (loss) income before reclassifications	(5,959		)	2,692			(3,267		)
Amounts reclassified out of accumulated other comprehensive loss	—			615			615
Tax effect	(1,179		)	(1,234		)	(2,413		)
Other comprehensive (loss) income	(7,138		)	2,073			(5,065		)
Balance at September 30, 2017	(82,493		)	(2,133		)	(84,626		)
Other comprehensive (loss) income before reclassifications	(1,862		)	3,645			1,783
Amounts reclassified out of accumulated other comprehensive loss	—			1,528			1,528
Tax effect	—			(1,236		)	(1,236		)
Other comprehensive (loss) income	(1,862		)	3,937			2,075
Effect of adoption of accounting standards	—			(429		)	(429		)
Balance at September 30, 2018	$	(84,355	)	$	1,375		$	(82,980	)

XML

Net Income (Loss) Per Share (Tables)

12 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Schedule of net (loss) income per share

The following table presents net income (loss) per share and related information (dollars in thousands):

	Years Ended September 30,
	2018		2017			2016
Net income (loss)	$	32,654	$	(237,346	)	$	91,378
Basic weighted average shares outstanding	99,156,998		98,700,879			97,634,155
Dilutive effect of stock options and restricted shares	343,479		—			531,701
Dilutive weighted average shares outstanding	99,500,477		98,700,879			98,165,856
Basic net income (loss) per share	$	0.33	$	(2.40	)	$	0.94
Diluted net income (loss) per share	$	0.33	$	(2.40	)	$	0.93

XML

Income Taxes (Tables)

12 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Schedule of income before provision for income taxes

Income (loss) before benefit or provision for income taxes for the years ended September 30, 2018, 2017 and 2016 was as follows (in thousands):

	2018		2017			2016
U.S. income (loss)	$	29,854	$	(261,594	)	$	63,614
Foreign income	30,758		13,347			61,976
Total	$	60,612	$	(248,247	)	$	125,590

Schedule of components of the Company's income tax provision

The components of our income tax provision (benefit) for the years ended September 30, 2018, 2017 and 2016 were as follows (in thousands):

	2018			2017			2016
Current provision
Federal	$	10,263		$	(2,536	)	$	7,315
State and local	729			(591		)	1,134
Foreign	7,717			12,999			12,482
Subtotal	18,709			9,872			20,931
Deferred (benefit) provision
Federal	11,390			(14,730		)	10,979
State and local	(3,206		)	(2,738		)	1,108
Foreign	1,065			(3,305		)	1,194
Subtotal	9,249			(20,773		)	13,281
Provision (benefit)for income taxes	$	27,958		$	(10,901	)	$	34,212

Schedule of reconciliation of the Company's provision (benefit) for income taxes to the U.S. federal statutory rate

A reconciliation of our (benefit) provision for income taxes to the U.S. federal statutory rate is as follows for the years ended September 30, 2018, 2017 and 2016 (in thousands):

	2018					2017					2016
Provision (benefit) for income taxes at statutory rate	$	14,867		24.53	%	$	(84,404	)	34.00	%	$	43,956		35.00	%
State taxes, net of tax benefit	742			1.22	%	(4,559		)	1.84	%	1,458			1.16	%
Deemed foreign dividends	1,301			2.15	%	6,099			(2.46	)%	3,963			3.16	%
Nondeductible items	658			1.09	%	283			(0.11	)%	(1,912		)	(1.52	)%
Impact of foreign operations	(92		)	(0.15	)%	(3,526		)	1.42	%	(8,015		)	(6.38	)%
Impact of Tax Act	8,423			13.90	%	—			—	%	—			—	%
Foreign tax credit	(18,275		)	(30.15	)%	(6,197		)	2.50	%	(4,313		)	(3.43	)%
Valuation allowance	19,098			31.51	%	15,057			(6.07	)%	—			—	%
Non-deductible goodwill impairment	—			—	%	23,644			(9.52	)%	—			—	%
Unremitted earnings of foreign subsidiaries	463			0.76	%	37,537			(15.12	)%	—			—	%
Tax contingencies	492			0.81	%	4,123			(1.66	)%	(674		)	(0.54	)%
Other	281			0.46	%	1,042			(0.43	)%	(251		)	(0.21	)%
Actual provision (benefit) for income taxes	$	27,958		46.13	%	$	(10,901	)	4.39	%	$	34,212		27.24	%

Schedule of components deferred income tax assets (liabilities)

As of September 30, 2018 and 2017, the components of deferred income tax assets (liabilities) were as follows (in thousands):

	2018			2017
Deferred tax assets - Non-current
Inventories	$	55,977		$	92,711
Reserves and other accruals	1,217			1,692
Compensation accruals	2,965			2,308
Goodwill and intangible assets	3,412			20,101
Stock options	2,377			3,197
Net operating losses and tax credits	42,664			19,345
Other	674			2,611
Total deferred tax assets	109,286			141,965
Deferred tax (liabilities) - Non-current
Property and equipment	(1,568		)	(3,505		)
Unremitted earnings of foreign subsidiaries	(185		)	(40,009		)
Other	(7,281		)	(7,008		)
Total deferred tax liabilities - non-current	(9,034		)	(50,522		)
Valuation allowance	(37,920		)	(18,602		)
Net deferred tax assets (liabilities)	$	62,332		$	72,841

Schedule of unrecognized tax benefits

The unrecognized tax benefits, which exclude interest and penalties, for the years ended September 30, 2018, 2017 and September 30, 2016 are as follows (in thousands):

	2018			2017			2016
Beginning balance	$	5,232		$	2,166		$	2,725
Increases related to tax positions taken during a prior year	—			3,250			—
Decreases related to tax positions taken during a prior year	—			—			—
Increases related to tax positions taken during the current year	490			—			—
Decreases related to settlements with taxing authorities	—			—			(579		)
Decreases related to expiration of statute of limitations	(55		)	(51		)	(113		)
Changes due to translation of foreign currencies	—			(133		)	133
Ending balance	$	5,667		$	5,232		$	2,166

Schedule of valuation allowance

valuation allowance has been recorded against these deferred tax assets (in thousands).

	Beginning Balance		Valuation Allowance Recorded During The Period			Ending Balance
Valuation allowance for deferred tax assets:
Year ended September 30, 2018	$	18,602	$	19,318		$	37,920
Year ended September 30, 2017	5,548		13,054			18,602
Year ended September 30, 2016	5,961		(413		)	5,548

XML

Stock-Based and Other Compensation Arrangements (Tables)

12 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of options activity

The following table sets forth the summary of options activity under the Plans (dollars in thousands except per share data):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value(1)
Options outstanding at September 30, 2017	2,462,810		$	14.92	6.99	$	79
Granted	454,546		9.51
Exercised	(13,541	)	5.79
Forfeited options	(495,688	)	12.96
Options outstanding at September 30, 2018	2,408,127		$	14.35	6.36	$	643
Options exercisable at September 30, 2018	2,041,586		$	14.98	5.95	$	211

(1) Aggregate intrinsic value is calculated based on the difference between our closing stock price at year end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised all their options on the fiscal year end date.

Schedule of restricted share activity

Restricted share activity during the year ended September 30, 2018 was as follows:

	Shares		Weighted Average Fair Value
Outstanding at September 30, 2017	797,562		$	12.21
Granted(1)	1,412,046		8.10
Vested	(502,555	)	11.30
Forfeited	(245,963	)	10.18
Outstanding at September 30, 2018	1,461,090		$	8.89

(1) Under the terms of their respective restricted stock award agreements, holders of restricted stock have the same voting rights as common stock shareholders; such rights exist even if the shares of restricted stock have not vested.

