EX-99.1 8 a2222337zex-99_1.htm EX-99.1

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Exhibit 99.1

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            , 2014

Dear B/E Aerospace, Inc. Shareholder:

        We are pleased to inform you that on November 25, 2014, the board of directors of B/E Aerospace, Inc. ("B/E Aerospace") approved the spin-off of KLX Inc., or "KLX," a wholly-owned subsidiary of B/E Aerospace. Upon completion of the spin-off, B/E Aerospace shareholders will own 100% of the outstanding shares of common stock of KLX.

        We believe that separating KLX from B/E Aerospace so that it can operate as an independent, publicly-owned company is in the best interests of both B/E Aerospace and KLX. The spin-off will (1) permit each company to tailor its strategic plans and growth opportunities and allow management of each company to focus on such company's specific business characteristics; (2) provide each company greater flexibility in investing capital in a manner appropriate for its business strategy and facilitate a more company-specific allocation of capital; (3) provide each company increased strategic flexibility to make acquisitions, including through the use of its own stock, and form corporate alliances; and (4) provide investors in each company with a more targeted investment opportunity.

        The spin-off will be completed by way of a pro rata distribution of KLX common stock to our shareholders of record as of the close of business, Eastern time, on December 5, 2014, the spin-off record date. Each B/E Aerospace shareholder will receive one share of KLX common stock for every two shares of B/E Aerospace common stock held by such shareholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. Following the spin-off, shareholders may request that their shares of KLX common stock be transferred to a brokerage or other account at any time. No fractional shares of KLX common stock will be issued. Fractional shares of KLX common stock to which B/E Aerospace shareholders of record would otherwise be entitled will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of the sales will be distributed ratably to those shareholders who would otherwise have received fractional shares of KLX common stock.

        We expect your receipt of shares of KLX common stock in the distribution to be tax-free for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. You should consult your own tax advisor as to the particular tax consequences of the distribution to you, including potential tax consequences under state, local and non-U.S. tax laws.

        The distribution does not require shareholder approval, nor do you need to take any action to receive your shares of KLX common stock. Immediately following the spin-off, you will own common stock in B/E Aerospace and KLX. B/E Aerospace's common stock will continue to trade on the NASDAQ Global Select Market under the symbol "BEAV." We expect that KLX common stock will be listed on the NASDAQ Global Select Market under the symbol "KLXI."

        The enclosed information statement, which we are mailing to all B/E Aerospace shareholders, describes the spin-off in detail and contains important information about KLX, including its historical combined financial statements. We urge you to read this information statement carefully.

        We want to thank you for your continued support of B/E Aerospace. We look forward to your support of KLX in the future.

    Yours sincerely,

 

 

Amin Khoury
Chairman of the Board
B/E Aerospace, Inc.

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Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

SUBJECT TO COMPLETION, DATED NOVEMBER 25, 2014

INFORMATION STATEMENT

KLX Inc.

1300 Corporate Center Way
Wellington, Florida 33414-2105

Common Stock
(par value $0.01 per share)



        We are sending this information statement to you in connection with the separation of KLX Inc. ("KLX"), a newly-formed company, from B/E Aerospace, Inc. (collectively with its predecessors and consolidated subsidiaries, other than, for all periods following the distribution, KLX and its consolidated subsidiaries, "B/E Aerospace"), following which KLX will be an independent, publicly-owned company. As part of the separation, B/E Aerospace will undergo an internal reorganization, after which it will contribute or otherwise transfer its Consumables Management Segment businesses to KLX and complete the separation by distributing all of the shares of KLX common stock on a pro rata basis to the holders of B/E Aerospace common stock. We refer to this pro rata distribution as the "distribution" and we refer to the separation, including the internal reorganization and distribution, as the "spin-off." We expect your receipt of shares of KLX common stock in the distribution to be tax-free for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. Every two shares of B/E Aerospace common stock outstanding as of the close of business, Eastern time, on December 5, 2014, the record date for the distribution, will entitle the holder thereof to receive one share of KLX common stock. The distribution of shares will be made in book-entry form. B/E Aerospace will not distribute any fractional shares of KLX common stock. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the spin-off. The distribution will be effective as of 11:59 p.m., Eastern time, on December 16, 2014. Immediately after the distribution becomes effective, we will be an independent, publicly-owned company.

        No vote or further action of B/E Aerospace shareholders is required in connection with the spin-off. We are not asking you for a proxy. B/E Aerospace shareholders will not be required to pay any consideration for the shares of KLX common stock they receive in the spin-off, and they will not be required to surrender or exchange shares of their B/E Aerospace common stock or take any other action in connection with the spin-off.

        B/E Aerospace currently owns all of the outstanding shares of KLX common stock. Accordingly, there is no current trading market for KLX common stock. We expect, however, that a limited trading market for KLX common stock, commonly known as a "when-issued" trading market, will develop beginning on or shortly before the record date for the distribution, and we expect "regular-way" trading of KLX common stock will begin the first trading day after the distribution date. We have applied for authorization to list KLX common stock on the NASDAQ Global Select Market under the ticker symbol "KLXI."



        In reviewing this information statement, you should carefully consider the matters described in "Risk Factors" beginning on page 24 of this information statement.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

        This information statement is not an offer to sell, or a solicitation of an offer
to buy, any securities.

        The date of this information statement is        , 2014.

        This information statement was first mailed to B/E Aerospace shareholders
on or about        , 2014.


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SUMMARY

        This summary highlights information contained in this information statement and provides an overview of our company, our separation from B/E Aerospace and the distribution of KLX common stock by B/E Aerospace to its shareholders. For a more complete understanding of our business and the spin-off, you should read this entire information statement carefully, particularly the discussion set forth under "Risk Factors" beginning on page 24 of this information statement, and our audited and unaudited historical combined financial statements, our unaudited pro forma condensed financial statements and the respective notes to those statements appearing elsewhere in this information statement. Except as otherwise indicated or unless the context otherwise requires, "KLX," "we," "us" and "our" refer to KLX Inc. and its consolidated subsidiaries after giving effect to the internal reorganization and the distribution, and "B/E Aerospace" refers to B/E Aerospace, Inc., its predecessors and its consolidated subsidiaries, other than, for all periods following the distribution, KLX Inc. and its consolidated subsidiaries.

Our Company

        We believe, based on our experience in the industry, that we are the world's leading distributor and value-added service provider of aerospace fasteners and consumables, and that we offer one of the broadest ranges of aerospace hardware and consumables and inventory management services worldwide. Through organic growth and a number of strategic acquisitions beginning in 2001, we believe we have become our industry's leading provider of aerospace fasteners, consumable products and supply chain management services. Through our global facilities network and advanced information technology systems, we offer unparalleled service to commercial airliners, business jet and defense original equipment manufacturers and their subcontractors ("OEMs"), airlines, maintenance, repair and overhaul ("MRO") operators, and fixed base operators ("FBOs"). With a large and diverse global customer base, including virtually all of the world's commercial airliners, business jet and defense OEMs, OEM subcontractors, major airlines and major MRO operators across five continents, we provide access to over one million stock keeping units ("SKUs"). We serve as a distributor for every major aerospace fastener manufacturer. In order to support our vast range of custom products and services, we have invested over $100 million in proprietary information technology ("IT") systems to create a superior technology platform. Our systems support both internal distribution processes and part attributes, along with customer services, including just-in-time ("JIT") deliveries and kitting solutions, which we believe are unmatched by any competitor. This business is operated within our Aerospace Solutions Group ("ASG") segment.

        In 2013, we initiated an expansion into the energy sector. Over the past two years we have acquired seven companies in the rapidly growing business of providing technical and logistics services and related rental equipment to oil and gas exploration and production companies. As a result, we now provide a broad range of technical solutions and equipment that brings value-added resources to a new customer base, often in remote locations. Our customers include independent and major oil and gas companies that are engaged in the exploration and production ("E&P") and development of oil and gas properties in North America, including in the Northeast (Marcellus and Utica Shale), Rocky Mountains (Bakken and Piceance Basins), Southwest (Permian Basin and Eagle Ford) and Mid-Continent. This business is operated within our Energy Services Group ("ESG") segment.

 

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        The charts below illustrate the breakdown of our segment revenues for the year ended December 31, 2013 on an actual and pro forma basis to account for acquisitions through June 30, 2014.


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For the year ended December 31, 2013, we reported revenue of $1.3 billion. On a pro forma basis to give effect to acquisitions through June 30, 2014 as if they had been completed January 1, 2013, pro forma revenues for 2013 would have been $1.6 billion.

        Our ASG segment has maintained strong, collaborative, long-standing relationships with its customers. As a result of our operational and information technology systems, we have historically been able to ship approximately 60% of our orders within 24 hours of receipt of the order. Our seasoned purchasing and sales teams, coupled with state-of-the-art IT and automated parts retrieval systems, help us to sustain our reputation for rapid, on-time delivery.

        ASG sells fasteners and other consumable products to over 4,700 customers throughout the world. Its top five customers in 2013 collectively accounted for approximately 35% of ASG's 2013 revenues.

        ESG has over 120 master services agreements ("MSAs") with customers, including substantially all of the major, regional and independent E&P companies in North America. Its top five customers collectively represented approximately 41% of ESG's 2013 revenues on a pro forma basis to account for acquisitions through June 30, 2014 (approximately 45% on an actual basis).

        Our management team has extensive industry experience and company tenure. Our executive officers have an average of more than 20 years in the aerospace consumables or energy technical services industries.

Industry Overview

Aerospace Solutions Group

        According to Stax, the global market for C-class aerospace parts, which includes hardware, bearings, electronic components and machined parts for both commercial and military customers, was approximately $6.5 billion in 2010. This market is generally segmented by end customer or sales channel. Based on industry sources, we estimate that during 2013 the market for the products and services provided by ASG was approximately $4.7 billion; of this amount, we estimate that approximately 34% or $1.6 billion is served by the manufacturers of these products directly to the end customers and approximately 66% or $3.1 billion is served by stocking distributors such as ASG.

        We believe that there is a direct relationship between demand for fasteners and other consumable products and airliner fleet size, aircraft utilization and aircraft age, as well as the new aircraft production rates. All aircraft must be serviced at prescribed intervals, which drives aftermarket demand for aerospace fasteners and consumable products. ASG generated approximately 40% of its 2013 revenues from aftermarket sales to support the in-service fleet of commercial aircraft, business jets and

 

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the global fleet of military aircraft. Historically, aerospace fastener and consumable products revenues have been derived from the following sources:

    Support for commercial, business jet and military aircraft OEMs;

    Mandated maintenance and replacement of specified parts;

    Support for commercial aircraft, business jet and defense subcontractors, most of which tend to purchase through distributors; and

    Demand for structural modifications, cabin interior modifications and passenger-to-freighter conversions.

        In addition, suppliers in the aerospace, defense and related industries increasingly rely on companies such as ASG to provide a customized single point of contact for inventory management, customized invoicing, automated forecasting and usage monitoring, centralized communications and tracking across their broad and varied supply base.

        Since 2010, as the global economy began to recover from recession, increased passenger traffic volumes and the return to profitability of the global airline industry have created significant demand for commercial aircraft. The Airline Monitor forecasts a 2014 global passenger traffic increase of approximately 5.4% and projects long-term growth at an approximate compounded annual growth rate ("CAGR") of 5.7% during the 2013-2028 period. The International Air Transport Association ("IATA") expects global airline profits to improve to $18.0 billion in 2014, or 70% higher than 2013, marking the global airline industry's fifth consecutive year of profitability.

        Many airlines deferred the replacement of a large number of aging aircraft over the 2008-2011 period. This, combined with recent more efficient new aircraft introductions, the growing requirements for more aircraft to support the projected long-term traffic growth, high fuel costs and the low cost of financing new aircraft drove the global airline industry to place record orders for new aircraft. Backlogs at Airbus S.A.S. ("Airbus") and The Boeing Company ("Boeing") stood at record levels of approximately 5,546 and 5,237, respectively, at June 30, 2014. They have reported that they each have an approximate eight-year backlog. As a result, most industry analysts believe the outlook for new aircraft deliveries will be strong for the foreseeable future, which bodes well for ASG.

        Through 2011, approximately 16% of our revenues were derived from support for military aircraft. Defense spending has historically been driven by the timing of military aircraft orders and evolving government strategies and policies. We also support military aircraft MRO providers. Defense spending began to decline in 2012 as the U.S. government implemented its sequestration program. As a result, we have seen demand from our military and defense customers decline from peak levels experienced prior to 2012 of approximately 16% of total ASG revenues to approximately 14% of 2013 revenues.

        Other factors expected to affect the industries served by ASG include long-term growth in worldwide fleet of passenger aircraft, an increase in the size of the existing installed base, aging of existing fleet, and an expected improvement in the business jet market.

Energy Services Group

        The services and equipment we provide to our customers in the energy sector include wireline services, fishing (retrieval) services and equipment, pressure control and rental equipment such as frac stacks, accommodations and surface rentals and other related components. According to Spears & Associates, the market for providers of technical and logistics services and related rental equipment and other similar products and services to the oil and gas industry in North America is valued at approximately $15 billion, and growing at approximately 10% annually.

 

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        Demand for our technical services and products is determined by the number of oil and gas wells drilled and completed each year, and the level of production / work over activity in North America on existing wells.

    With 223 billion barrels of technically recoverable shale oil reserves and 2,431 trillion cubic feet of recoverable shale gas reserves contained within the United States, combined with the United States' long term goal of energy independence, E&P activity in North America has been, and is expected, to remain strong. Furthermore, any significant increase in natural gas prices is expected to expand natural gas development activity and to expand the market for our services.