Schedule of weighted average assumptions

The weighted average assumptions used to value the option grants are as follows:

	2018		2017		2016
Expected life (in years)	6.00		6.00		6.00
Volatility	33.85	%	30.94	%	35.00	%
Risk free interest rate	2.07	%	1.33	%	1.55	%
Dividend yield	—		—		—

XML

Supplemental Cash Flow Information (Tables)

12 Months Ended

Sep. 30, 2018

Supplemental Cash Flow Information [Abstract]

Schedule of supplemental cash flow information

	Years Ended September 30,
	2018		2017		2016
	(in thousands)
Cash payments for:
Interest	$	42,659	$	33,386	$	33,349
Income taxes	7,160		10,287		37,193
Schedule of non-cash investing and financing activities:
Property and equipment acquired pursuant to capital leases	$	2,816	$	3,891	$	1,780

XML

Quarterly Financial Data (unaudited) (Tables)

12 Months Ended

Sep. 30, 2018

Quarterly Financial Information Disclosure [Abstract]

Summary of unaudited quarterly financial data

Summarized unaudited quarterly financial data for quarters ended December 31, 2016 through September 30, 2018 is as follows (in thousands except per share data):

Quarters Ended:	September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017
Net sales	$	406,817	$	410,359	$	390,183	$	363,091
Gross profit	98,800		104,197		105,735		94,424
Net income (loss)	7,274		10,754		15,000		(374		)
Basic net income (loss) per share (1)	$	0.07	$	0.11	$	0.15	$	—
Diluted net income (loss) per share (1)	$	0.07	$	0.11	$	0.15	$	—

Quarters Ended:	September 30, 2017			June 30, 2017			March 31, 2017		December 31, 2016
Net sales	$	361,552		$	363,907		$	364,599	$	339,371
Gross profit	87,487			90,208			94,755		89,457
Net (loss) income (2)	(38,287		)	(229,608		)	17,442		13,107
Basic net (loss) income per share (1)	$	(0.39	)	$	(2.32	)	$	0.18	$	0.13
Diluted net (loss) income per share (1)	$	(0.39	)	$	(2.32	)	$	0.18	$	0.13

1. Net income (loss) per share calculations for each quarter are based on the weighted average basic and diluted shares outstanding for that quarter and may not total to the full year amount.

2. During the three months ended June 30, 2017, we recorded a non-cash goodwill impairment charge of $311.1 million. See Note 2, Note 5 and Note 8 for additional information.

XML

Segment Reporting (Tables)

12 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Schedule of net sales and other financial information by business segment

The following table presents net sales and other financial information by business segment (in thousands):

	Year Ended September 30, 2018
	Americas		EMEA		APAC		Unallocated Corporate Costs			Consolidated
Net sales (1)	$	1,271,893	$	262,087	$	36,470	$	—		$	1,570,450
Income (loss) from operations (2)	128,908		17,926		2,017		(39,383		)	109,468
Interest expense, net	43,499		5,281		100		—			48,880
Capital expenditures	4,917		533		216		—			5,666
Depreciation and amortization	25,458		3,484		314		—			29,256
Total assets	1,485,453		248,937		55,086		—			1,789,476
Goodwill	204,183		51,190		11,271		—			266,644

(1) For fiscal 2018, approximately 11% of our total net sales were derived from one individual customer, which was reported under the Americas, EMEA and APAC segments.

(2) Unallocated corporate costs for fiscal 2018 consisted of payroll and personnel costs of $10.3 million, stock-based compensation expenses of $5.7 million, professional fees of $22.2 million and other corporate expenses of $1.2 million.

	Year Ended September 30, 2017
	Americas			EMEA		APAC			Unallocated Corporate Costs			Consolidated
Net sales (1)	$	1,142,366		$	258,072	$	28,991		$	—		$	1,429,429
Income (loss) from operations (2) (3)	(213,501		)	25,138		(172		)	(20,260		)	(208,795		)
Interest expense, net	35,936			3,786		99			—			39,821
Capital expenditures	5,659			3,165		99			—			8,923
Depreciation and amortization	24,765			3,321		266			—			28,352
Total assets	1,436,840			275,445		41,822			—			1,754,107
Goodwill (3)	204,183			51,190		11,271						266,644

(1) For fiscal 2017, nearly 11% of our total net sales were derived from one individual customer, which was reported under the Americas, EMEA and APAC segments.

(2) Unallocated corporate costs for fiscal 2017 consisted of payroll and personnel costs of $10.1 million, stock-based compensation expenses of $3.4 million, and professional fees and other corporate expenses of $6.8 million.

(3) Changes in the goodwill balance for fiscal 2017 included a non-cash impairment charge of $311.1 million, of which $308.4 million was related to the Americas segment and $2.7 million was related to the APAC segment. See Note 8 for further information.

	Year Ended September 30, 2016
	Americas		EMEA		APAC			Unallocated Corporate Costs			Consolidated
Net sales	$	1,177,496	$	274,952	$	24,918		$	—		$	1,477,366
Income (loss) from operations (1)	134,159		43,881		1,196			(20,486		)	158,750
Interest expense, net	32,595		4,309		(3		)	—			36,901
Capital expenditures	12,728		1,143		121						13,992
Depreciation and amortization	24,412		3,289		279			—			27,980

(1) Unallocated corporate costs for fiscal 2016 consisted of payroll and personnel costs of $6.7 million, stock-based compensation expenses of $5.3 million, and professional fees and other corporate expenses of $8.5 million.

Schedule of net sales by geographical area

Net sales by geographic area, for the years ended September 30, 2018, 2017, and 2016, were as follows (dollars in thousands):

	Years Ended September 30,
	2018				2017				2016
	Sales		% of Total Sales		Sales		% of Total Sales		Sales		% of Total Sales
United States of America	$	1,173,429	74.7	%	$	1,062,523	74.3	%	$	1,087,691	73.6	%
United Kingdom	182,124		11.6	%	179,160		12.5	%	195,473		13.2	%
Other foreign countries	214,897		13.7	%	187,746		13.2	%	194,202		13.2	%
All foreign countries	397,021		25.3	%	366,906		25.7	%	389,675		26.4	%
Total	$	1,570,450	100.0	%	$	1,429,429	100.0	%	$	1,477,366	100.0	%

Schedule of long-lived assets by geographic area

Our long-lived assets consist of property and equipment, net, intangible assets, net and investment in joint ventures. Long-lived assets by geographic area, for the years ended September 30, 2018 and 2017, were as follows (in thousands):

	Years Ended September 30
	2018		2017
United States of America	$	169,377	$	185,438
All foreign countries	48,832		54,109
	$	218,209	$	239,547

Schedule of net sales by product categories

Net sales by product categories, for the years ended September 30, 2018, 2017 and 2016 were as follows (dollars in thousands):

	Years Ended September 30
	2018				2017				2016
	Sales		% of Total Sales		Sales		% of Total Sales		Sales		% of Total Sales
Hardware	$	732,892	46.7	%	$	665,224	46.6	%	$	711,177	48.2	%
Chemicals	656,959		41.8	%	602,039		42.1	%	600,124		40.6	%
Electronic components	114,875		7.3	%	100,160		7.0	%	105,207		7.1	%
Bearings	36,212		2.3	%	34,566		2.4	%	34,662		2.3	%
Machined parts and other	29,512		1.9	%	27,440		1.9	%	26,196		1.8	%
Total	$	1,570,450	100.0	%	$	1,429,429	100.0	%	$	1,477,366	100.0	%

XML

Organization and Business (Details)	12 Months Ended
	Sep. 30, 2018 location
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Minimum stocking locations	56

XML

Basis of Presentation and Summary of Significant Accounting Policies (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Allowance for doubtful accounts activity
Allowance for doubtful accounts receivable, current, beginning balance	$ 3,109	$ 3,846	$ 5,892
Allowance for doubtful accounts receivable, current, changes to cost and expenses	(27)	(133)	(846)
Allowance for doubtful accounts receivable, current, write-offs	(205)	(604)	(1,200)
Allowance for doubtful accounts receivable, current, ending balance	$ 2,877	$ 3,109	$ 3,846
Minimum
Accounts receivable
Accounts receivable dating	30 days
Maximum
Accounts receivable
Accounts receivable dating	60 days