    Almost all E&P companies rent or lease the equipment and services required by them to drill wells and maintain production. Drilling and completion activities require numerous products and services from time to time on an "as needed" basis.

    The decline of conventional North American oil and natural gas reservoirs, together with the development of new recovery technologies, is leading to a shift toward the drilling and development of onshore unconventional oil and natural gas resources that require more wells to be drilled and maintained. We believe the increased drilling requirements of these unconventional resources will lead to continued drilling activity.

    Technologically driven breakthroughs, including (i) continued drilling activity supported by unconventional resources, (ii) the expanding use of horizontal drilling techniques, and (iii) longer lateral lengths and increasing number of stages per well, have all created growing demand for technical services and products to support these advanced drilling activities, much of which are in remote areas with harsh environments.

    The increasing complexity of technology used in the oil and natural gas development process requires additional technicians on location during drilling and, therefore, additional workforce accommodations. In particular, the increasing trend of pursuing horizontal and directional wells as opposed to vertical wells requires additional expertise on location and, typically, longer drilling times. In some cases, up to six to nine workforce accommodation units are used during a drilling project, an increase over traditional utilization levels.

        We believe that ESG offers services and products which create value for our customers by reducing their exposure to non-productive time ("NPT") during the drilling and production phases. We provide equipment and services that assist our customers with increasing the permeability of the reservoir. We provide specialized experts and equipment to locate and remove blockages or lost equipment from the reservoir that impede drilling or production operations. We also provide accommodations and associated surface rentals such as portable light towers, generators, and pumping systems, in remote drilling sites, thereby facilitating more efficient staffing of the drilling and production activities.

        Other factors expected to affect the industry served by our ESG segment include:

        Higher Demand for Natural Gas in the United States.    We believe that natural gas will be in high demand in the United States over the next several years because of its growing popularity as a cleaner burning fuel. Additionally, according to the International Energy Agency's 2014 World Energy Outlook, North America has been at the center of the surge in global investment in recent years and will remain the region with the largest oil and gas investment requirement until 2035.

        Increasing Focus on Working Conditions and Safety.    Due to the increase in rig count and the corresponding increase in demand for labor in the oil and gas industry, our customers continue to attempt to improve living and working conditions at the wellsite to help retain employees. We believe our workforce accommodations solutions and associated surface rentals for crew quarters contribute to improved living and working conditions at the wellsite. Our customers also continue to enhance their

 

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safety procedures to help reduce injuries and to help ensure compliance with more stringent regulatory requirements.

        Continued Outsourcing of Ancillary Services.    Some of the services we provide have been historically handled by drilling contractors themselves. In many instances, these services are only ancillary to the primary activity of drilling and completing wells and represent only a minor portion of the total well drilling cost. Many drilling contractors are increasingly electing to outsource these services to suppliers who can provide high-quality and reliable services.

Our Competitive Strengths

Aerospace Solutions Group

        With a deep understanding of our customers' needs and goals, we believe that we have a strong competitive position attributable to a number of factors, including the following:

        Unmatched Depth and Breadth of Products and Services.    We provide a comprehensive line of products and services to a broad global customer base. We offer the broadest and deepest product portfolio in the world with over one million SKUs valued at over $1 billion. We are an authorized distributor for more than 200 manufacturers, including every major aerospace fastener manufacturer, and offer products for more than 3,000 other manufacturers. Through the combination of our value-added services and unmatched depth and breadth of our inventory, we offer our aerospace customers a compelling value proposition. Our services can significantly improve on-time delivery performance, enabling our customers to reduce their inventory and total acquisition cost, while at the same time decreasing the frequency of production interruptions caused by part shortages. Due to the high levels of precision and engineering standards in the aerospace industry, our customers must ensure the highest levels of quality assurance which is provided by our rigorous quality control processes. We track quality in a number of ways via quality process review, quality objectives review, process performance and product conformity, and internal and external audits, and we report on our results and necessary corrective actions in regular meetings with our dedicated quality control staff. We have been granted Quality Assurance Inspection Authority by our customers and are authorized by the Federal Aviation Administration (the "FAA") and Honeywell International Inc. ("Honeywell") to ship our products directly where they are needed for efficiency and accuracy. We meet certain ISO and FAA standards in order to fulfill customer and contractual obligations; no product is sold by us without a certificate of compliance. While our wide array of value-added services aids in developing and maintaining strong customer relationships, we believe our broad product and services offering and large customer base make us less vulnerable to the loss of any one customer or program.

        Premier Technology and Logistics Platform.    We believe we have unrivaled management information systems for optimal execution of customer orders. We have invested over $100 million in our proprietary IT systems to create a superior technology platform. We book approximately 16,000 orders daily and manage 750,000 customer bins with greater than 99% on-time delivery. Our information technology systems and highly refined automated parts retrieval systems allow us to ship approximately 60% of orders placed within 24 hours of receipt.

        Industry Leading Customer Satisfaction.    We believe we provide outstanding customer service. Customer recognition awards for 2013 included, among others: Supplier of the Year at Aviation Partners Boeing (third consecutive year), Elite Supplier Award at Korean Aviation Industry, Silver Supplier Award at Erickson, Best Supplier Award at ANA, Supplier Responsiveness Award at Nordam Group and Platinum Supplier Award at SIA Engineering Company.

        Long-standing Customer Partnerships.    Through the unmatched depth and breadth of our products and services offering, consistent on-time delivery and focus on operational excellence and customer service, we have successfully developed long-standing partnerships with several of our top

 

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ASG customers. The average length of our partnership with our top ten customers, based on expected revenues for 2014, is approximately ten years. Additionally, during the year ended December 31, 2013, we renewed or extended over 200 existing long term agreements ("LTAs") with our customers.

        Exposure to International Markets with a Balanced, Global Footprint.    We are a leading global provider of aerospace fasteners and other consumables and of logistics services to the airline and aerospace industries, serving a diverse worldwide customer base of over 4,700 customers that includes all major commercial, business jet and military OEMs, aftermarket MRO providers and airlines. In 2013, 57% of ASG's revenue was derived from North America, 28% from Europe and 15% in the rest of the world, which is primarily comprised of Asia, the Pacific Rim, and the Middle East. We serve our ASG customers with sales, marketing, customer service and program management specialists in 60 countries globally. We believe that our geographic diversification makes us less susceptible to a downturn in a specific geographic region and allows us to take advantage of regional growth trends.

Energy Services Group

        Strong Footprint in Key Energy Producing Geographies.    Following a series of acquisitions completed in 2013 and 2014, we now provide a comprehensive range of technical services and associated rental equipment to North American E&P businesses that operate in geographies with strong drilling and production economics. We have established business presence in the Bakken formation of North Dakota, Permian Basin, Eagle Ford, Haynesville, Marcellus and Utica Shales, Piceance Basin, Mid-Continent, Oklahoma, and other key energy-producing geographies. Our operations service Arkansas, Colorado, Louisiana, New Mexico, New York, North Dakota, Ohio, Oklahoma, Montana, Pennsylvania, Texas, Utah, West Virginia and Wyoming. According to the U.S. Energy Information Administration, these states account for approximately 78% of U.S. on-shore oil production and 84% of U.S. on-shore natural gas withdrawals. We believe ESG will best serve its customers, and therefore our stockholders, by maintaining a focus on domestic oil and natural gas production areas that include both the highest concentrations of existing hydrocarbons and the largest prospective acreage for new drilling activity. We believe our well-developed geographic presence, together with our mission of being a best-in-class leading provider of our specialized services and products, provides ESG with a competitive advantage. Further, we believe our thoughtful geographic presence and carefully selected range of services and products positions our business to generate superior returns on assets deployed.

        24/7 Availability of Just-in-Time Services.    Our experienced industry professionals are available 24 hours a day, seven days a week to respond to customer needs, which has helped to differentiate us from many of our competitors. We specialize in just-in-time support for customers facing critical and time-sensitive operating issues in well drilling or production, leveraging our technical expertise to resolve issues encountered by our E&P customers. As an example, we are often called to wellsites in order to remove obstructions that impede drilling activities or reduce the flow of fluids and gases, often in remote locations and under harsh conditions. These obstructions could be as far as two miles or more from the wellsite. These technical services almost always require the use of various tools or equipment from our large and growing portfolio of specialized rental equipment.

        Vast Range of High Quality Equipment.    We supply a vast range of drilling and completion rental tools and equipment for a variety of onshore services, including well stimulation and completion, wirelines for access to the well bore, fishing intervention at the wellsite, and pressure control. We routinely refurbish and recertify our equipment to maintain the quality of our service and to provide a safe working environment for our personnel. For this purpose, we maintain dedicated on-site remanufacturing shops in several of our operations facilities.

        Experienced Management Team with Proven Track Records.    Our ESG management team has an average of more than 20 years of industry experience, having served as key managers in various energy

 

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service companies, including some of the largest energy service companies in the world. Through their collective expertise, we have developed a Houston, Texas-based group of industry experts responsible for maintaining a unified infrastructure to support our operations through standardized safety environmental, maintenance processes and controls and financial and accounting policies and procedures.

        Extensive Local Market Knowledge.    We operate on a geographic basis with technical sales and product line management personnel to support the geographic leaders. As a result, our regional managers are responsible for operational execution including cost control, policy compliance and training and other aspects of quality control. With the majority of our regional managers having over 15 years of industry experience, each regional manager has extensive knowledge of the customer base, job requirements and working conditions in each local market. Our product-line managers are directly responsible for asset management, customer relationships, execution of the services provided, personnel management, technology, accident prevention and equipment maintenance, all of which are key drivers of our operating profitability. This management structure allows us to monitor operating performance on a daily basis, maintain financial, accounting and asset management controls, prepare timely financial reports and manage contractual risk.

        Standardized, Young Fleets of Specialized and Certified Equipment Create Competitive Advantages.    Through the use of newly-acquired specialized and certified equipment, we believe we are able to create a number of competitive advantages, including:

    training and operational efficiencies arising from a skilled workforce that is trained using the same equipment and procedures, thereby increasing their familiarity with operating and troubleshooting the units and facilitating a common training platform throughout our business;

    efficient maintenance due to standardized parts and components, and a reduction in equipment-driven failures due to the young age of our equipment rental portfolio; and

    higher levels of employee retention; skilled operators generally prefer to work with newer equipment which facilitates better job performance, and therefore their overall compensation.

        We believe having newer, well maintained equipment provides companies such as ours with an advantage in employee development and retention in tight employment markets such as the oil field services sector.

        Strong Safety Culture Creates Competitive Advantages and Barriers to Entry.    Safety in our ESG segment is driven top-down. All safety-related incidents are reviewed by senior management and appropriate corrective actions are taken as necessary. We conduct standardized safety and orientation training for new employees, monthly safety meetings and annual safety trainings, which are tailored to address any unique requirements of our various product and service offerings. Safety requirements for MSAs with our customers must be reviewed and verified annually. Compliance with the safety requirements set forth by the major oil companies typically requires suppliers to maintain an effective, dedicated health, safety and environment ("HSE") function. Complying with these requirements is expensive to establish, implement and maintain. Our Vice President—HSE has more than 20 years of industry experience and acts as our in-house expert on applicable HSE requirements, developing and maintaining segment-wide policies and procedures at the recently acquired companies and monitoring compliance with our MSAs. We are aligning our policies and procedures and adopting best practices as recommended by our advisors, Leggette, Brashears & Graham, Inc., an independent HSE consulting firm, and representatives from our insurance carrier. Our HSE compliance is also monitored by a third party ("ISN"), an independent, for-profit provider of an online contractor management database. ISN collects health and safety, procurement, quality and regulatory information such as HSE policies and procedures, incident logs, safety meetings, and training information. Maintaining an adequate rating with ISN is a key requirement in order to work for many of our customers. We believe some of the

 

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companies we compete against lack the infrastructure and financial resources to provide an effective safety program, thereby providing ESG with a competitive advantage and a further barrier to entry.

Our Business Strategy

Aerospace Solutions Group

        Our business strategy is to maintain a leadership position and to best serve our customers by:

        Continued Focus on Operational Excellence and Maintenance of Market Leadership.    We have built strong relationships with our existing ASG customers and suppliers through a relentless focus on operational excellence. We intend to continue providing our customers with best-in-class on-time delivery performance and quality assurance. We also intend to continue investing in our integrated, highly customized IT systems and process automation technologies. We believe that by focusing on operational excellence, we will be able to further improve our already high customer satisfaction, our industry-leading operating metrics and our global market leading position in this industry.

        Winning New Business from Existing Aerospace Consumables Customers.    We will continue our strategy of expanding our relationships with existing ASG customers by transitioning them to our JIT and kitting supply chain management services as well as expanding our programs to include additional customer sites and SKUs. We are a key partner supplying fasteners and consumables to support the launch of new aircraft programs. We will continue to support our customers in the launch of new aircraft programs by introducing new supply chain solutions that minimize costs, improve productivity, lower inventory investment and ensure a seamless supply of parts for production and aftermarket support. In addition, we have expanded, and expect to continue to expand, our product offerings with existing customers. We believe we create value for our customers through our industry leading on-time delivery capabilities, our continuous focus on quality, our global sourcing capabilities and our ability to get the parts where they need to be when the customer needs them. In doing so, we offer a competitive value proposition by reducing our customers' investments in working capital and ensuring that our customers' state-of-the art production systems are properly supported throughout their production processes. We believe we will be rewarded by our customers with incremental business as a result of delivering our high quality services, as promised, where they want it, when they want it and for a lower total acquisition cost.