XML

Basis of Presentation and Summary of Significant Accounting Policies (Details 2) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Inventory Adjustments
Cost of sales		$ 1,167,294	$ 1,067,522	$ 1,083,674
Inventory adjustment		16,800	12,900	14,600
Deferred Financing Costs
Amortization of deferred debt issuance costs		5,688	6,143	4,627
Deferred financing costs		11,612	15,400
Debt issuance costs		8,785	11,724
Remaining unamortized deferred financing costs		2,827	3,676
Goodwill and Indefinite-Lived Intangible Assets
Goodwill impairment charge	$ 311,100	$ 0	311,114	0
Building And Building Improvements | Minimum
Inventory Adjustments
Useful lives and lease terms for depreciable assets		1 year
Building And Building Improvements | Maximum
Inventory Adjustments
Useful lives and lease terms for depreciable assets		39 years 6 months
Machinery and equipment | Minimum
Inventory Adjustments
Useful lives and lease terms for depreciable assets		5 years
Machinery and equipment | Maximum
Inventory Adjustments
Useful lives and lease terms for depreciable assets		7 years
Furniture and fixtures
Inventory Adjustments
Useful lives and lease terms for depreciable assets		7 years
Vehicles
Inventory Adjustments
Useful lives and lease terms for depreciable assets		5 years
Computer hardware and software | Minimum
Inventory Adjustments
Useful lives and lease terms for depreciable assets		3 years
Computer hardware and software | Maximum
Inventory Adjustments
Useful lives and lease terms for depreciable assets		7 years
Americas
Goodwill and Indefinite-Lived Intangible Assets
Goodwill impairment charge			308,403
APAC
Goodwill and Indefinite-Lived Intangible Assets
Goodwill impairment charge	$ 2,711		2,700
Cargo and Freight
Inventory Adjustments
Cost of sales		$ 1,200	$ 1,500	$ 1,900

XML

Basis of Presentation and Summary of Significant Accounting Policies (Details 3) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Shipping and Handling Costs
Net sales	$ 406,817	$ 410,359	$ 390,183	$ 363,091	$ 361,552	$ 363,907	$ 364,599	$ 339,371	$ 1,570,450	$ 1,429,429	$ 1,477,366
Cost of sales									1,167,294	1,067,522	1,083,674
Foreign Currency Translation
Foreign currency transaction gains and (losses)									$ 300	$ 100	$ 3,200
Maximum
Revenue from Contract with Customer
Service fees as a percentage of consolidated net sales									10.00%
Consigned inventory fixed fees as a percentage of consolidated revenues									1.00%
Cost of goods total | Supplier concentration risk | Precision Castparts Corporation
Shipping and Handling Costs
Concentration risk									12.00%	13.00%	12.00%
Cost of goods total | Supplier concentration risk | Alcoa Fastening Systems
Shipping and Handling Costs
Concentration risk									8.00%	9.00%	8.00%
Accounts payable | Supplier concentration risk | Precision Castparts Corporation
Shipping and Handling Costs
Concentration risk									4.00%	6.00%
Accounts payable | Supplier concentration risk | Alcoa Fastening Systems
Shipping and Handling Costs
Concentration risk									6.00%	6.00%
Sales revenue | Customer concentration risk
Shipping and Handling Costs
Concentration risk									11.00%	10.00%	10.00%
Accounts receivable | Customer concentration risk | U.S. Defense Logistics Agency or Defense Contractors
Shipping and Handling Costs
Concentration risk									14.00%	16.00%	15.00%
Shipping and Handling
Shipping and Handling Costs
Net sales									$ 3,900	$ 4,600	$ 5,100
Cost of sales									$ 33,500	$ 31,400	$ 28,000

XML

Basis of Presentation and Summary of Significant Accounting Policies (Details 4)	12 Months Ended
	Sep. 30, 2018
Performance Shares
Stock-based and other compensation arrangements
Vesting term	3 years
Employee Stock Option
Stock-based and other compensation arrangements
Vesting term	3 years
Contractual term of stock options	10 years

XML

Recent Accounting Pronouncements (Details) - USD ($) $ in Millions	Sep. 30, 2018	Jul. 01, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating leases, future minimum payments due	$ 50.8
Accounting Standards Update 2018-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Effect of adoption of accounting standard		$ 0.4

XML

Commitments and Contingencies (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Operating Leases
2019	$ 12,439
2020	9,681
2021	7,753
2022	6,665
2023	5,817
Thereafter	8,430
Total	50,800
Total rent expense	13,400	$ 12,600	$ 11,900
Capital Lease Commitments
2019	2,311
2020	1,292
2021	474
2022	401
2023	215
Thereafter	66
Total including interest	4,759	$ 5,300
Less: Interest	(226)
Total	4,533
Third Party
Operating Leases
2019	10,575
2020	9,364
2021	7,583
2022	6,382
2023	5,539
Thereafter	8,160
Total	47,603
Related Party
Operating Leases
2019	1,864
2020	317
2021	170
2022	283
2023	278
Thereafter	270
Total	$ 3,182

XML

Inventory (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Inventory Disclosure [Abstract]
Inventory provision	$ 16,780	$ 12,900	$ 14,615

XML

Related Party Transactions (Details) - USD ($)	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Majority Shareholder | Management Agreement
Related Party Transactions
Annual management fee	$ 1,000,000
Expenses incurred	100,000	$ 600,000	$ 1,300,000
Chief Executive Officer | Lease Agreements
Related Party Transactions
Expenses incurred	$ 1,900,000	$ 1,600,000	$ 1,800,000

XML

Property and Equipment, net (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 123,403	$ 116,115
Less: accumulated depreciation	(79,198)	(65,760)
Property and equipment, net	44,205	50,355
Depreciation and amortization expense	14,400	13,400	$ 12,100
Land, buildings and improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	31,966	31,202
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	22,321	21,265
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, gross	7,930	8,011
Vehicles
Property, Plant and Equipment [Line Items]
Property and equipment, gross	859	942
Computer hardware and software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	56,643	50,395
Construction in progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	3,684	4,300
Assets held under capital leases
Property, Plant and Equipment [Line Items]
Property and equipment, gross	18,400	15,600
Less: accumulated depreciation	(11,300)	(7,900)
Depreciation and amortization expense	$ 3,400	$ 2,500	$ 1,500

XML

Goodwill and Intangible Assets, net (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Change in goodwill
Beginning balance, goodwill, gross		$ 841,529	$ 841,529	$ 843,636
Beginning balance, goodwill, impaired, accumulated impairment loss		(574,885)	(263,771)
Beginning balance, goodwill, net		266,644	579,865
Foreign currency translation		0	(2,107)
Goodwill impairment	$ (311,100)	0	(311,114)	0
Ending balance, goodwill, impaired, accumulated impairment loss		(574,885)	(574,885)	(263,771)
Ending balance, goodwill, net		266,644	266,644	579,865
Americas
Change in goodwill
Beginning balance, goodwill, gross		773,384	773,384	773,384
Beginning balance, goodwill, impaired, accumulated impairment loss		(569,201)	(260,798)
Beginning balance, goodwill, net		204,183	512,586
Foreign currency translation		0	0
Goodwill impairment		0
Ending balance, goodwill, impaired, accumulated impairment loss		(569,201)	(569,201)	(260,798)
Ending balance, goodwill, net		204,183	204,183	512,586
EMEA
Change in goodwill
Beginning balance, goodwill, gross		51,190	51,190	53,297
Beginning balance, goodwill, impaired, accumulated impairment loss		0	0
Beginning balance, goodwill, net		51,190	53,297
Foreign currency translation		0	(2,107)
Goodwill impairment		0	0
Ending balance, goodwill, impaired, accumulated impairment loss		0	0	0
Ending balance, goodwill, net		51,190	51,190	53,297
APAC
Change in goodwill
Beginning balance, goodwill, gross		16,955	16,955	16,955
Beginning balance, goodwill, impaired, accumulated impairment loss		(5,684)	(2,973)
Beginning balance, goodwill, net		11,271	13,982
Foreign currency translation		0	0
Goodwill impairment		0
Ending balance, goodwill, impaired, accumulated impairment loss		(5,684)	(5,684)	(2,973)
Ending balance, goodwill, net		$ 11,271	$ 11,271	$ 13,982

XML

Goodwill and Intangible Assets, net - Additional Details (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Sep. 30, 2017 reporting_unit	Jun. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
Goodwill [Line Items]
Goodwill impairment charge		$ 311,100	$ 0	$ 311,114	$ 0
Number of reporting units | reporting_unit	3
Americas
Goodwill [Line Items]
Goodwill impairment charge				308,403
APAC
Goodwill [Line Items]
Goodwill impairment charge		$ 2,711		$ 2,700

XML

Goodwill and Intangible Assets, net (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Intangible Assets, net
Gross Amount	$ 263,577	$ 263,577
Accumulated Amortization	(100,139)	(85,285)
Estimated future amortization expense
2019	14,855
2020	14,721
2021	14,317
2022	14,317
2023	14,317
Thereafter	53,078
Total	125,605
Amortization expense included in the accompanying statements of operations
Amortization of intangible assets	14,900	14,900	$ 15,800
Customer relationships
Intangible Assets, net
Gross Amount	172,603	172,603
Accumulated Amortization	$ (75,102)	$ (64,319)
Customer relationships | Minimum
Intangible Assets, net
Estimated useful life	12 years	12 years
Customer relationships | Maximum
Intangible Assets, net
Estimated useful life	20 years	20 years
Backlog
Intangible Assets, net
Estimated useful life	2 years	2 years
Gross Amount	$ 4,327	$ 4,327
Accumulated Amortization	(4,327)	(4,327)
Non-compete agreements
Intangible Assets, net
Gross Amount	1,457	1,457
Accumulated Amortization	$ (1,457)	$ (1,457)
Non-compete agreements | Minimum
Intangible Assets, net
Estimated useful life	3 years	3 years
Non-compete agreements | Maximum
Intangible Assets, net
Estimated useful life	4 years	4 years
Technology
Intangible Assets, net
Estimated useful life	10 years	10 years
Gross Amount	$ 32,260	$ 32,260
Accumulated Amortization	(14,670)	(11,572)
Trademarks
Intangible Assets, net
Gross Amount	52,930	52,930
Accumulated Amortization	(4,583)	(3,610)
Indefinite life intangibles
Carrying value of Wesco Aircraft trademark	$ 37,800	$ 37,800
Trademarks | Minimum
Intangible Assets, net
Estimated useful life	5 years	5 years

XML

Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Accrued Liabilities, Current [Abstract]
Accrued compensation and related expenses	$ 18,590	$ 16,271
Accrual for professional fees	951	951
Accrued customer rebates	5,604	4,240
Accrued taxes (property, sales and use)	1,083	2,083
Deferred revenue	971	301
Accrual for severance and other expenses	1,203	354
Interest rate swap	289	2,462
Other accruals	14,076	8,667
Accrued expenses and other current liabilities	$ 42,767	$ 35,329

XML

Fair Value of Financial Instruments (Details) - Fair value inputs Level 2 - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Carrying Amount | Term loan A
Fair value of financial instruments
Long-term debt	$ 360,000	$ 380,000
Carrying Amount | Term loan B
Fair value of financial instruments
Long-term debt	440,562	440,562
Carrying Amount | Revolving credit facility
Fair value of financial instruments
Long-term debt	54,000	55,000
Fair Value | Term loan A
Fair value of financial instruments
Long-term debt	357,840	376,960
Fair Value | Term loan B
Fair value of financial instruments
Long-term debt	432,192	428,667
Fair Value | Revolving credit facility
Fair value of financial instruments
Long-term debt	54,000	55,000
Interest rate contracts | Carrying Amount
Fair value of financial instruments
Interest rate swap hedge assets (liabilities), net	1,807	(3,365)
Interest rate contracts | Fair Value
Fair value of financial instruments
Interest rate swap hedge assets (liabilities), net	$ 1,807	$ (3,365)

XML

Long-Term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Long-Term Debt
Long-term debt, gross	$ 854,562	$ 875,562
Debt issuance costs	(8,785)	(11,724)
Long-term debt, current and noncurrent	845,777	863,838
Less: current portion	74,000	75,000
Long-term debt, excluding current maturities	780,562	800,562
Long-term debt, less current portion	771,777	788,838
Term loan A
Long-Term Debt
Long-term debt, gross	360,000	380,000
Debt issuance costs	(5,842)	(7,562)
Long-term debt, current and noncurrent	354,158	372,438
Term loan B
Long-Term Debt
Long-term debt, gross	440,562	440,562
Debt issuance costs	(2,943)	(4,162)
Long-term debt, current and noncurrent	437,619	436,400
Revolving credit facility
Long-Term Debt
Long-term debt, gross	54,000	55,000
Debt issuance costs	0	0
Long-term debt, current and noncurrent	$ 54,000	$ 55,000

XML

Long-Term Debt (Details 2) - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Debt Disclosure [Abstract]
Maturities of long-term debt, 2019	$ 74,000
Maturities of long-term debt, 2020	20,000
Maturities of long-term debt, 2021	760,562
Long-term Debt, Gross	$ 854,562	$ 875,562

XML

Long-Term Debt (Details 3) £ in Millions	12 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2018 GBP (£)	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Oct. 04, 2016 USD ($)
Long-Term Debt
Long-term debt, gross	$ 854,562,000	$ 875,562,000
Periodic payment	20,000,000
Repayments of short-term borrowings	(68,500,000)	(22,000,000)	$ 0
Proceeds from short-term borrowings	67,500,000	77,000,000	$ 0
Long-term debt, current and noncurrent	$ 845,777,000	863,838,000
Debt issuance costs		15,400,000
Consolidated total leverage ratio	4.18			4.18
Maximum
Long-Term Debt
Consolidated total leverage ratio	6.00			6.00
Amendment and restatement of credit agreement
Long-Term Debt
Debt issuance costs								$ 1,900,000
Term loan A
Long-Term Debt
Principal amount	$ 400,000,000.0
Percentage of quarterly payment in year one	1.25%			1.25%
Interest rate, effective percentage	5.25%			5.25%
Debt issuance costs		7,562,000
Debt, weighted average interest rate	5.15%			5.15%
Term loan A | Amendment and restatement of credit agreement
Long-Term Debt
Debt issuance costs								1,291,000
Term loan A | Debt instrument variable rate basis alternate base rate | Minimum
Long-Term Debt
Applicable margin rate	1.00%
Term loan A | Debt instrument variable rate basis alternate base rate | Maximum
Long-Term Debt
Applicable margin rate	2.00%
Term loan A | Eurodollar | Minimum
Long-Term Debt
Applicable margin rate	2.00%
Term loan A | Eurodollar | Maximum
Long-Term Debt
Applicable margin rate	3.00%
Revolving credit facility
Long-Term Debt
Revolving facility	$ 180,000,000.0
Repayments of short-term borrowings	(68,500,000)
Revolving line of credit, current borrowing capacity	126,000,000
Proceeds from short-term borrowings	$ 67,500,000
Debt issuance costs		$ 3,676,000
Revolving credit facility | Amendment and restatement of credit agreement
Long-Term Debt
Debt issuance costs								609,000
Revolving credit facility | Sixth amendment to credit agreement
Long-Term Debt
Consolidated total leverage ratio	6	6.25		6	6.00	6.25	6.25
Term loan B
Long-Term Debt
Principal amount	$ 525,000,000.0
Interest rate, effective percentage	4.75%			4.75%
Percentage of quarterly payment	0.25%			0.25%
Debt issuance costs		$ 4,162,000
Term loan B | Amendment and restatement of credit agreement
Long-Term Debt
Debt issuance costs								$ 0
Term loan B | Debt instrument variable rate basis alternate base rate
Long-Term Debt
Applicable margin rate	1.50%
Term loan B | Debt instrument variable rate basis alternate base rate | Minimum
Long-Term Debt
Base rate	1.75%
Term loan B | Eurodollar
Long-Term Debt
Applicable margin rate	2.50%
Term loan B | Eurodollar | Minimum
Long-Term Debt
Base rate	0.75%
Foreign line of credit | Wesco Aircraft Europe Limited
Long-Term Debt
Applicable margin rate	1.65%
Revolving line of credit, current borrowing capacity | £				£ 5.0
Basis of interest rate	base rate
Line of credit | Wesco Aircraft Europe Limited
Long-Term Debt
Revolving line of credit, current borrowing capacity	$ 6,500,000
Term loan A
Long-Term Debt
Long-term debt, gross	360,000,000	380,000,000
Long-term debt, current and noncurrent	354,158,000	372,438,000
Revolving credit facility
Long-Term Debt
Long-term debt, gross	54,000,000	55,000,000
Long-term debt, current and noncurrent	54,000,000	55,000,000
Term loan B
Long-Term Debt
Long-term debt, gross	440,562,000	440,562,000
Long-term debt, current and noncurrent	$ 437,619,000	$ 436,400,000