        As an example, we first began supplying consumables and other products for a portion of one division of United Technologies Corporation ("UTC") in 2004. Over time, we have substantially expanded our relationship with UTC and been awarded significantly larger portions of UTC's consumables spending. While we have served certain business units of UTC over the past ten years, we did not operate under a corporate-wide LTA. In December 2013, we expanded the scope and length of our LTA, valued at approximately $950 million, to support a number of UTC's aerospace and defense operations, including UTC Aerospace Systems, Sikorsky, and Pratt & Whitney through 2022.

        Expanding our Customer Base.    We believe that our services and capabilities are attractive to potential new ASG customers and we plan to expand our customer base. For example, we have succeeded in winning business after competitors were unable to meet customer service level requirements and after customers outsourced work that was previously performed internally. Historically, we have focused our activities on the major OEMs and their subcontractors, but we believe there is a significant opportunity to expand our commercial MRO presence and that we can have a greater overall presence in the commercial airline maintenance market.

        Further Expansion into International Markets.    We have established a presence in international locations such as the United Arab Emirates, Australia, China, Singapore, India, Germany, Mexico and Italy to support new and existing ASG customers. We will continue our international expansion efforts to more effectively serve our existing customer base and to reach new customers, as the manufacture of

 

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aircraft and aircraft structures continues to become more global and interconnected. We believe that we mitigate many of the risks associated with international expansion by entering into customer contracts before we establish a new stocking facility. We believe the depth and breadth of product offerings and our logistics capabilities allow us to initially serve customers from our central warehouses, without providing on site inventories and personnel. This allows us to explore new business opportunities with minimum initial investments, allowing us to demonstrate our capabilities and the value of our services over time, prior to making significant site-specific investments. Smaller competitors without resources similar to ours are unable to do so and either must pass on these opportunities or make substantial upfront investments to try to win the business, thereby increasing the amount of risk prior to winning an LTA.

        Selectively Pursuing Strategic Acquisitions.    Our industry is fragmented and we believe that there are opportunities for continued consolidation. In January 2012, we acquired UFC Aerospace Corp. ("UFC"), a leading provider of complex supply chain management and inventory logistics solutions. In July 2012, we acquired Interturbine Projekt Management GmbH ("Interturbine"), a provider of material management logistical services to global airlines and MRO providers. We believe that we are well positioned to expand our product offering and geographical footprint through strategic acquisitions. Consistent with this strategy, we continue to evaluate potential acquisition opportunities for ASG. We seek to manage liability, integration and other risks associated with acquisitions through due diligence, favorable acquisition contracts and careful planning and execution of the integration of the acquired businesses.

Energy Services Group

        Our business strategy is to develop a leadership position in a niche of the technical services and related equipment rental for the North American onshore energy sector and to best serve our customers by:

        Extending our Services and Product Line Offerings in Each Geographical Area.    We believe we have built strong relationships with our existing ESG customers by offering a broad range of quality services and products in a safe, competent and consistent manner on a 24 hours a day, seven days a week availability basis. Through the seven acquisitions completed since August 2013, we have assembled an impressive portfolio of products, services and capabilities covering the key oil and gas geographies. Following each acquisition, we have increased capital spending to address unmet customer demand while focusing on customer service, quality of service and safety.

        Pursuing Acquisition Opportunities that Meet Our Disciplined Acquisition Criteria.    We expect to leverage our existing position in the energy services industry by strategically deploying capital to accelerate our revenue and earnings growth rates through acquisitions. We intend to pursue strategic opportunities in the highly fragmented and growing market for high quality providers of technical and logistic services and associated rental equipment. We believe that we are well positioned to expand our geographical footprint in North America as well as to expand our services and product offerings through both capital investment and strategic acquisitions to address our customers' needs, enhance the breadth and quality of our services and assets and to help to further improve stockholder value.

        Develop Market Leadership in Niche Sectors Through Operational Excellence.    Our customers are increasingly sophisticated consumers of the services we seek to provide. They require, among other things, standardized procedures and equipment, as well as health and safety practices that can be counted upon on a just-in-time basis. We compete against a large number of smaller, regional businesses who may not have either the capital investment capacity to offer the range of up-to-date equipment that we do across multiple wells and multiple geographies, nor the database and operating practices to meet the current HSE requirements. We compete based upon being a best-in-class leading

 

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provider of specialized services delivered on a consistent basis for both local customers and larger, multi-region oil & gas companies.

Growth Opportunities

Aerospace Solutions Group

        We believe that our ASG segment will benefit from the following industry trends:

        Growing Worldwide Fleet Creates Demand for Aftermarket Services and Products.    The worldwide fleet of commercial airliners is expected to continue to grow over the long-term, reflecting the expected growth in passenger travel over the 2014 through 2028 period. The size of the worldwide fleet is important to us since the proper maintenance of the fleet generates ongoing demand for spare parts, including fasteners and other consumables products, to support the active fleets of commercial aircraft, business jets and military aircraft. For the years ended December 31, 2013 and 2012, approximately 40% and 35%, respectively, of ASG's revenues were derived from the aftermarket. In addition, aftermarket revenues are generally driven by aircraft usage, and as such, have historically tended to recover more quickly than revenues from OEM production.

        Opportunity to Substantially Expand our Addressable Aerospace Consumables Markets.    Our ASG segment leverages our key strengths, including marketing and service relationships with most of the world's airlines, commercial aircraft OEMs and their suppliers, business jet OEMs and their suppliers, MRO providers and the military. Nearly 40% of ASG's demand is generated by the aftermarket. As a result, demand for aerospace hardware, fasteners, bearings, seals, gaskets, lighting products, electrical components and other consumables is expected to increase over time as the fleet expands and ages. The aerospace and military OEMs are increasingly outsourcing to subcontract manufacturers, which benefits distributors such as ASG, as many of these subcontractors tend to purchase through distributors. In addition, aerospace manufacturers, airlines, MRO providers and suppliers are increasingly seeking companies such as ASG to provide a customized single point of contact for inventory management, automated forecasting and usage monitoring, centralized communications and tracking across their supply base.

Energy Services Group

        We believe that our ESG segment will benefit from the following industry trends:

        Large, Highly Fragmented and Rapidly Growing Energy Technical Services Market.    Recent shale gas and oil discoveries and new methods of extraction have uncovered vast untapped oil and gas reserves in North America, contributed to a drilling boom and created demand for products and services to support advanced drilling activities, most of which are in remote areas with harsh environments. Currently, there are 24 states with land based drilling activity and, according to Spears & Associates, the market for providers of technical and logistics services and related rental equipment and other similar products and services to the oil and gas industry in North America is valued at approximately $15 billion, and growing at approximately 10% annually. This market segment is highly fragmented with hundreds of small companies providing technical and logistics services and related rental equipment to E&P companies. With our entry into this market through several strategic acquisitions, we are providing high quality services and products to remote drilling sites using our manufacturing, certification, IT and logistics capabilities to prepare for deployment and store, locate and deliver equipment and services as needed by our customers.

        Acquisition Opportunities.    The highly fragmented and growing oilfield technical services, equipment rental, and logistics and services industry offers numerous acquisition opportunities to expand our existing product and service offerings in the various geographies in which we currently operate. In addition, we believe we can grow organically both through product line expansions in each

 

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of the key geographies in which we are currently operating and through geographic expansions into other emerging markets within North America.

Other Information

        KLX started operations in 1974 as M&M Aerospace Hardware ("M&M"). B/E Aerospace acquired M&M in 2001. Our headquarters are located at 1300 Corporate Center Way, Suite 200, Wellington, Florida. Our telephone number is (561) 383-5100. Our website address is www.klx.com. Information contained on, or connected to, our website or B/E Aerospace's website does not and will not constitute part of this information statement or the registration statement on Form 10 of which this information statement is a part.

The Spin-Off

Overview

        On November 25, 2014, the board of directors of B/E Aerospace approved the spin-off of KLX from B/E Aerospace, following which KLX will be an independent, publicly-owned company.

        Before our spin-off from B/E Aerospace, we will enter into a Separation and Distribution Agreement, and several other agreements with B/E Aerospace related to the spin-off. These agreements will govern the relationship between us and B/E Aerospace after completion of the spin-off and provide for the allocation between us and B/E Aerospace of various assets, liabilities and obligations (including employee benefits, information technology, insurance and tax-related assets and liabilities). See "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off."

        We expect that, in connection with the spin-off, we will incur indebtedness in an amount estimated to be approximately $1.2 billion by an issuance of 5.875% senior unsecured notes due 2022 in an exempt offering that we priced on November 21, 2014. We expect to close this offering of senior unsecured notes on or about December 8, 2014. On the closing date, we will enter into an indenture governing the terms of the senior unsecured notes and the gross proceeds will be deposited into an escrow account pending consummation of the spin-off. We estimate that the net proceeds from this offering after transaction costs will be approximately $1,179 million, of which we will distribute up to $750 million to B/E Aerospace, leaving KLX with expected net proceeds of approximately $430 million. B/E Aerospace will use the funds so received, together with funds B/E Aerospace expects to raise through new borrowing, to retire all or substantially all of B/E Aerospace's existing indebtedness and pay related fees and expenses. KLX will use the net proceeds for general corporate purposes, including approximately $102 million to settle deferred payments associated with acquisitions we made in 2014. B/E Aerospace's board of directors has determined that this will result in each company being capitalized in a manner that is most appropriate given its particular business, strategy and cash flow profile.

        The distribution of KLX common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. In addition, B/E Aerospace has the right not to complete the spin-off if, at any time prior to the distribution, the board of directors of B/E Aerospace determines, in its sole discretion, that the spin-off is not in the best interests of B/E Aerospace or its shareholders, or that it is not advisable for KLX to separate from B/E Aerospace. See "The Spin-Off—Conditions to the Spin-Off."

 

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Questions and Answers about the Spin-Off

        The following provides only a summary of the terms of the spin-off. For a more detailed description of the matters described below, see "The Spin-Off."

Q:
What is the spin-off?

A:
The spin-off is the method by which KLX Inc. ("KLX" or the "Company") will separate from B/E Aerospace. To complete the spin-off, B/E Aerospace will distribute to its shareholders all of the shares of KLX common stock. We refer to this as the distribution. Following the spin-off, KLX will be a separate company from B/E Aerospace, and B/E Aerospace will not retain any ownership interest in KLX. The number of shares of B/E Aerospace common stock you own will not change as a result of the spin-off.

Q:
What is KLX?

A:
KLX is a wholly-owned direct subsidiary of B/E Aerospace whose shares will be distributed to B/E Aerospace shareholders if we complete the spin-off. After we complete the spin-off, KLX will be a public company and we will continue operations as a distributor and value-added service provider of aerospace fasteners and consumables. KLX will also continue providing technical and logistics services and associated rental equipment to oil and gas exploration and production companies in the energy sector.

Q:
What will I receive in the spin-off?

A:
As a holder of B/E Aerospace common stock, you will retain your B/E Aerospace shares and will receive one share of KLX common stock for every two shares of B/E Aerospace common stock you own as of the record date. Your proportionate interest in B/E Aerospace will not change as a result of the spin-off. For a more detailed description, see "The Spin-Off."

Q:
When is the record date for the distribution?

A:
The record date will be the close of business of the NASDAQ Global Select Market ("NASDAQ") on December 5, 2014.

Q:
When will the distribution occur?

A:
The distribution date of the spin-off is December 16, 2014. KLX expects that it will take the distribution agent, acting on behalf of B/E Aerospace, up to one week after the distribution date to fully distribute the shares of KLX common stock to B/E Aerospace shareholders. The ability to trade KLX shares will not be affected during that time.

Q:
What are the reasons for and benefits of separating KLX from B/E Aerospace?

A:
B/E Aerospace believes the spin-off will provide a number of benefits, including:

the spin-off will permit each company to tailor its strategic plans and growth opportunities and allow management of each company to focus on such company's specific business characteristics;

the spin-off will provide each company greater flexibility in investing capital in a manner appropriate for its business strategy and facilitate a more company-specific allocation of capital;

the spin-off will provide each company increased strategic flexibility to make acquisitions, including through the use of its own stock, and form corporate alliances; and

the spin-off will provide investors in each company with a more targeted investment opportunity.

 

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For a more detailed discussion of the reasons for the spin-off, see "The Spin-Off—Reasons for the Spin-Off."

Q:
What are the risks associated with the spin-off?

A:
An investment in KLX common stock is subject to both general and specific risks relating to our ASG and ESG businesses and the industries in which they operate, our business in general, the spin-off and ownership of KLX common stock.

Risks relating to the spin-off include the risk that we may not achieve some or all of the expected benefits of the spin off; the risk that we incur greater costs as an independent company than we did when we were a part of B/E Aerospace or that we have difficulty meeting our capital needs due to the loss of financial support from B/E Aerospace; and the risk we and/or B/E Aerospace and the B/E Aerospace shareholders become subject to significant tax liabilities because the distribution fails to qualify for its intended tax-free treatment.

Risks relating to the ownership of KLX common stock include the risk that an active trading market for our common stock may not develop or be sustained after the spin-off; the risk that the price of our common stock fluctuates significantly following the spin-off or substantial sales of our common stock occur in connection with the spin-off; and the risk that certain provisions in our amended and restated certificate of incorporation and bylaws, certain provisions of Delaware law and our agreements with B/E Aerospace may prevent or delay an acquisition of our Company or other strategic transactions.

The above list of risk factors is not exhaustive. Please read the information in the section entitled "Risk Factors" starting on page 24 for a more thorough description of these and other risks.

Q:
Can B/E Aerospace decide to cancel the spin-off even if all the conditions to the spin-off have been satisfied?

A:
B/E Aerospace has the right not to complete the spin-off if, at any time prior to the distribution, the board of directors of B/E Aerospace determines, in its sole discretion, that the spin-off is not in the best interests of B/E Aerospace or its shareholders, or that it is not advisable for us to separate from B/E Aerospace.