XML

Long-Term Debt (Details 4)	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018 USD ($)	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Nov. 02, 2017	Sep. 30, 2017 USD ($)
Long-Term Debt
Consolidated total leverage ratio												4.18
Debt issuance costs												$ 8,785,000					$ 11,724,000
Maximum
Long-Term Debt
Consolidated total leverage ratio												6.00
Sixth amendment to credit agreement
Long-Term Debt
Excess cash flow percentage																75.00%
Debt issuance costs												$ 1,900,000
Sixth amendment to credit agreement | Credit Agreement, scenario one
Long-Term Debt
Maximum borrowing capacity												0
Sixth amendment to credit agreement | Credit Agreement, scenario two
Long-Term Debt
Excess cash flow percentage																50.00%
Sixth amendment to credit agreement | Credit Agreement, scenario two | Maximum
Long-Term Debt
Consolidated total leverage ratio																4.00
Sixth amendment to credit agreement | Credit Agreement, scenario two | Minimum
Long-Term Debt
Consolidated total leverage ratio																3.00
Sixth amendment to credit agreement | Credit Agreement, scenario three
Long-Term Debt
Excess cash flow percentage																25.00%
Sixth amendment to credit agreement | Credit Agreement, scenario three | Maximum
Long-Term Debt
Consolidated total leverage ratio																3.00
Sixth amendment to credit agreement | Credit Agreement, scenario three | Minimum
Long-Term Debt
Consolidated total leverage ratio																2.50
Sixth amendment to credit agreement | Credit Agreement, scenario four
Long-Term Debt
Consolidated total leverage ratio																2.50
Excess cash flow percentage																0.00%
Sixth amendment to credit agreement | Credit Agreement, scenario five
Long-Term Debt
Maximum borrowing capacity												75,000,000
Sixth amendment to credit agreement | Credit Agreement, scenario five | Maximum
Long-Term Debt
Consolidated total leverage ratio																4.00
Sixth amendment to credit agreement | Credit Agreement, scenario five | Minimum
Long-Term Debt
Consolidated total leverage ratio																3.50
Sixth amendment to credit agreement | Credit Agreement, scenario six
Long-Term Debt
Maximum borrowing capacity												$ 150,000,000
Sixth amendment to credit agreement | Credit Agreement, scenario six | Maximum
Long-Term Debt
Consolidated total leverage ratio																3.50
Sixth amendment to credit agreement | Revolving credit facility
Long-Term Debt
Consolidated total leverage ratio												6	6.00	6.25	6.25		6.25
Debt issuance costs												$ 600,000
Sixth amendment to credit agreement | Term loan A
Long-Term Debt
Debt issuance costs												$ 1,300,000
Forecast | Sixth amendment to credit agreement | Revolving credit facility
Long-Term Debt
Consolidated total leverage ratio	3.00	4	4	4	4.00	4.75	4.75	4.75	5.25	5.50	5.75

XML

Long-Term Debt Long-Term Debt (Details 5) - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017	Oct. 04, 2016
Long-Term Debt
Debt issuance costs		$ 15,400
Amortization of deferred debt issuance costs	$ (5,688)
Deferred financing costs	11,612	15,400
Term loan A
Long-Term Debt
Debt issuance costs		7,562
Amortization of deferred debt issuance costs	(3,011)
Deferred financing costs	5,842
Term loan B
Long-Term Debt
Debt issuance costs		4,162
Amortization of deferred debt issuance costs	(1,219)
Deferred financing costs	2,943
Revolving credit facility
Long-Term Debt
Debt issuance costs		$ 3,676
Amortization of deferred debt issuance costs	(1,458)
Deferred financing costs	$ 2,827
Amendment and restatement of credit agreement
Long-Term Debt
Debt issuance costs			$ 1,900
Amendment and restatement of credit agreement | Term loan A
Long-Term Debt
Debt issuance costs			1,291
Amendment and restatement of credit agreement | Term loan B
Long-Term Debt
Debt issuance costs			0
Amendment and restatement of credit agreement | Revolving credit facility
Long-Term Debt
Debt issuance costs			$ 609

XML

Derivative Financial Instruments (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Derivative financial instruments
Interest expense, net	$ (48,880)	$ (39,821)	$ (36,901)
Cash flow hedging
Derivative financial instruments
Other comprehensive income (loss), effective portion of cash flow hedge	$ 2,774	1,688
Interest rate swap one | Cash flow hedging
Derivative financial instruments
Interest rate	2.2625%
Interest rate swap one | Designated as hedging instrument | Cash flow hedging
Derivative financial instruments
Notional amount	$ 275,000
Interest rate swap two | Cash flow hedging
Derivative financial instruments
Interest rate	2.79%
Interest rate swap two | Designated as hedging instrument | Cash flow hedging
Derivative financial instruments
Notional amount	$ 160,800
Interest rate contracts | Cash flow hedging
Derivative financial instruments
Derivative instruments, gain (loss) reclassification from AOCI to income	200
Other comprehensive income (loss), effective portion of cash flow hedge	2,774
Interest rate contracts | Accumulated gain (loss), net, cash flow hedge, parent | Cash flow hedging
Derivative financial instruments
Other comprehensive income (loss), effective portion of cash flow hedge		1,688	(2,973)
Interest rate contracts | Reclassification out of AOCI
Derivative financial instruments
Gain (loss) fair value hedges recognized in earnings	1,163	385	$ 1,344
Interest rate contracts | Designated as hedging instrument
Derivative financial instruments
Notional amount	435,800	375,000
Interest rate contracts | Designated as hedging instrument | Cash flow hedging | Other Current Assets
Derivative financial instruments
Liability derivatives, fair value	1,045	0
Interest rate contracts | Designated as hedging instrument | Cash flow hedging | Other Assets
Derivative financial instruments
Liability derivatives, fair value	1,051	0
Interest rate contracts | Designated as hedging instrument | Cash flow hedging | Accrued expenses and other current liabilities
Derivative financial instruments
Liability derivatives, fair value	289	2,462
Interest rate contracts | Designated as hedging instrument | Cash flow hedging | Other liabilities
Derivative financial instruments
Liability derivatives, fair value	$ 0	$ 903