Q:
What is being distributed in the spin-off?

A:
Approximately 52,652,752 shares of KLX common stock will be distributed in the spin-off, based on the number of shares of B/E Aerospace common stock expected to be outstanding as of the record date. The actual number of shares of KLX common stock to be distributed will be calculated on December 5, 2014, the record date. The shares of KLX common stock to be distributed by B/E Aerospace will constitute all of the issued and outstanding shares of KLX common stock immediately prior to the distribution. For more information on the shares being distributed in the spin-off, see "Description of Capital Stock—Common Stock."

Q:
What do I have to do to participate in the spin-off?

A:
You do not need to take any action, although we urge you to read this entire document carefully. No shareholder approval of the distribution is required or sought. You are not being asked for a proxy. No action is required on your part to receive your shares of KLX common stock. You will not be required to pay anything for the new shares or to surrender any shares of B/E Aerospace common stock to participate in the spin-off.

 

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Q:
How will fractional shares be treated in the spin-off?

A:
Fractional shares of KLX common stock will not be distributed. Fractional shares of KLX common stock to which B/E Aerospace shareholders of record would otherwise be entitled will be aggregated and sold in the public market by the distribution agent at prevailing market prices. The distribution agent, in its sole discretion, will determine when, how and through which broker-dealers, provided that such broker-dealers are not affiliates of B/E Aerospace or KLX, and at what prices to sell these shares. The aggregate net cash proceeds of the sales will be distributed ratably to those shareholders who would otherwise have received fractional shares of KLX common stock. See "The Spin-Off—Treatment of Fractional Shares" for a more detailed explanation.

Q:
How will the spin-off affect equity awards held by B/E Aerospace employees?

A:
We will establish a separate KLX stock and incentive cash compensation plan, effective as of or shortly before the spin-off. Generally, we anticipate that the outstanding B/E Aerospace equity awards held by employees who will transfer employment to KLX will be assumed by KLX and converted to equity awards with respect to KLX common stock and the outstanding B/E Aerospace equity awards held by employees who will continue employment with B/E Aerospace will remain equity awards with respect to B/E Aerospace common stock and will be equitably adjusted. Each time-based vesting B/E Aerospace equity award will be subject to the same terms and conditions as were in effect prior to the distribution. Performance-based vesting equity awards will also be assumed and converted or adjusted in the same manner as described above, and will remain subject to the same terms and conditions as were in effect prior to the distribution, except that performance goals for any portion of the performance period after the distribution will be set by the KLX Compensation Committee for employees transferring to KLX and by the B/E Aerospace Compensation Committee for employees continuing employment with B/E. All outstanding equity awards held by Amin Khoury will be treated as though Mr. Khoury were solely an employee of B/E Aerospace following the distribution.

For more information on the treatment of equity awards, see "The Spin-Off—Treatment of Equity Awards."

Q:
What are the U.S. federal income tax consequences of the distribution to B/E Aerospace shareholders?

A:
The distribution is conditioned upon, among other matters, B/E Aerospace's receipt of an opinion of Shearman & Sterling LLP, which shall remain in full force and effect at the time of distribution, to the effect that the distribution, together with certain related transactions, will qualify as a reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended ("Code"), and such opinion shall be in form and substance satisfactory to B/E Aerospace, in its sole discretion.

B/E Aerospace expects to receive an opinion from Shearman & Sterling LLP to the effect that the distribution, together with certain related transactions, will so qualify. Accordingly, and so long as the distribution so qualifies for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income, upon the receipt of shares of KLX common stock pursuant to the distribution, except with respect to any cash received in lieu of fractional shares. For more information regarding the tax opinion and the potential U.S. federal income tax consequences to you of the distribution, see the section entitled "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution" included elsewhere in this information statement.

 

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Q:
How will I determine the tax basis I will have in the KLX common stock I receive in the distribution?

A:
Generally, for U.S. federal income tax purposes, your aggregate basis in the common stock you hold in B/E Aerospace and the KLX common stock received in the distribution (including any fractional shares in KLX common stock for which cash is received) will equal the aggregate basis of B/E Aerospace common stock held by you immediately before the distribution. This aggregate basis should be allocated between your B/E Aerospace common stock and the KLX common stock you receive in the distribution (including any fractional shares of KLX common stock for which cash is received) in proportion to the relative fair market value of each immediately following the distribution. See the section entitled "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution" included elsewhere in this information statement for more information.

You should consult your tax advisor about how this allocation will work in your situation (including a situation where you have purchased B/E Aerospace common stock on different dates or at different prices) and regarding any particular consequences of the distribution to you, including the application of state, local and foreign tax laws.

Q:
Will the KLX common stock be listed on a stock exchange?

A:
Yes. Although there is no current public market for KLX common stock, KLX has applied for authorization to list its common stock on NASDAQ under the symbol "KLXI." We anticipate that trading of KLX common stock will commence on a "when-issued" basis beginning on or shortly before the record date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. When-issued trades generally settle within four trading days after the distribution date. On the first trading day following the distribution date, any when-issued trading of KLX common stock will end and "regular-way" trading will begin. "Regular-way" trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full trading day following the date of the transaction. See "The Spin-Off—Trading Market for Our Common Stock" for more information.

Q:
Will my shares of B/E Aerospace common stock continue to trade?

A:
Yes. B/E Aerospace common stock will continue to be listed and trade on NASDAQ under the symbol "BEAV."

Q:
If I sell, on or before the distribution date, shares of B/E Aerospace common stock that I held on the record date, am I still entitled to receive shares of KLX common stock distributable with respect to the shares of B/E Aerospace common stock I sold?

A:
Beginning on or shortly before the record date and continuing through the distribution date for the spin-off, B/E Aerospace's common stock will begin to trade in two markets on NASDAQ: a "regular-way" market and an "ex-distribution" market. If you are a holder of record of shares of B/E Aerospace common stock as of the record date for the distribution and choose to sell those shares in the regular-way market after the record date for the distribution and before the distribution date, you also will be selling the right to receive shares of KLX common stock in connection with the spin-off. However, if you are a holder of record of shares of B/E Aerospace common stock as of the record date for the distribution and choose to sell those shares in the ex-distribution market after the record date for the distribution and before the distribution date, you will not be selling the right to receive shares of KLX common stock in connection with the spin-off and you will still receive shares of KLX common stock.

 

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Q:
Will the spin-off affect the trading price of my B/E Aerospace stock?

A:
Yes, we expect the trading price of shares of B/E Aerospace common stock immediately following the distribution will be lower than immediately prior to the distribution because it will no longer reflect the value of B/E Aerospace's aerospace consumables and energy technical services business. However, we cannot provide you with any assurance as to the price at which the B/E Aerospace shares will trade following the spin-off.

Q:
What are the financing plans for KLX?

A:
We expect that, in connection with the spin-off, we will incur indebtedness in an amount estimated to be approximately $1.2 billion by an issuance of senior unsecured notes, of which we will distribute up to $750 million to B/E Aerospace, leaving KLX with expected net proceeds of approximately $430 million after transaction costs. KLX will use the net proceeds for general corporate purposes, including approximately $102 million to settle deferred payments associated with acquisitions we made in 2014. We also expect to establish a $500 million secured revolving credit facility for general corporate purposes, none of which is expected to be outstanding on the distribution date.

Q:
What will the relationship be between B/E Aerospace and KLX after the spin-off?

A:
Following the spin-off, KLX will be an independent, publicly-owned company and B/E Aerospace will have no continuing stock ownership interest in KLX. In conjunction with the spin-off, KLX will have entered into a Separation and Distribution Agreement and several other agreements with B/E Aerospace for the purpose of allocating between KLX and B/E Aerospace various assets, liabilities and obligations (including employee benefits, insurance and tax-related assets and liabilities). These agreements will also govern KLX's relationship with B/E Aerospace following the spin-off. These agreements will also include arrangements for transitional services. We describe these agreements in more detail under "Certain Relationships and Related Party Transactions."

Q:
What will KLX's dividend policy be after the spin-off?

A:
KLX does not currently intend to pay dividends. KLX's dividend policy will be established by the KLX board of directors (the "Board") based on KLX's financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that the Board considers relevant. In addition, the terms of the agreements governing our new debt or debt that we may incur in the future may limit or prohibit the payments of dividends. For more information, see "Dividend Policy."

Q:
Will KLX have a stock repurchase program after the spin-off?

A:
The Board has authorized a stock repurchase program in which, after the distribution, KLX may purchase up to an aggregate of $250 million of KLX common stock. All decisions regarding future stock repurchases will be at KLX's sole discretion and will be evaluated from time to time in light of many factors, including KLX's financial condition, earnings, capital requirements and debt covenants, if any, other contractual restrictions, as well as legal requirements (including compliance with published Internal Revenue Service ("IRS") guidelines for tax-free spin-offs), regulatory constraints, industry practice and other factors that KLX may deem relevant. The stock repurchase program may be modified, extended, suspended or discontinued by KLX at any time and we cannot provide any assurances that any shares will be repurchased.

 

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Q:
Will I have appraisal rights in connection with the spin-off?

A:
As a holder of B/E Aerospace's common stock, you will not have any appraisal rights in connection with the spin-off.

Q:
Who will be the transfer agent for KLX common stock after the spin-off?

A:
After the distribution, we expect that the transfer agent for KLX's common stock will be Computershare Trust Company, N.A.

Q:
Who is the distribution agent for the spin-off?

A:
We expect that the distribution agent in connection with the spin-off will be Computershare Trust Company, N.A.

Q:
Where can I get more information?

A:
If you have any questions relating to the mechanics of the distribution, you should contact the distribution agent at:


Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Phone: (800) 733-5001


Before the spin-off, if you have any questions relating to the spin-off, you should contact B/E Aerospace at:


B/E Aerospace, Inc.
1400 Corporate Center Way,
Wellington, Florida 33414
Attention: Investor Relations
Phone: (561) 791-5000
www.investor.beaerospace.com


After the spin-off, if you have any questions relating to KLX, you should contact KLX at:


KLX Inc.
1300 Corporate Center Way, Suite 200
Wellington, Florida 33414
Attention: Investor Relations
Phone: (561) 383-5100
www.klx.com

 

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Summary of the Spin-Off

Distributing Company

  B/E Aerospace, Inc., a Delaware corporation. After the distribution, B/E Aerospace will not own any shares of KLX common stock.

Distributed Company

 

KLX Inc., a newly-formed Delaware corporation and a wholly-owned direct subsidiary of B/E Aerospace. After the spin-off, KLX will be an independent, publicly-owned company.

Distributed Securities

 

All of the shares of KLX common stock owned by B/E Aerospace, which will be 100% of KLX common stock issued and outstanding immediately prior to the distribution.

Record Date

 

The record date for the distribution is the close of business, Eastern time, on December 5, 2014.

Distribution Date

 

The distribution date is December 16, 2014.

Internal Reorganization

 

As part of the spin-off, B/E Aerospace will undergo an internal reorganization that will, among other things, result in KLX owning the operations comprising and the entities that conduct B/E Aerospace's aerospace consumables and energy technical services businesses. For more information, see the description of this internal reorganization in "The Spin-Off—Manner of Effecting the Spin-Off—Internal Reorganization."

Indebtedness and Other Financing Arrangements

 

We expect that, in connection with the spin-off, we will incur indebtedness in an amount estimated to be approximately $1.2 billion by an issuance of senior unsecured notes, of which we will distribute up to $750 million to B/E Aerospace, leaving KLX with expected net proceeds of approximately $430 million after transaction costs. KLX will use the net proceeds for general corporate purposes, including approximately $102 million to settle deferred payments associated with acquisitions we made in 2014. We also expect to establish a $500 million secured revolving credit facility for general corporate purposes, none of which is expected to be outstanding on the distribution date.

Distribution Ratio

 

Each holder of B/E Aerospace common stock will receive one share of KLX common stock for every two shares of B/E Aerospace common stock held on the record date.

 

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The Distribution

 

On the distribution date, B/E Aerospace will release the shares of KLX common stock to the distribution agent to distribute to B/E Aerospace shareholders. The shares will be distributed in book-entry form, which means that no physical share certificates will be issued. We expect that it will take the distribution agent up to one week to electronically issue shares of KLX common stock to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form. Any delay in the electronic issuance of KLX shares by the distribution agent will not affect trading in KLX common stock. Following the spin-off, shareholders who hold their shares in book-entry form may request that their shares be transferred to a brokerage or other account at any time. You will not be required to make any payment, surrender or exchange your shares of B/E Aerospace common stock or take any other action to receive your shares of KLX common stock.

Fractional Shares

 

The distribution agent will not distribute any fractional shares of KLX common stock to B/E Aerospace shareholders, but will instead aggregate all fractional shares of KLX common stock to which B/E Aerospace shareholders of record would otherwise be entitled and sell them in the public market. The distribution agent will then aggregate the net cash proceeds of the sales and distribute those proceeds ratably to those shareholders who would otherwise have received fractional shares. Shareholders' receipt of cash in lieu of fractional shares from these sales generally will result in a taxable gain or loss to those shareholders for U.S. federal income tax purposes, as described in more detail under "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution."

Conditions to the Spin-Off

 

Completion of the spin-off is subject to the satisfaction or waiver by B/E Aerospace of the following conditions:

 

the board of directors of B/E Aerospace, in its sole and absolute discretion, shall have authorized and approved the spin-off (including the internal reorganization) and not withdrawn such authorization and approval, and shall have declared the dividend of the common stock of KLX to B/E Aerospace shareholders;

 

the Separation and Distribution Agreement and each ancillary agreement contemplated by the Separation and Distribution Agreement shall have been executed by each party thereto;

 

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KLX's registration statement on Form 10, of which this information statement is a part, shall have become effective under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), no stop order suspending that effectiveness shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the Securities and Exchange Commission (the "SEC");

 

KLX common stock shall have been accepted for listing on NASDAQ or another national securities exchange approved by B/E Aerospace, subject to official notice of issuance;

 

the transfer of the aerospace consumables and energy technical services businesses to KLX (including the internal reorganization as described in "The Spin-Off—Manner of Effecting the Spin-Off—Internal Reorganization"), the issuance of KLX stock to B/E Aerospace and the payment by KLX of the cash proceeds contemplated to be paid to B/E Aerospace shall have been completed;

 

B/E Aerospace shall have received an opinion of Shearman & Sterling LLP, which shall remain in full force and effect at the time of distribution, to the effect that the distribution, together with certain related transactions, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, and such opinion shall be in form and substance satisfactory to B/E Aerospace, in its sole discretion;

 

this information statement shall have been mailed to the B/E Aerospace shareholders;

 

KLX's amended and restated certificate of incorporation (as amended and restated, the "certificate of incorporation") and amended and restated bylaws (as amended and restated, the "bylaws"), each in the form filed as exhibits to the Form 10 of which this information statement is a part, shall be in effect;

 

the Board shall consist of the individuals identified in this information statement as directors of KLX;

 

arrangements shall have been made to ensure that, except for Amin Khoury, no individual who will be an officer or employee of KLX or any of its subsidiaries immediately following the distribution will remain a director, officer or employee of B/E Aerospace or any of its non-KLX subsidiaries immediately following the distribution, and, except for Amin Khoury, no individual who will be an officer or employee of B/E Aerospace or any of its non-KLX subsidiaries immediately following the distribution will remain an officer or director of KLX or any of its subsidiaries immediately following the distribution;

 

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any debt financing contemplated to be obtained in connection with the spin-off shall have been obtained;

 

no order, injunction or decree of any governmental authority of competent jurisdiction that would prevent the consummation of the distribution shall be in effect, no other legal restraint or prohibition preventing consummation of the distribution shall be in effect and no other event outside the control of B/E Aerospace shall have occurred or failed to occur that would prevent the consummation of the distribution;

 

any material governmental approvals and other consents necessary to consummate the spin-off shall have been obtained and be in full force and effect; and

 

no event or development shall have occurred prior to the distribution that, in the judgment of the board of directors of B/E Aerospace, would result in the distribution having a material adverse effect on B/E Aerospace or its shareholders.

 

The fulfillment of these conditions will not create any obligation on B/E Aerospace's part to effect the spin-off. Except as described above, we are not aware of any material federal or state regulatory requirements that must be complied with or any material approvals that must be obtained in connection with the distribution. B/E Aerospace has the right not to complete the spin-off if, at any time prior to the distribution, B/E Aerospace's board of directors determines, in its sole discretion, that the spin-off is not in the best interests of B/E Aerospace or its shareholders, or that it is not advisable for KLX to separate from B/E Aerospace. For more information, see "The Spin-Off—Conditions to the Spin-Off."

Trading Market and Symbol

 

We have applied for authorization to list KLX common stock on NASDAQ under the ticker symbol "KLXI." We anticipate that, beginning on or shortly before the record date, trading of shares of KLX common stock will begin on a "when-issued" basis and will continue up to and including the distribution date, and we expect "regular-way" trading of KLX common stock will begin the first trading day after the distribution date. We also anticipate that, beginning on or shortly before the record date, there will be two markets in B/E Aerospace common stock: a regular-way market on which shares of B/E Aerospace common stock will trade with an entitlement to shares of KLX common stock to be distributed in the distribution, and an "ex-distribution" market on which shares of B/E Aerospace common stock will trade without an entitlement to shares of KLX common stock. For more information, see "The Spin-Off—Trading Market for Our Common Stock."

 

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Material U.S. Federal Income Tax Consequences

 

B/E Aerospace expects to receive an opinion from Shearman & Sterling LLP to the effect that the distribution, together with certain related transactions, will qualify as a reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. Accordingly, and so long as the distribution so qualifies for U.S. federal income tax purposes, no gain or loss will be recognized by a shareholder of B/E Aerospace, and no amount will be included in the income of a shareholder of B/E Aerospace, upon the receipt of KLX common stock pursuant to the distribution, except with respect to any cash received in lieu of fractional shares. For more information regarding the potential U.S. federal income tax consequences to you of the distribution, see the section entitled "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution" included elsewhere in this information statement.

Relationship with B/E Aerospace after the Spin-Off

 

We will enter into a Separation and Distribution Agreement and other agreements with B/E Aerospace related to the spin-off. These agreements will govern our relationship with B/E Aerospace after completion of the spin-off and provide for the allocation between us and B/E Aerospace of various assets, liabilities and obligations (including employee benefits, insurance and tax-related assets and liabilities). In addition, we will enter into a Transition Services Agreement and an IT Services Agreement with B/E Aerospace under which B/E Aerospace will provide us with certain services, and we will provide B/E Aerospace with certain services, on an interim basis following the distribution. We also will enter into an Employee Matters Agreement that will set forth our agreements with B/E Aerospace concerning certain employee compensation and benefit matters. Further, we will enter into a Tax Sharing and Indemnification Agreement with B/E Aerospace that will, among other things, allocate the liability for taxes incurred prior to the distribution, require us to indemnify B/E Aerospace in certain instances for taxes resulting from the distribution and certain related transactions and contain certain restrictions on us to preserve the tax-free treatment of the distribution and certain related transactions. We describe these arrangements in greater detail under "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off," and describe some of the risks of these arrangements under "Risk Factors—Risks Relating to the Spin-Off."

 

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Certain Restrictions

 

In general, under the Tax Sharing and Indemnification Agreement that we will enter into with B/E Aerospace, we will be prohibited from taking or failing to take any action that prevents the distribution and certain related transactions from being tax-free. Further, for the two-year period following the distribution, we may be prohibited, except in specified circumstances, from: (i) entering into any transaction resulting in an acquisition of our stock or our assets beyond certain thresholds, whether by merger or otherwise; (ii) merging, consolidating or liquidating; (iii) issuing equity securities beyond certain thresholds; (iv) repurchasing our common stock; and (v) ceasing to actively conduct our aerospace consumables and energy technical services businesses.

Dividend Policy

 

KLX does not currently intend to pay dividends. Our Board will establish our dividend policy based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that the Board considers relevant. In addition, the terms of the agreements governing our new debt or debt that we may incur in the future may limit or prohibit the payments of dividends. For more information, see "Dividend Policy."

Distribution Agent

 

Computershare Trust Company, N.A.

Risk Factors

 

We face both general and specific risks and uncertainties relating to our business, our relationship with B/E Aerospace and our being an independent, publicly-owned company. We also are subject to risks relating to the spin-off. You should carefully read "Risk Factors" beginning on page 24 of this information statement.

 

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RISK FACTORS

        You should carefully consider each of the following risks and uncertainties, which we believe are the principal risks that we face and of which we are currently aware, and all of the other information in this information statement. Some of the risks and uncertainties described below relate to our business, while others relate to the spin-off. Other risks relate principally to the securities markets and ownership of our common stock.

        If any of the following events actually occur, our business, financial condition or financial results could be materially adversely affected, the trading price of our common stock could decline and you could lose all or part of your investment. Additional risks and uncertainties that we do not presently know about or currently believe are not material may also adversely affect our business and operations.

Risks Relating to Our Business

Risks Relating to the Aerospace Consumables Business

We sell products to the airline industry, which is a heavily regulated industry, and the ASG 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 FAA prescribes standards and licensing requirements for aircraft components, including virtually all commercial airline and general aviation cabin interior products and licenses component repair stations within the United States. Comparable agencies, such as the European Aviation Safety Agency, the Civil Aviation Administration of China and the Japanese Civil Aviation Board, regulate these matters in other countries. Our suppliers and customers must generally be certified by such governmental agencies. 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, ASG's results of operations and financial condition may be adversely affected.

        From time to time, these regulatory agencies propose new regulations or heighten industry oversight. These new regulations generally cause an increase in costs of our suppliers and customers to comply with these regulations. 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, ASG's results of operations and financial condition may be adversely affected.

We are directly dependent upon the conditions in the airline, business jet and defense industries and an economic downturn could negatively impact our results of operations and financial condition.

        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. Although the economy has exhibited signs of recovery, global financial markets have experienced extreme volatility and disruption, which, at times, reached unprecedented levels as a result of the financial crisis affecting the banking system and participants in the global financial markets. Concerns over the tightening of the corporate credit markets, inflation, energy costs and the dislocation of the residential real estate and mortgage markets have contributed to the volatility in the global financial markets and, together with the global financial crisis, have created uncertainties for global economic conditions in the future. The airline and business jet industries are sensitive to changes in economic conditions. In 2008 and 2009, as a result of the global economic downturn, the airline industry parked aircraft, delayed new aircraft purchases and deliveries of new aircraft, deferred retrofit programs and depleted existing inventories. The business jet industry was also severely impacted by both the recession and by declining corporate profits during that period.

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        Unfavorable economic conditions have also caused reduced spending for both leisure and business travel, which has negatively affected the airline and business jet industries. According to IATA, the economic downturn, combined with the high fuel prices experienced during most of 2009, contributed to the worldwide airline industry's operating loss of approximately $4.6 billion in 2009. In addition, as a result of the decline in both traffic and airfares following the September 11, 2001 terrorist attacks and threats of future terrorist attacks, the SARS and H1N1 outbreaks, the conflicts in Iraq and Afghanistan, as well as other factors, such as increases in fuel costs and heightened competition from low-cost carriers, the world airline industry generated total operating losses of approximately $52.8 billion during the period from 2001 to 2009, which caused a significant number of airlines worldwide to declare bankruptcy or cease operations.

        The commercial airline and business jet industries could experience a difficult operating environment due to a number of factors beyond our control. As an example, the operating environment would be negatively impacted by increasing fuel prices, consolidation in the industry, changes in regulation, terrorism, safety, environmental and health concerns and labor issues. Many of these factors could have a negative impact on air travel, which could materially adversely affect ASG's operating results.

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 policy on jet fuel production, transportation and marketing make it difficult 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 was a major reduction in the availability of jet fuel or significant increases in its cost, commercial airlines will face increased operating costs. Due to the competitive nature of the airline industry, airlines are often unable to pass on future increases in fuel prices directly 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 revenue resulting from reduced airline travel. Decreases in airline profitability could decrease the demand for new commercial aircraft, resulting in delays to or reductions in deliveries of commercial aircraft that utilize the products we sell, and, as a result, although rising oil and gas prices may benefit our ESG segment, ASG's financial condition, results of operations and cash flows could be materially adversely affected.

We and our ASG customers are subject to federal, state, local, and foreign laws and regulations regarding issues of health, safety, climate change and the protection of the environment, under which we or our ASG customers may become liable for penalties, damages or costs of remediation or other corrective measures. Changes in such laws or regulations could increase our or our ASG customers' costs of doing business and adversely impact our business.

        Our operations and our ASG customers' operations are subject to stringent federal, state, local, and foreign laws and regulations, including those relating to, among other things, natural resources, wetlands, endangered species, the environment, health and safety, waste management, waste disposal and the transportation of waste and other materials. Some environmental laws and regulations may impose strict liability, joint and several liability or both. Increased costs of regulatory compliance, claims for liability or sanctions for noncompliance and related costs could cause us or our ASG customers to incur substantial costs or losses. Clean-up costs and other damages resulting from any contamination-related liabilities and costs associated with changes in and compliance with environmental laws and regulations could result in the reduction or discontinuation of our or our ASG customers' operations, and in a material adverse effect on our financial condition and results of operations.

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        For example, ASG's European operations are subject to the Registration, Evaluation, Authorisation and Restriction of Chemicals regulation ("REACH") in the European Union, which regulates the production and use of chemical substances. In July 2014, one of our German businesses, Interturbine Aviation Logistics GmbH ("ITL"), which was acquired by B/E Aerospace Systems Holding GmbH in July 2012, was informed by the German State Agency for Agriculture, Environment and Rural Areas (Landesamt für Landwirtschaft, Umwelt und ländliche Räume or the "LLUR") that it had allegedly violated certain provisions of REACH related to the import and sale of certain chemical products for the period of 2009 through 2013. We are cooperating with the LLUR and currently investigating the amounts of chemical products that were allegedly imported and sold in violation of REACH. These violations could result in an administrative monetary penalty and a disgorgement of profits from the sale of products allegedly sold in violation of REACH, which could be material. We are not currently able to determine the amount of liability, if any, that we may ultimately be found to be responsible for that is not covered by any indemnity claims against the seller of ITL.

        Laws protecting the environment generally have become more stringent over time and we expect them to continue to do so, which could lead to material increases in our and our ASG customers' costs for future environmental compliance and remediation.

Demand for ASG's products and services is closely tied to the aerospace industry, which may exhibit pronounced cyclicality.

        Demand for the products and services ASG offers is tied to the cyclical nature of the aerospace industry. During periods of economic expansion, when capital spending normally increases, we generally benefit from greater demand for our products. During periods of economic contraction, when capital spending normally decreases, we generally are adversely affected by declining demand for our products and services. Aerospace industry conditions are impacted by numerous factors over which we have no control, including political, regulatory, economic and military conditions, environmental concerns, weather conditions and fuel pricing. Any prolonged cyclical downturn could have an adverse impact on ASG's operating results.

There are risks inherent in international operations that could have a material adverse effect on ASG's business operations.