XML

Derivative Financial Instruments - AOCI Rollfoward (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Cash flow hedging
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Change in fair value of hedging instruments	$ 2,774	$ 1,688
Designated as hedging instrument | Cash flow hedging
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance at beginning of period	(2,133)	(4,206)
Amounts reclassified to earnings	1,163	385
Net current period other comprehensive income	3,937	2,073
Effect of adoption of accounting standard	(429)	0
Balance at end of period	1,375	(2,133)	$ (4,206)
Accumulated gain (loss), net, cash flow hedge, parent
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Amounts reclassified to earnings	1,163	$ 385	$ 1,344
Effect of adoption of accounting standard	$ (429)

XML

Derivative Financial Instruments - Pretax Gain/Loss (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Foreign exchange contract | Other Income | Not designated as hedging instrument
Derivative Instruments, Gain (Loss) [Line Items]
Foreign exchange contract, other income, net	$ 0	$ (1,843)	$ (5,606)

XML

Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other comprehensive loss, before tax	$ 3,311	$ (2,652)	$ (41,795)
Other comprehensive loss, tax	(1,236)	(2,413)	955
Other comprehensive income (loss), net of income taxes	2,075	(5,065)	(40,840)
Accumulated gain (loss), net, cash flow hedge, parent
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other comprehensive loss before reclassifications	3,645	2,692	(4,716)
Change in unrealized holding gain (losses) on derivatives, tax	(871)	(1,004)	1,743
Change in unrealized holding gain (losses) on derivatives, net of tax	2,774	1,688	(2,973)
Less: Reclassification adjustment from AOCI on derivatives, before tax	1,528	615	2,132
Less: Reclassification adjustment from AOCI on derivatives, tax	(365)	(230)	(788)
Less: Reclassification adjustment from AOCI on derivatives, net of tax	1,163	385	1,344
Other comprehensive loss, tax	(1,236)	(1,234)	955
Other comprehensive income (loss), net of income taxes	3,937	2,073	(1,629)
Change in net foreign currency translation adjustment
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other comprehensive loss before reclassifications	(1,862)	(5,959)	(39,211)
Less: Reclassification adjustment from AOCI on derivatives, before tax	0	0	0
Other comprehensive loss, before tax	(1,862)	(5,959)	(39,211)
Other comprehensive loss, tax	0	(1,179)	0
Other comprehensive income (loss), net of income taxes	$ (1,862)	$ (7,138)	$ (39,211)

XML

Other Comprehensive Income (Loss) (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward]
Total stockholders' equity, beginning balance	$ 649,731	$ 882,915	$ 817,573
Tax effect	(1,236)	(2,413)	955
Other comprehensive income (loss)	2,075	(5,065)	(40,840)
Total stockholders' equity, ending balance	692,469	649,731	882,915
Change in net foreign currency translation adjustment
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward]
Total stockholders' equity, beginning balance	(82,493)	(75,355)	(36,144)
Other comprehensive loss before reclassifications	(1,862)	(5,959)	(39,211)
Less: Reclassification adjustment from AOCI on derivatives, before tax	0	0	0
Tax effect	0	(1,179)	0
Other comprehensive income (loss)	(1,862)	(7,138)	(39,211)
Effect of adoption of accounting standards	0
Total stockholders' equity, ending balance	(84,355)	(82,493)	(75,355)
Unrealized Losses on Derivative Instruments
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward]
Total stockholders' equity, beginning balance	(2,133)	(4,206)	(2,577)
Other comprehensive loss before reclassifications	3,645	2,692	(4,716)
Less: Reclassification adjustment from AOCI on derivatives, before tax	1,528	615	2,132
Tax effect	(1,236)	(1,234)	955
Other comprehensive income (loss)	3,937	2,073	(1,629)
Effect of adoption of accounting standards	(429)
Total stockholders' equity, ending balance	1,375	(2,133)	(4,206)
Accumulated Other Comprehensive Loss
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward]
Total stockholders' equity, beginning balance	(84,626)	(79,561)	(38,721)
Other comprehensive loss before reclassifications	1,783	(3,267)	(43,927)
Less: Reclassification adjustment from AOCI on derivatives, before tax	1,528	615	2,132
Tax effect	(1,236)	(2,413)	955
Other comprehensive income (loss)	2,075	(5,065)	(40,840)
Effect of adoption of accounting standards	(429)
Total stockholders' equity, ending balance	$ (82,980)	$ (84,626)	$ (79,561)

XML

Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
Net income (loss)	$ 7,274	$ 10,754	$ 15,000	$ (374)	$ (38,287)	$ (229,608)	$ 17,442	$ 13,107	$ 32,654	$ (237,346)	$ 91,378
Basic weighted average shares outstanding									99,156,998	98,700,879	97,634,155
Dilutive effect of stock options and restricted shares									343,479	0	531,701
Dilutive weighted average shares outstanding									99,500,477	98,700,879	98,165,856
Basic net (loss) income per share (in dollars per share)	$ 0.07	$ 0.11	$ 0.15	$ 0.00	$ (0.39)	$ (2.32)	$ 0.18	$ 0.13	$ 0.33	$ (2.40)	$ 0.94
Diluted net (loss) income per share (in dollars per share)	$ 0.07	$ 0.11	$ 0.15	$ 0.00	$ (0.39)	$ (2.32)	$ 0.18	$ 0.13	$ 0.33	$ (2.40)	$ 0.93
Common stock equivalents not included in diluted calculation due to anti-dilutive effect (in shares)									2,800,000	3,700,000	2,000,000

XML

Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Income Tax Disclosure [Abstract]
U.S. income (loss)	$ 29,854	$ (261,594)	$ 63,614
Foreign income	30,758	13,347	61,976
Income (loss) before income taxes	60,612	(248,247)	125,590
Current federal tax expense (benefit)	10,263	(2,536)	7,315
Current state and local tax expense (benefit)	729	(591)	1,134
Current foreign tax expense (benefit)	7,717	12,999	12,482
Current income tax expense (benefit)	18,709	9,872	20,931
Deferred federal income tax expense (benefit)	11,390	(14,730)	10,979
Deferred state and local income tax expense (benefit)	(3,206)	(2,738)	1,108
Deferred foreign income tax expense (benefit)	1,065	(3,305)	1,194
Deferred income tax expense (benefit)	9,249	(20,773)	13,281
Provision (benefit)for income taxes	27,958	(10,901)	34,212
Tax (impact deducted from) benefit credited to additional paid in capital	$ (100)	$ (900)	$ (1,098)