        While the majority of ASG's operations are based domestically, we have significant operations based internationally with distribution facilities in the United Kingdom, Germany and France. In addition, we sell our products to airlines all over the world. Our customers are located primarily in North America, Europe, Asia, the Pacific Rim, South America and the Middle East. As a result, 43% of ASG's revenues for the year ended December 31, 2013 were to customers located outside the United States. Volatile international economic, political and market conditions may have a negative impact on our operating results and our ability to achieve our goals.

        In addition, we have several subsidiaries in foreign countries (primarily in Europe), which have sales outside the United States. As a result, we are exposed to currency exchange rate fluctuations as a portion of our revenues and expenses are denominated in currencies other than the U.S. dollar. Approximately 14% of ASG's revenues during the year ended December 31, 2013 came from our foreign operations. 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 December 31, 2013, we reported a cumulative foreign currency translation adjustment of approximately $48.2 million in stockholders' equity as a result of foreign currency adjustments, and we may incur additional adjustments in future periods. In addition, operating results of foreign subsidiaries are translated into U.S. dollars for purposes of our statement of earnings and comprehensive income at average monthly exchange rates. Moreover, to the extent that our revenues 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 distribution

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facilities in the United Kingdom and Germany are incurred in British pounds or Euros but the related sales revenues may be 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.

        Historically, we have not engaged in hedging transactions. However, we may engage in hedging transactions in the future to manage or reduce our foreign exchange risk. Our attempts to manage our foreign currency exchange risk may not be successful and, as a result, our results of operations and financial condition could be materially adversely affected.

        Our foreign operations could also be subject to unexpected changes in regulatory requirements, tariffs and other market barriers and political, economic and social instability in the countries where we operate or sell our products and offer our services. The impact of any such events that may occur in the future could subject us to additional costs or loss of sales, which could materially adversely affect our operating results.

We are subject to a variety of risks associated with the sale of our products and services to the U.S. government directly and indirectly through our defense customers, which could negatively affect our revenues and results of operations.

        As a supplier directly to the defense industry and as a subcontractor to suppliers of the U.S. government, we face risks that are specific to doing business with the U.S. government. The U.S. government has the ability to unilaterally suspend the award of new contracts to us in the event of any violations of procurement laws, or reviews of the same. It could also reduce the value of our existing contracts as well as audit our costs and fees. Many of our U.S. government contracts, or our customers' contracts with the United States government may be terminated for convenience by the government. Termination-for-convenience provisions typically provide that we would recover only our incurred or committed costs, settlement expenses and profit on the work that we completed prior to termination. In such an event, we would not earn the revenue that we would have originally anticipated from such a terminated contract.

        Government reviews can be costly and time consuming, and could divert our management resources away from running our business. As a result of such reviews, we could be required to provide a refund to the U.S. government or we could be asked to enter into an arrangement whereby our prices would be based on cost, or the U.S. government could seek to pursue alternative sources of supply for our products. These actions could have a negative effect on our management efficiency and could reduce our revenues and results of operations. Additionally, as a U.S. government contractor or subcontractor, we are subject to federal laws governing suppliers to the U.S. government, including potential application of the False Claims Act.

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 December 30, 2013, approximately 14% of ASG's revenues were related to support the military markets, as compared with approximately 16% of ASG's revenues in 2012 and 2011. The military market is highly dependent upon government budgetary 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, including pursuant to mandated spending reductions under the so-called "sequestration" process, 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.

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        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 results of operations and financial condition.

We do not have guaranteed future sales of the products we sell and we generally take the risk of cost overruns when we enter into JIT contracts and LTAs with our customers, 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.

        Our JIT contracts and LTAs are long-term, generally fixed-price agreements with no guarantee of future customer purchase requirements, and may be terminated for convenience on short notice by our customers, often without meaningful penalties, provided that we are reimbursed for the cost of any inventory specifically procured for the customer. 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 in the event that our customers do not place orders consistent with our forecasts. We also 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, which may increase above our established prices at the time we entered into the customer contract and established prices for parts 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, product costs increase unexpectedly, we experience high start-up costs on new contracts or our contracts are terminated, our results of operations and financial condition could be negatively affected.

Our international operations require us to comply with anti-corruption laws and regulations of the U.S. government and various international 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 and our subsidiaries to comply with the laws and regulations of the U.S. government and various international jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to liabilities. These laws and regulations apply to companies, individual directors, officers, employees and agents, and may restrict our operations, trade practices, investment decisions and partnering activities. In particular, our international operations are subject to U.S. and foreign anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (the "FCPA"). The FCPA prohibits us from providing anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment, and requires companies to maintain adequate record-keeping and internal accounting practices to accurately reflect the transactions of the company. As part of our business, we deal with state-owned business enterprises, the employees and representatives of which may be considered foreign officials for purposes of the FCPA. In addition, some of the international locations in which we operate lack a developed legal system and have elevated levels of corruption. As a result of the above activities, we are exposed to the risk of violating anti-corruption laws.

        We are also subject to International Traffic in Arms Regulation ("ITAR"). ITAR requires export licenses from the U.S. Department of State for products shipped outside the United States that have military or strategic applications. Violations of these legal requirements are punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts as well as other remedial measures. We have established policies and procedures designed to assist us and our personnel to comply with applicable U.S. and international laws and regulations. However, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business, financial condition and results of operations.

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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 on 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 results of operations and financial condition.

ASG has a significant backlog that may be deferred or may not be entirely realized.

        As of December 31, 2013, ASG had approximately $985 million of booked backlog. Given the nature of our industry and customers, there is a risk that orders forming part of our backlog may be cancelled or deferred due to economic conditions or fluctuations in our customers' business needs, purchasing budgets or inventory management practices.

Risks Relating to the Energy Technical Services Business

We serve customers who are involved in drilling for and production of oil and natural gas. Demand for services in the oil and natural gas industry is cyclical and any adverse developments affecting this industry could have a material adverse effect on our financial condition and results of operations.

        Our revenues in the ESG segment are primarily generated from customers who are engaged in drilling for and production of oil and natural gas. Demand for services in the oil and natural gas industry is cyclical, and we depend on our customers' willingness to make capital and operating expenditures to explore for, develop and produce oil and natural gas in the United States. Additionally, developments that adversely affect oil and natural gas drilling and production services could reduce our customers' willingness to make such expenditures and materially reduce our customers' demand for our products and services, resulting in a material adverse effect on our results of operations and financial condition.

        The predominant factor that would reduce demand for ESG products and services would be a reduction in land-based drilling activity in the continental United States. Commodity prices, and market expectations of potential changes in these prices, may significantly affect this level of activity, as well as the rates paid for our services. Worldwide political, economic and military events as well as natural disasters and other factors beyond our control contribute to oil and natural gas price levels and volatility and are likely to continue to do so in the future. Natural gas prices declined significantly in late 2011 and 2012 to the lowest level in recent years, and while prices have risen in recent months from their lows, they remain depressed as compared to historical levels. For example, the twelve-month average New York Mercantile Exchange ("NYMEX") price of natural gas futures contracts per MMBtu was $4.17, $3.54 and $3.24 as of December 31, 2013, 2012 and 2011, respectively. Oil prices have fluctuated significantly in recent years, reaching record highs above $100 per barrel in 2008, dropping below $40 per barrel in 2009 and trading on the NYMEX at a West Texas Intermediate (WTI) spot price of $102.71 per barrel as of May 30, 2014. Actual or anticipated declines or volatility in the price of natural gas, oil or natural gas liquids, could have an adverse impact on the level of drilling, exploration and production activity, which could materially and adversely affect the demand for our services and the rates we are able to charge for our services in our ESG segment, although declines in the price of jet fuel may benefit our ASG segment. We negotiate the rates payable under our contracts based on prevailing market rates and rate books which are periodically updated and, as such, the rates we are able to charge will fluctuate with market conditions. However, higher commodity prices do not necessarily translate into increased drilling activity because our customers' expectations of future prices also influence their activity. Additionally, in response to low natural gas

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prices, a number of third-party E&P companies have reduced dry natural gas drilling and production and redirected their activities and capital toward liquids-rich plays that are currently more economical. Overall reductions in the demand for oilfield services could occur, which would adversely affect the rates that we are able to charge, and the demand for our services. Additionally, we may incur costs and have downtime any time our customers' activities are refocused towards different drilling regions.

        Another factor that would reduce the level of drilling and production activity is increased government regulation of that activity. Our customers' drilling and production operations are subject to extensive federal, state, local and foreign laws and government regulations concerning emissions of pollutants and greenhouse gases; hydraulic fracturing; the handling of oil and natural gas and byproducts thereof and other materials and substances used in connection with oil and natural gas operations, including drilling fluids and wastewater; well spacing; production limitations; plugging and abandonment of wells; unitization and pooling of properties; and taxation. More stringent legislation or regulation (including public pressure on governmental bodies and regulatory agencies to regulate the oil and natural gas industry), a moratorium on drilling or hydraulic fracturing, or increased taxation of oil and natural gas drilling activity could directly curtail such activity or increase the cost of drilling, resulting in reduced levels of drilling activity and therefore reduced demand for our ESG products and services.

        Spending by E&P companies can also be impacted by conditions in the capital markets. Limitations on the availability of capital, or higher costs of capital, for financing expenditures may cause E&P companies to make additional reductions to capital budgets in the future even if oil prices remain at current levels or natural gas prices increase from current levels. Any such cuts in spending would likely curtail drilling and completion programs as well as discretionary spending on wellsite services, which may result in a reduction in the demand for our services, the rates we can charge and the utilization of our services. Moreover, reduced discovery rates of new oil and natural gas reserves, or a decrease in the development rate of reserves in our market areas, whether due to increased governmental regulation, including with respect to environmental matters, limitations on exploration and drilling activity or other factors, could also have an impact on our business, even in a stronger oil and natural gas price environment. An adverse development in any of these areas could have an adverse impact on our customers' operations or financial condition, which could in turn result in reduced demand for our products and services.

        Other factors over which we have no control that could affect our customers' willingness to undertake drilling and completion spending activities include:

    domestic and foreign supply of and demand for oil and natural gas;

    the availability, pricing and perceived safety of pipeline, trucking, train storage and other transportation capacity;

    lead times associated with acquiring equipment and availability of qualified personnel;

    the expected rates of decline in production from existing and prospective wells;

    the discovery rates of new oil and natural gas reserves;

    adverse weather conditions, including hurricanes, that can affect oil and natural gas operations over a wide area;

    oil refining capacity;

    merger and divestiture activity among oil and gas producers;

    the availability of water resources and suitable proppants in sufficient quantities and on acceptable terms for use in hydraulic fracturing operations;

    the availability, capacity and cost of disposal and recycling services for used hydraulic fracturing fluids;

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    the political environment in oil and natural gas producing regions, including uncertainty or instability resulting from civil disorder, terrorism or war;

    advances in exploration, development and production technologies or in technologies affecting energy consumption; and

    the price and availability of alternative fuels and energy sources.

Any future decreases in the rate at which oil or natural gas reserves are discovered or developed could decrease the demand for our energy technical services.

        Reduced discovery rates of new oil and natural gas reserves, or a decrease in the development rate of reserves, in our market areas, whether due to increased governmental regulation, limitations on exploration and drilling activity or other factors, could have a material adverse impact on our financial condition and results of operations even in a stronger oil and natural gas price environment.

Conservation measures and technological advances could reduce demand for oil and natural gas.

        Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, technological advances in fuel economy and energy generation devices could reduce demand for oil and natural gas. We cannot predict the impact of the changing demand for oil and natural gas services, and any major changes may have a material adverse effect on ESG's results of operations and financial condition.

Delays by us or our ESG customers in obtaining permits or the inability by us or our ESG customers to obtain or renew permits could impair our business.

        We and our ESG customers are required to obtain permits from one or more governmental agencies in order to perform certain activities. Such permits are typically required by state agencies but can also be required by federal and local governmental agencies. The requirements for such permits vary depending on the type of operations, including the location where our ESG customers' drilling and completion activities will be conducted. As with all governmental permitting processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit to be issued and the conditions which may be imposed in connection with the granting of the permit. Certain regulatory authorities have delayed or suspended the issuance of permits while the potential environmental impacts associated with issuing such permits can be studied and appropriate mitigation measures evaluated. Permitting delays, an inability to obtain or renew permits or revocation of our or our ESG customers' current permits could cause a loss of revenue and could materially and adversely affect our results of operations and financial condition.

Our ESG business involves many hazards and operational risks, and we are not insured against all the risks we face.

        ESG's operations are subject to many hazards and risks, including the following:

    accidents resulting in serious bodily injury and the loss of life or property;

    liabilities from accidents or damage by our equipment;

    pollution and other damage to the environment;

    well blow-outs, the uncontrolled flow of natural gas, oil or other well fluids into or through the environment, including onto or into the ground or into the atmosphere, groundwater, surface water or an underground formation;

    fires and explosions;

    mechanical or technological failures;

    spillage handling and disposing of materials;

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    adverse weather conditions; and

    failure of our employees to comply with our internal environmental, health and safety guidelines.

        If any of these hazards materialize, they could result in suspension of operations, termination of contracts without compensation, damage to or destruction of our equipment and the property of others, or injury or death to our personnel or third parties and could expose us to substantial liability or losses. The frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators. In addition, these risks may be greater for us upon the acquisition of another company that has not allocated significant resources and management focus to safety and has a poor safety record.

        We are not fully insured against all risks inherent in our business. For example, although we are insured for environmental pollution resulting from certain environmental accidents that occur on a sudden and accidental basis, we may not be insured against all environmental accidents or events that might occur, some of which may result in toxic tort claims. If a significant accident or event occurs for which we are not adequately insured, it could adversely affect our financial condition and results of operations. Furthermore, we may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market conditions, premiums and deductibles for certain of our insurance policies may substantially increase. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage.

Our ESG business may be adversely affected by a deterioration in general economic conditions or a weakening of the broader energy industry.

        A prolonged economic slowdown, another recession in the United States, adverse events relating to the energy industry and local, regional and national economic conditions and factors, particularly a slowdown in the E&P industry, could negatively impact our ESG operations and therefore adversely affect our results. The risks associated with our business are more acute during periods of economic slowdown or recession because such periods may be accompanied by decreased spending by our customers.

We participate in a capital-intensive industry, and may need to obtain additional capital or financing to fund expansion of our asset base, which could increase our financial leverage, or we may not be able to finance our capital needs.

        In order to expand our ESG asset base, we may need to make significant capital expenditures. If we do not make sufficient or effective capital expenditures, we will be unable to organically expand our business operations. These expenditures may be significant because assets in our industry require significant capital to purchase and modify.

        We intend to rely primarily on cash flows from operating activities and borrowings under the $500 million secured revolving credit facility that we expect to enter into in connection with the spin-off to fund our capital expenditures. If our cash flows from operating activities and borrowings under the secured revolving credit facility are not sufficient to fund our capital expenditures, we would be required to fund these expenditures through the issuance of additional debt or equity or pursue alternative financing plans, such as refinancing or restructuring our debt, selling assets or reducing or delaying acquisitions or capital investments, such as planned upgrades or acquisitions of equipment and refurbishments of equipment, even if previously publicly announced.

        The terms of debt instruments that we will incur in connection with the spin-off and any future debt instruments may restrict us from adopting some of these alternatives. If debt and equity capital or alternative financing plans are not available on favorable terms or at all, we would be required to curtail our capital spending, and our ability to sustain or improve our profits may be adversely affected. Our ability to refinance or restructure our debt will depend on the condition of the capital markets and our financial condition at such time, among other things. Any refinancing of our debt could be at

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higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. Moreover, our separation from B/E Aerospace could lead to a deterioration of our credit profile, could increase our costs of borrowing money and limit our access to the capital markets and commercial credit. In addition, incurring additional debt may significantly increase our interest expense and financial leverage, and issuing common stock may result in significant dilution to our current shareholders.

Shortages or increases in the costs of the equipment we use in our operations could adversely affect our operations in the future.

        We generally do not have specialized tools, trucks, or long-term contracts in place that provide for the delivery of equipment, including, but not limited to, replacement parts and other equipment. We could experience delays in the delivery of the equipment that we have ordered and its placement into service due to factors that are beyond our control. New federal regulations regarding diesel engines, demand by other oilfield services companies and numerous other factors beyond our control could adversely affect our ability to procure equipment that we have not yet ordered or cause the prices of such equipment to increase. Price increases, delays in delivery and interruptions in supply may require us to increase capital and repair expenditures and incur higher operating costs. Each of these could have a material adverse effect on our financial condition and results of operations.

We are dependent on a small number of suppliers for key goods and services that we use in our operations.

        We do not have long term contracts with third party suppliers of many of the goods and services that we use in large volumes in our ESG operations, including manufacturers of accommodations units, rental and fishing tools, chargers and other tools and equipment used in our operations. Especially during periods in which oilfield services are in high demand, the availability of certain goods and services used in our industry decreases and the price of such goods and services increases. We are dependent on a small number of suppliers for key goods and services. During the twelve months ended December 31, 2013, based on total purchase cost, our ten largest suppliers of goods and services represented approximately 29% of all such purchases. Our reliance on such suppliers could increase the difficulty of obtaining such goods and services in the event of a shortage in our industry or cause us to pay higher prices. Price increases, delays in delivery and interruptions in supply may require us to incur higher operating costs. Each of these could have a material adverse effect on our results of operations and financial condition.

Our inability to develop, obtain or implement new technology may cause us to become less competitive.

        The energy technical services industry is subject to the introduction of new drilling and completion techniques and services using new technologies, some of which may be subject to patent protection or costly to obtain. As competitors and others use or develop new technologies in the future, we may be placed at a competitive disadvantage if we fail to keep pace with technological advancements within our industry. Furthermore, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost. Some of our competitors have greater financial, technical and personnel resources that may allow them to enjoy technological advantages and implement new technologies before we can. We cannot be certain that we will be able to implement new technologies or products on a timely basis or at an acceptable cost. Thus, limits on our ability to effectively use and implement new and emerging technologies may have a material adverse effect on our results of operations and financial condition.

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Oilfield anti-indemnity provisions enacted by many states may restrict or prohibit a party's indemnification of us.

        We typically enter into agreements with our ESG customers governing the provision of our services, which usually include certain indemnification provisions for losses resulting from operations. These agreements may require each party to indemnify the other against certain claims regardless of the negligence or other fault of the indemnified party; however, many states place limitations on contractual indemnity agreements, particularly agreements that indemnify a party against the consequences of its own negligence. Furthermore, certain states, including Louisiana, New Mexico, Texas and Wyoming, have enacted statutes generally referred to as "oilfield anti-indemnity acts" expressly prohibiting certain indemnity agreements contained in or related to oilfield services agreements. Such oilfield anti-indemnity acts may restrict or void a party's indemnification of us, which could have a material adverse effect on our results of operations and financial condition.

Changes in trucking regulations may increase our transportation costs and negatively impact our results of operations.

        For the transportation and relocation of our oilfield services equipment, we operate trucks and other heavy equipment. Therefore, we are subject to regulation as a motor carrier by the U.S. Department of Transportation and by various state agencies, whose regulations include certain permit requirements of highway and safety authorities. These regulatory authorities exercise broad powers over our trucking operations, generally governing such matters as the authorization to engage in motor carrier operations, safety, equipment testing and specifications and insurance requirements. The trucking industry is subject to possible regulatory and legislative changes that may impact our operations, such as changes in fuel emissions limits, the hours of service regulations that govern the amount of time a driver may drive or work in any specific period, limits on vehicle weight and size and other matters. On May 21, 2010, President Obama signed an executive memorandum directing the National Highway Traffic Safety Administration (the "NHTSA") and the U.S. Environmental Protection Agency (the "EPA") to develop new, stricter fuel efficiency standards for medium- and heavy-duty trucks. On September 15, 2011, the NHTSA and the EPA published regulations, further amended on August 16, 2013 that regulate fuel efficiency and greenhouse gas emissions from medium- and heavy-duty trucks, beginning with vehicles built for model year 2014. As a result of these regulations, we may experience an increase in costs related to truck purchases or rentals and maintenance, an impairment of equipment productivity, a decrease in the residual value of these vehicles and an increase in operating expenses. Proposals to increase federal, state or local taxes, including taxes on motor fuels, are also made from time to time, and any such increase would increase our operating costs. We cannot predict whether, or in what form, any legislative or regulatory changes applicable to our trucking operations will be enacted and to what extent any such legislation or regulations could increase our costs or otherwise adversely affect our results of operations and financial condition.

Changes in laws or government regulations regarding hydraulic fracturing could increase our customers' costs of doing business, limit the areas in which our customers can operate and reduce oil and natural gas production by our customers, which could adversely impact our business.

        The adoption of any future federal, state or local laws or implementing regulations imposing reporting obligations on, or limiting or banning, the hydraulic fracturing process could make it more difficult to complete natural gas and oil wells and could have a material adverse impact on ESG's results of operations and financial condition. Presently, hydraulic fracturing is regulated primarily at the state level, typically by state oil and natural gas commissions and similar agencies. Several states have either adopted or proposed laws and/or regulations to require oil and natural gas operators to disclose chemical ingredients and water volumes used to hydraulically fracture wells, in addition to more stringent well construction and monitoring requirements. The EPA is conducting a study of the

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potential impacts of hydraulic fracturing activities on drinking water. This study or other studies may be undertaken by the EPA or other governmental authorities, depending on their results, could spur initiatives to regulate hydraulic fracturing. If new federal, state or local laws or regulations that significantly restrict hydraulic fracturing are adopted, such legal requirements could result in delays, eliminate certain drilling activities and make it more difficult or costly for our customers to perform fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could reduce oil and natural gas exploration and production activities by our customers and, therefore, adversely affect our business. Such laws or regulations could also materially increase our costs of compliance and doing business by more strictly regulating how hydraulic fracturing wastes are handled or disposed.

We and our ESG customers are subject to federal, state and local laws and regulations regarding issues of health, safety, climate change and the protection of the environment, under which we or our customers may become liable for penalties, damages or costs of remediation or other corrective measures. Changes in such laws or regulations could increase our or our customers' costs of doing business and adversely impact our business.

        Our operations and our ESG customers' operations are subject to stringent federal, state, and local laws and regulations, including those relating to, among other things, protection of natural resources, wetlands, endangered species, the environment, health and safety, waste management, waste disposal and the transportation of waste and other materials. Many of the facilities that are used for our ESG operations are leased, and such leases include varying levels of indemnity obligations to the landlord for environmental matters related to our use and occupation of such facilities. Our ongoing operations and our ESG customers' operations pose risks of environmental liability, including leakage from operations to surface or subsurface soils, surface water or groundwater. Some environmental laws and regulations may impose strict liability, joint and several liability, or both. Additionally, an increase in regulatory requirements on oil and gas exploration and completion activities could significantly delay or interrupt our ESG customers' operations. Increased costs of regulatory compliance, claims for liability or sanctions for noncompliance and related costs could cause us or our ESG customers to incur substantial costs or losses. Clean-up costs and other damages resulting from any contamination-related liabilities and costs associated with changes in and compliance with environmental laws and regulations could result in the reduction or discontinuation of our or our ESG customers' operations, and in a material adverse effect on our financial condition and results of operations.

        The U.S. Congress has considered adopting legislation to reduce emissions of greenhouse gases, or GHGs, and almost one-half of the states have already taken legal measures to reduce emissions of GHGs. The EPA has begun adopting and implementing regulations to restrict emissions of GHGs under existing provisions of the Clean Air Act. Although it is not possible at this time to estimate how potential future laws or regulations addressing GHG emissions could impact our business, any future federal, state or local laws or regulations that may be adopted to address GHG emissions in areas where our customers operate could require our customers to incur increased compliance and operating costs. Regulation of GHGs could also result in a reduction in demand for and production of oil and natural gas, which would result in a decrease in demand for our services. Moreover, incentives to conserve energy or use alternative energy sources could reduce demand for oil and natural gas.

        Laws protecting the environment generally have become more stringent over time and we expect them to continue to do so, which could lead to material increases in our and our ESG customers' costs for future environmental compliance and remediation.

We may be required to assume responsibility for environmental and other liabilities of companies we have acquired or will acquire.

        We may incur liabilities in connection with environmental conditions currently unknown to us relating to our existing, prior or future operations or those of predecessor companies whose liabilities

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we may have assumed or acquired. We also could be subject to third-party and governmental claims with respect to environmental matters, including claims under the Comprehensive Environmental Response, Compensation and Liability Act in instances where we are identified as a potentially responsible party. We believe that indemnities provided to us in certain of our pre-existing acquisition agreements may cover certain environmental conditions existing at the time of the acquisition, subject to certain terms, limitations and conditions. However, if these indemnification provisions terminate or if the indemnifying parties do not fulfill their indemnification obligations, we may be subject to liability with respect to the environmental matters that those indemnification provisions address.

Increased labor costs or the unavailability of skilled workers could hurt our operations.

        We are dependent upon a pool of available skilled employees to operate and maintain our business. We compete with other oilfield services businesses and other similar employers to attract and retain qualified personnel with the technical skills and experience required to provide the highest quality service. The demand for skilled workers is high and the supply is limited, and a shortage in the labor pool of skilled workers or other general inflationary pressures or changes in applicable laws and regulations could make it more difficult for us to attract and retain personnel and could require us to enhance our wage and benefits packages thereby increasing our operating costs.

        Although our employees are not covered by a collective bargaining agreement, union organizational efforts could occur and, if successful, could increase our labor costs. A significant increase in the wages paid by competing employers or the unionization of groups of our employees could result in increases in the wage rates that we must pay. Likewise, laws and regulations to which we are subject, such as the Fair Labor Standards Act, which governs such matters as minimum wage, overtime and other working conditions, can increase our labor costs or subject us to liabilities to our employees. We cannot assure you that labor costs will not increase. Increases in our labor costs or unavailability of skilled workers could impair our capacity and diminish our profitability, having a material adverse effect on our business, financial condition and results of operations.

General

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

        The markets in which we operate are highly competitive. Since we sell our ASG segment products around the world, we face competition in the aerospace solutions market from both U.S. and non-U.S. companies. We believe that the principal competitive factors in this industry include the ability to provide superior customer service and support, on-time delivery, sufficient inventory availability, competitive pricing and an effective quality assurance program.

        In terms of the energy technical services market, price competition, equipment availability, location and suitability, experience of the workforce, safety records, reputation, operating integrity and condition of the equipment are all factors used by customers in awarding contracts. Our competitors are numerous, and many have more financial and technological resources. Contracts are traditionally awarded on the basis of competitive bids or direct negotiations with customers. The competitive environment has intensified as recent mergers among E&P companies have reduced the number of available ESG customers. The fact that certain oilfield services equipment is mobile and can be moved from one market to another in response to market conditions heightens the competition in the industry. In addition, any increase in the supply of hydraulic fracturing fleets could have a material adverse impact on market prices. This increased supply could also require higher capital investment to keep our services competitive.

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        Some of our competitors may have greater financial, technical, marketing and personnel resources than we do. Our future success and profitability will partly depend upon our ability to keep pace with our customers' demands for awarding contracts.