XML

Income Taxes (Details 2) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Reconciliation of the Company's provision (benefit) for income taxes to the U.S. federal statutory rate
Provision (benefit) for income taxes at statutory rate		$ 14,867	$ (84,404)	$ 43,956
State taxes, net of tax benefit		742	(4,559)	1,458
Deemed foreign dividends		1,301	6,099	3,963
Nondeductible items		658	283	(1,912)
Impact of foreign operations		(92)	(3,526)	(8,015)
Impact of Tax Act		8,423	0	0
Foreign tax credit		(18,275)	(6,197)	(4,313)
Valuation allowance		19,098	15,057	0
Non-deductible goodwill impairment		0	23,644	0
Unremitted earnings of foreign subsidiaries		463	37,537	0
Tax contingencies		492	4,123	(674)
Other		281	1,042	(251)
Provision (benefit)for income taxes		$ 27,958	$ (10,901)	$ 34,212
Reconciliation of the Company's provision (benefit) for income taxes to the U.S. federal statutory rate
Provision (benefit) for income taxes at statutory rate (as a percent)		24.53%	34.00%	35.00%
State taxes, net of tax benefit (as a percent)		1.22%	1.84%	1.16%
Deemed foreign dividends (as a percent)		2.15%	(2.46%)	3.16%
Nondeductible items (as a percent)		1.09%	(0.11%)	(1.52%)
Impact of foreign operations (as a percent)		(0.15%)	1.42%	(6.38%)
Impact of Tax Act (as a percent)		13.90%	0.00%	0.00%
Foreign tax credit (as a percent)		(30.15%)	2.50%	(3.43%)
Valuation allowance (as a percent)		31.51%	(6.07%)	0.00%
Non-deductible goodwill impairment (as a percent)		0.00%	(9.52%)	0.00%
Unremitted earnings of foreign subsidiaries (as a percent)		0.76%	(15.12%)	0.00%
Tax contingencies (as a percent)		0.81%	(1.66%)	(0.54%)
Other (as a percent)		0.46%	(0.43%)	(0.21%)
Actual (benefit) provision for income taxes (as a percent)		46.13%	4.39%	27.24%
Operating Loss Carryforwards [Line Items]
Deferred tax liabilities, unremitted foreign earnings			$ 38,700
Tax Cuts and Jobs Act of 2017, incomplete accounting, change in tax rate, partial reversal deferred tax liability, provisional income tax expense		$ 38,200
Undistributed earnings of foreign subsidiaries		27,200
Tax Cuts And Jobs Act Of 2017, incomplete accounting, transition tax for accumulated foreign earnings, provisional income tax expense	$ 9,100
Tax Cuts And Jobs Act of 2017, incomplete accounting, change in tax rate, deferred tax asset, provisional income tax expense	$ 800
Minimum
Operating Loss Carryforwards [Line Items]
Undistributed earnings, taxes		500
Maximum
Operating Loss Carryforwards [Line Items]
Undistributed earnings, taxes		$ 1,000

XML

Income Taxes (Details 3) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2018	Sep. 30, 2017
Deferred tax assets - Non-current
Inventories					$ 55,977	$ 92,711
Reserves and other accruals					1,217	1,692
Compensation accruals					2,965	2,308
Goodwill and intangible assets					3,412	20,101
Stock options					2,377	3,197
Net operating losses and tax credits					42,664	19,345
Other					674	2,611
Total deferred tax assets					109,286	141,965
Deferred tax (liabilities) - Non-current
Property and equipment					(1,568)	(3,505)
Unremitted earnings of foreign subsidiaries					(185)	(40,009)
Other					(7,281)	(7,008)
Total deferred tax liabilities - non-current					(9,034)	(50,522)
Valuation allowance		$ (18,602)	$ (5,548)	$ (5,961)	(37,920)	(18,602)
Net deferred tax assets (liabilities)					62,332	72,841
Goodwill, Impairment Loss	$ 311,100	0	311,114	0
Deferred tax liability, net					2,803	$ 3,197
Undistributed earnings of foreign subsidiaries					27,200
Gross unrecognized income tax benefits					7,000
Unrecognized tax benefits, interest		1,000
Unrecognized tax benefits, penalties		300
Decreases related to expiration of statute of limitations		(55)	(51)	(113)
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Unrecognized tax benefits, beginning balance		5,232	2,166	2,725
Increases related to tax positions taken during a prior year		0	3,250	0
Decreases related to tax positions taken during a prior year		0	0	0
Increases related to tax positions taken during the current year		490	0	0
Decreases related to settlements with taxing authorities		0	0	(579)
Decreases related to expiration of statute of limitations		(55)	(51)	(113)
Changes due to translation of foreign currencies		0	(133)
Changes due to translation of foreign currencies				133
Unrecognized tax benefits, ending balance		5,667	5,232	2,166
Valuation allowance for deferred tax assets
Valuation allowance, beginning balance		18,602	5,548	5,961
Valuation allowance recorded during the period		19,318	13,054	(413)
Valuation allowance, ending balance		$ 37,920	$ 18,602	$ 5,548
Foreign tax authority
Deferred tax (liabilities) - Non-current
Operating loss carryforwards					16,200
Foreign tax authority | Tax Year 2021
Deferred tax (liabilities) - Non-current
Operating loss carryforwards					8,500
Tax credit carryforward, amount					36,100
State tax authority | Tax Year 2022
Deferred tax (liabilities) - Non-current
Operating loss carryforwards					13,800
Minimum
Deferred tax (liabilities) - Non-current
Undistributed earnings, taxes					500
Maximum
Deferred tax (liabilities) - Non-current
Undistributed earnings, taxes					$ 1,000

XML

Stock-Based and Other Compensation Arrangements (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016	Jan. 27, 2015
Employee Stock Option
Stock-Based and Other Compensation Arrangements
Vesting period	3 years
Exercisable term	10 years
Number of Shares
Outstanding at the beginning of the period (in shares)	2,462,810
Granted (in shares)	454,546
Exercised (in shares)	(13,541)
Forfeited options (in shares)	(495,688)
Outstanding at the end of the period (in shares)	2,408,127	2,462,810
Exercisable at the end of the period (in shares)	2,041,586
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 14.92
Granted (in dollars per share)	9.51
Exercised (in dollars per share)	5.79
Forfeited options (in dollars per share)	12.96
Outstanding at the end of the period (in dollars per share)	14.35	$ 14.92
Exercisable at the end of the period (in dollars per share)	$ 14.98
Weighted Average Remaining Contractual Life
Outstanding at the end of the period	6 years 130 days	6 years 360 days
Exercisable at the end of the period	5 years 345 days
Aggregate Intrinsic Value
Outstanding at the end of the period	$ 643	$ 79
Exercisable at the end of the period	211
Additional disclosures
Total intrinsic value of options exercised	100	6,000	$ 4,500
Stock-based compensation expense	1,400	2,600	3,200
Unrecognized stock-based compensation cost	$ 1,700
Unrecognized stock-based compensation expected period of recognition	1 year 5 months 5 days
Exercise stock options cash proceeds, net	$ 100	2,700	6,300
Employee Stock Option | Time based vesting
Stock-Based and Other Compensation Arrangements
Unvested stock options (in shares)	366,541
Restricted Stock
Additional disclosures
Stock-based compensation expense	$ 7,800	$ 3,800	$ 5,300
Unrecognized stock-based compensation expected period of recognition	1 year 6 months 15 days
Equity Incentive Award Plan 2014
Stock-Based and Other Compensation Arrangements
Shares authorized for issuance				5,717,584
Shares remaining available for issuance	2,341,594

XML

Stock-Based and Other Compensation Arrangements (Details 2) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Weighted average assumptions used to value the option grants
Dividend yield (as a percent)	0.00%	0.00%	0.00%
Restricted Stock
Stock-Based and Other Compensation Arrangements
Stock-based compensation expense	$ 7.8	$ 3.8	$ 5.3
Unrecognized stock-based compensation cost	$ 8.6
Weighted Average Fair Value
Granted (in dollars per share)	$ 8.10	$ 12.63	$ 12.29
Fair value of shares vested	$ 5.7	$ 5.3	$ 3.5
Fair value of shares granted	11.4	11.1	6.9
Tax benefits realized from tax deductions associated with option exercised and restricted share activity	$ 0.1	$ 0.9	$ 1.1
Restricted Stock | Employee
Stock-Based and Other Compensation Arrangements
Vesting period	3 years
Shares
Granted (in shares)	1,307,383
Restricted Stock | Director
Shares
Granted (in shares)	104,663	68,493	57,759
Performance-Related Restricted Stock Units
Stock-Based and Other Compensation Arrangements
Vesting period	3 years
Performance period	3 years
Restricted Stock and Restricted Stock Units
Shares
Outstanding at start of year (in shares)	797,562
Granted (in shares)	1,412,046
Vested (in shares)	(502,555)
Forfeited (in shares)	(245,963)
Outstanding at end of year (in shares)	1,461,090	797,562
Weighted Average Fair Value
Outstanding at start of year (in dollars per share)	$ 12.21
Granted (in dollars per share)	8.10
Vested (in dollars per share)	11.30
Forfeited (in dollars per share)	10.18
Outstanding at end of year (in dollars per share)	$ 8.89	$ 12.21
Employee Stock Option
Stock-Based and Other Compensation Arrangements
Vesting period	3 years
Stock-based compensation expense	$ 1.4	$ 2.6	$ 3.2
Weighted average assumptions used to value the option grants
Expected life	6 years	6 years	6 years
Volatility (as a percent)	33.85%	30.94%	35.00%
Risk free interest rate (as a percent)	2.07%	1.33%	1.55%
Weighted average fair value per option at grant date for options issued (in dollars per share)	$ 3.46	$ 4.37	$ 4.38
Minimum | Performance-Related Restricted Stock Units
Stock-Based and Other Compensation Arrangements
Target shares percent	0.00%
Maximum | Performance-Related Restricted Stock Units
Stock-Based and Other Compensation Arrangements
Target shares percent	200.00%

XML

Employee Benefit Plan (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Retirement Benefits [Abstract]
Minimum requisite service period to participate in plan	1 month
Minimum age of full-time employees to be eligible to participate in the plan	20 years
Maximum percentage of employee gross pay the employee may contribute to a defined contribution plan.	60.00%
Employer contributions	$ 2.4	$ 2.4	$ 2.4

XML

Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Cash payments for:
Interest	$ 42,659	$ 33,386	$ 33,349
Income taxes	7,160	10,287	37,193
Schedule of non-cash investing and financing activities:
Property and equipment acquired pursuant to capital leases	$ 2,816	$ 3,891	$ 1,780

XML

Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Quarterly Financial Information Disclosure [Abstract]
Net sales	$ 406,817	$ 410,359	$ 390,183	$ 363,091	$ 361,552	$ 363,907	$ 364,599	$ 339,371	$ 1,570,450	$ 1,429,429	$ 1,477,366
Gross profit	98,800	104,197	105,735	94,424	87,487	90,208	94,755	89,457	403,156	361,907	393,692
Net income (loss)	$ 7,274	$ 10,754	$ 15,000	$ (374)	$ (38,287)	$ (229,608)	$ 17,442	$ 13,107	$ 32,654	$ (237,346)	$ 91,378
Basic net (loss) income per share (in dollars per share)	$ 0.07	$ 0.11	$ 0.15	$ 0.00	$ (0.39)	$ (2.32)	$ 0.18	$ 0.13	$ 0.33	$ (2.40)	$ 0.94
Diluted net (loss) income per share (in dollars per share)	$ 0.07	$ 0.11	$ 0.15	$ 0.00	$ (0.39)	$ (2.32)	$ 0.18	$ 0.13	$ 0.33	$ (2.40)	$ 0.93
Goodwill impairment charge						$ 311,100			$ 0	$ 311,114	$ 0

XML

Segment Reporting (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Segment Reporting
Net sales	$ 406,817	$ 410,359	$ 390,183	$ 363,091	$ 361,552	$ 363,907	$ 364,599	$ 339,371	$ 1,570,450	$ 1,429,429	$ 1,477,366
Income (loss) from operations (2)									109,468	(208,795)	158,750
Capital expenditures									5,666	8,923	13,992
Depreciation and amortization									29,256	28,352	27,980
Total assets	1,789,476				1,754,107				1,789,476	1,754,107
Goodwill	266,644				266,644				266,644	266,644	579,865
Payroll and personnel costs									10,300	10,100	6,700
Stock-based compensation expense									5,700	3,400	5,300
Professional fees									22,200		8,500
Other corporate expenses									1,200
Professional fees and other corporate expenses										6,800
Goodwill impairment charge						311,100			0	311,114	0
Americas
Segment Reporting
Goodwill impairment charge										308,403
APAC
Segment Reporting
Goodwill impairment charge						$ 2,711				2,700
Operating Segments | Americas
Segment Reporting
Net sales									1,271,893	1,142,366	1,177,496
Income (loss) from operations (2)									128,908	(213,501)	134,159
Interest Income (Expense), Nonoperating, Net									43,499	35,936	32,595
Capital expenditures									4,917	5,659	12,728
Depreciation and amortization									25,458	24,765	24,412
Total assets	1,485,453				1,436,840				1,485,453	1,436,840
Goodwill	204,183				204,183				204,183	204,183
Operating Segments | EMEA
Segment Reporting
Net sales									262,087	258,072	274,952
Income (loss) from operations (2)									17,926	25,138	43,881
Interest Income (Expense), Nonoperating, Net									5,281	3,786	4,309
Capital expenditures									533	3,165	1,143
Depreciation and amortization									3,484	3,321	3,289
Total assets	248,937				275,445				248,937	275,445
Goodwill	51,190				51,190				51,190	51,190
Operating Segments | APAC
Segment Reporting
Net sales									36,470	28,991	24,918
Income (loss) from operations (2)									2,017	(172)	1,196
Interest Income (Expense), Nonoperating, Net									100	99	(3)
Capital expenditures									216	99	121
Depreciation and amortization									314	266	279
Total assets	55,086				41,822				55,086	41,822
Goodwill	11,271				11,271				11,271	11,271
Corporate
Segment Reporting
Net sales									0	0	0
Income (loss) from operations (2)									(39,383)	(20,260)	(20,486)
Interest Income (Expense), Nonoperating, Net									0	0	0
Capital expenditures									0	0
Depreciation and amortization									0	0	0
Total assets	0				0				0	0
Goodwill	0								0
Consolidated
Segment Reporting
Net sales									1,570,450	1,429,429	1,477,366
Income (loss) from operations (2)									109,468	(208,795)	158,750
Interest Income (Expense), Nonoperating, Net									48,880	39,821	36,901
Capital expenditures									5,666	8,923	13,992
Depreciation and amortization									29,256	28,352	$ 27,980
Total assets	1,789,476				1,754,107				1,789,476	1,754,107
Goodwill	$ 266,644				$ 266,644				$ 266,644	$ 266,644
Customer concentration risk | Sales revenue
Segment Reporting
Concentration risk									11.00%	10.00%	10.00%

XML

Segment Reporting (Details 2) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Segment Reporting
Sales	$ 406,817	$ 410,359	$ 390,183	$ 363,091	$ 361,552	$ 363,907	$ 364,599	$ 339,371	$ 1,570,450	$ 1,429,429	$ 1,477,366
% of Total Sales									100.00%	100.00%	100.00%
Long-lived assets	218,209				239,547				$ 218,209	$ 239,547
Hardware
Segment Reporting
Sales									$ 732,892	$ 665,224	$ 711,177
% of Total Sales									46.70%	46.60%	48.20%
Chemicals
Segment Reporting
Sales									$ 656,959	$ 602,039	$ 600,124
% of Total Sales									41.80%	42.10%	40.60%
Electronic components
Segment Reporting
Sales									$ 114,875	$ 100,160	$ 105,207
% of Total Sales									7.30%	7.00%	7.10%
Bearings
Segment Reporting
Sales									$ 36,212	$ 34,566	$ 34,662
% of Total Sales									2.30%	2.40%	2.30%
Machined parts and other
Segment Reporting
Sales									$ 29,512	$ 27,440	$ 26,196
% of Total Sales									1.90%	1.90%	1.80%
United States of America
Segment Reporting
Sales									$ 1,173,429	$ 1,062,523	$ 1,087,691
% of Total Sales									74.70%	74.30%	73.60%
Long-lived assets	169,377				185,438				$ 169,377	$ 185,438
United Kingdom
Segment Reporting
Sales									$ 182,124	$ 179,160	$ 195,473
% of Total Sales									11.60%	12.50%	13.20%
Other foreign countries
Segment Reporting
Sales									$ 214,897	$ 187,746	$ 194,202
% of Total Sales									13.70%	13.20%	13.20%
All foreign countries
Segment Reporting
Sales									$ 397,021	$ 366,906	$ 389,675
% of Total Sales									25.30%	25.70%	26.40%
Long-lived assets	$ 48,832				$ 54,109				$ 48,832	$ 54,109