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 significant customers change from year to year, in the case of ASG, depending on the level of overhaul, maintenance, repair and refurbishment activity and the level of new aircraft purchases, and in the case of ESG, depending on the level of E&P activity and the use of our services. During 2013 and 2012, Boeing, a customer in our ASG segment, accounted for 10% and 12%, respectively, of our combined revenues. During 2013, another customer accounted for 10% of our combined revenues. During 2012, a third customer accounted for 10% of our combined revenues. No other individual customers accounted for more than 10% of our combined revenues during 2013 and 2012, and during 2011, no single customer accounted for more than 10% of our combined revenues.

        ASG's top five customers for 2013 together accounted for approximately 35% of ASG's 2013 revenues. ESG's top five customers for 2013 together accounted for approximately 41% of ESG's 2013 revenues on a pro forma basis to account for acquisitions through June 30, 2014 (approximately 45% on an actual basis).

        A reduction in purchasing our products or services by or loss of one of our larger customers for any reason, such as changes in manufacturing or drilling practices, loss of a customer as a result of the acquisition of such customer by a purchaser who, in the case of ASG, does not fully utilize a distribution model, or who uses a competitor, in-sourcing by customers, a transfer of business to a competitor, an economic downturn, insolvency of a customer, failure to adequately service our clients, decreased production or a strike, could have a material adverse effect on our financial condition and results of operations.

We may be unable to effectively and efficiently manage our inventories and/or our equipment fleet as we expand our business, which could have an adverse effect on our financial condition.

        We have substantially expanded the size, scope and nature of our business through acquisitions and organic means, resulting in an increase in the breadth of our product offerings and an expansion of our business geographically. Business expansion places increasing demands on us to increase the inventories that we carry and/or our equipment fleet. We must anticipate demand well out into the future in order to service our extensive customer base. The inability to effectively and efficiently manage our inventories to meet current and future needs of our customers, which may vary widely from what is originally forecast due to a number of factors beyond our control, could have an adverse effect on our results of operations and financial condition.

If suppliers are unable to supply us with the products we sell in a timely manner, in adequate quantities and/or at a reasonable cost, 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.

        We depend on manufacturing firms to support our operations through the timely supply of products. Our suppliers may experience capacity constraints that may result in their inability to supply us with products in a timely fashion, with adequate quantities or at a desired price. Factors affecting the manufacturing sector can include labor disputes, general economic issues, and changes in raw material and energy costs. Natural disasters such as earthquakes or hurricanes, as well as political instability and terrorist activities, may negatively impact the production or delivery capabilities of our suppliers as well. These factors could lead to increased prices for our inventory, curtailment of supplies

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and the unfavorable allocation of product by our suppliers, which could reduce our revenues and profit margins and harm our customer relations. Significant disruptions in our supply chain could negatively impact our results of operations and financial condition.

Increased leverage could adversely impact our business and results of operations.

        We may incur additional debt under our new $500 million secured revolving credit facility or otherwise to finance our operations or for future growth, including funding acquisitions. A high degree of leverage could have important consequences to us. For example, it could:

    increase our vulnerability to adverse economic and industry conditions;

    require us to dedicate a substantial portion of cash from operations to the payment of debt service, thereby reducing the availability of cash to fund working capital, capital expenditures and other general corporate purposes;

    limit our ability to obtain additional financing for working capital, capital expenditures, general corporate purposes or acquisitions;

    place us at a disadvantage compared to our competitors that are less leveraged; and

    limit our flexibility in planning for, or reacting to, changes in our business and in our industry.

We cannot ensure that any future acquisitions will be successful in delivering expected performance post-acquisition, which could have a material adverse effect on our financial condition.

        Our business was created largely through a series of acquisitions. We may consider future acquisitions, some of which could be material to us. We explore and conduct discussions with many third parties regarding possible acquisitions. Our ability to continue to achieve our goals may depend upon our ability to effectively identify attractive businesses, access financing sources on acceptable terms, negotiate favorable transaction terms and successfully consummate and integrate any businesses we acquire, achieve cost efficiencies and to manage these businesses as part of our company.

        Our acquisition activities may involve unanticipated delays, costs and other problems. If we encounter unanticipated problems with one of our acquisitions, our senior management may be required to divert attention away from other aspects of our business. Additionally, we may fail to consummate proposed acquisitions or divestitures, after incurring expenses and devoting substantial resources, including management time, to such transactions. Acquisitions also pose the risk that we may be exposed to successor liability relating to actions by an acquired company and its management before the acquisition. The due diligence we conduct in connection with an acquisition, and any contractual guarantees or indemnities that we receive from the sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities. Additionally, depending upon the acquisition opportunities available, we also may need to raise additional funds through the capital markets or arrange for additional bank financing in order to consummate such acquisitions or to fund capital expenditures necessary to integrate the acquired business. We also may not be able to raise the substantial capital required for acquisitions and integrations on satisfactory terms, if at all.

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

        Our total assets reflect substantial intangible assets. At December 31, 2013, goodwill and identified intangibles, net, represented approximately 46% of our total assets. Intangible assets consist principally of goodwill and other identified intangible assets associated with our acquisitions. On at least an annual basis, we will assess whether there has been an impairment in the value of goodwill and other intangible assets with indefinite lives. If the carrying value of the tested asset exceeds its estimated fair

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value, impairment is deemed to have occurred. In this event, the amount is written down to fair value. Under generally accepted accounting principles in the United States, this would result in a charge to operating earnings. Any determination requiring the write-off of a significant portion of goodwill or unamortized identified intangible assets would negatively affect our results of operations and total capitalization, which could be material. There was no impairment recorded in 2011, 2012 or 2013. As of December 31, 2013, the remaining balances of goodwill and intangible assets were $1,069.8 million and $345.0 million, respectively.

The debt instruments that we intend to enter into in connection with the spin-off may have significant financial and operating restrictions that may have an adverse effect on our operations.

        We intend to enter into certain financing arrangements prior to or concurrently with the spin-off. While we have not finalized such financing arrangements, the debt instruments governing such arrangements may contain numerous financial, operating and/or negative covenants that would limit our ability to incur additional or repay existing indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments, to engage in transactions with affiliates, to engage in sale/leaseback transactions, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. Agreements governing future indebtedness could also contain significant financial and operating restrictions. A failure to comply with the obligations contained in any such agreement governing our indebtedness could result in an event of default under such agreement, which could permit acceleration of the related debt and acceleration of debt under other instruments that may contain cross acceleration or cross default provisions. We may not have, or may not be able to obtain, sufficient funds to make any required accelerated payments.

Our operations rely on an extensive network of information technology resources and a failure to maintain, upgrade and protect such systems could adversely impact our business, financial condition and results of operations.

        Information technology plays a crucial role in all of our operations. To remain competitive, our hardware, software and related services must interact with our suppliers and customers efficiently, record and process our financial transactions accurately, and obtain the data and information to enable the analysis of trends and plans and the execution of our strategies.

        The failure or unavailability of our information technology systems could directly impact our ability to interact with our customers and provide them with products and services when needed. Such failure to properly supply or service our customers could have an adverse effect on our business, financial condition and results of operations. Moreover, our customer relationships could be damaged well beyond the period of the downtime of our information technology systems.

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.

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We have been expanding our available products and services, and our business may continue to grow at a rapid pace. Our inability to properly manage or support the growth may have a material adverse effect on our business, financial condition, and results of operations and could cause the market value of our common stock to decline.

        We have been expanding our available products and services in recent periods and intend to continue to grow our business both through acquisitions and internal expansion of products and services. Our growth could place significant demands on our management team and our operational, administrative and financial resources. We may not be able to grow effectively or manage our growth successfully, and the failure to do so could have a material adverse effect on our business, financial condition, and results of operations and could cause the market value of our common stock to decline.

Severe weather conditions, including hurricanes and tropical storms, could have a material adverse effect on our business.

        Adverse weather can directly impede our operations. Repercussions of severe weather conditions may include curtailment of services; weather-related damage to facilities and equipment, resulting in suspension of operations; in the case of our ESG segment, inability to deliver equipment and personnel to job sites in accordance with customer requirements; in the case of our ASG segment, inability to deliver products to customers in accordance with contract schedules or critical next-day customer requirements and loss of productivity. These constraints could delay our operations and materially increase our operating and capital costs. The operations of our ESG customers could also be adversely affected by severe weather, such as unusually warm winters or cool summers decreasing demand for natural gas or droughts in semi-arid regions impacting hydraulic fracturing operations, which could affect the demand for services of our ESG segment.

        Additionally, our operations are particularly susceptible to the impact of hurricanes and tropical storms, as our corporate headquarters and certain of our principal facilities are located in Florida and Texas. A hurricane or tropical storm could result in major damage to our properties, inventory and equipment and the properties of our customers located in such areas. Additionally, a hurricane or tropical storm could delay or disrupt the delivery of supplies to our facilities, which could lead to delays in delivering our products to our customers. Related storm damage could also affect telecommunications capability, causing interruptions to our operations. These and other possible effects of hurricanes or tropical storms could have a material adverse effect on our business.

Risks Relating to the Spin-Off

We may not achieve some or all of the expected benefits of the spin-off, and the spin-off may adversely affect our business.

        We may not be able to achieve the full strategic and financial benefits expected to result from the spin-off, or such benefits may be delayed or not occur at all. These expected benefits include the benefits described in the section "The Spin-Off—Reasons for the Spin-Off."

        We may not achieve these and other anticipated benefits for a variety of reasons. There also can be no assurance that the spin-off will not adversely affect our business.

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We may incur greater costs as an independent company than we did when we were a part of B/E Aerospace, which could decrease our profitability.

        As a segment of B/E Aerospace, we take advantage of B/E Aerospace's size and purchasing power in procuring certain goods and services such as insurance, professional fees, healthcare benefits, and technology such as computer software licenses. After the spin-off, as a separate, independent entity, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable to us as those we obtained prior to the spin-off. We also rely on B/E Aerospace to provide various financial, administrative and other corporate services. B/E Aerospace will continue to provide certain of these services on a short-term transitional basis after the spin-off. However, we will be required to establish the necessary infrastructure and systems to supply these services on an ongoing basis. We may not be able to replace the services provided by B/E Aerospace in a timely manner or on terms and conditions as favorable as those we receive from B/E Aerospace. If functions previously performed by B/E Aerospace cost us more than the amounts reflected in our historical financial statements, our profitability could decrease.

Our ability to meet our capital needs may be harmed by the loss of financial support from B/E Aerospace.

        The loss of financial support from B/E Aerospace could harm our ability to meet our capital needs. B/E Aerospace can currently provide certain capital that may be needed in excess of the amounts generated by our operating activities. After the spin-off, we expect to obtain any funds needed in excess of the amounts generated by our operating activities through accessing the capital markets or bank financing, and not from B/E Aerospace. Further, we cannot guarantee you that we will be able to obtain capital market financing or credit on favorable terms, or at all, in the future. We cannot assure you that our ability to meet our capital needs will not be harmed by the loss of financial support from B/E Aerospace.

We expect to incur new indebtedness in connection with the spin-off, and the degree to which we will be leveraged following completion of the spin-off may have a material adverse effect on our financial position, results of operations and cash flows.

        We intend to enter into certain financing arrangements prior to or concurrently with the spin-off. Additionally, following the spin-off we expect to pursue a high-growth model through strategic acquisitions which may require us to incur even more debt.

        Our ability to make payments on and refinance our indebtedness, including the debt incurred in connection with the spin-off as well as any future debt that we may incur, will depend on our ability to generate cash in the future from operations, financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that we cannot control. If we cannot service our debt or repay or refinance our debt as it becomes due, we may be forced to sell assets or take other disadvantageous actions, including (1) reducing financing in the future for working capital, capital expenditures and general corporate purposes or (2) dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness. In addition, our ability to withstand competitive pressures and to react to changes in the aerospace consumables and oilfield services industries could be impaired. The lenders or other investors who hold debt that we fail to service or on which we otherwise default could also accelerate amounts due, which could potentially trigger a default or acceleration of our other debt.

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If the distribution, together with certain related transactions, were to fail to qualify as a reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, then we and/or B/E Aerospace and our shareholders could be subject to significant tax liabilities.

        B/E Aerospace has not requested a private letter ruling from the IRS in respect of the distribution because in 2013 the IRS announced in public guidance that it generally will no longer issue private letter rulings to the effect that, for U.S. federal income tax purposes, a spin-off transaction (similar to the distribution together with certain related transactions) will qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code. The distribution is, however, conditioned upon, among other matters, B/E Aerospace's receipt of an opinion of Shearman & Sterling LLP, which shall remain in full force and effect at the time of distribution, to the effect that the distribution, together with certain related transactions, will qualify as a reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. B/E Aerospace expects to receive an opinion from Shearman & Sterling LLP to the effect that the distribution, together with certain related transactions, will so qualify. The opinion relies on certain representations, assumptions, undertakings and covenants, and the conclusions set forth in the opinion may be adversely affected if one or more of the representations and assumptions is incorrect or one or more of the undertakings and covenants is not complied with. These representations, assumptions, undertakings and covenants are expected to relate to, among other things, B/E Aerospace's business reasons for proceeding with the distribution, the past and future conduct of our businesses and those of B/E Aerospace, the historical ownership and capital structures of B/E Aerospace and our and B/E Aerospace's current plans and intentions to not materially modify our or B/E Aerospace's respective ownership and capital structures following the distribution. Notwithstanding the opinion, the IRS could determine that the distribution should be treated as a taxable transaction if it determines that any of the representations, assumptions, undertakings or covenants upon which the opinion relied is incorrect or has not been completed or complied with or if it disagrees with the conclusions in the tax opinion. For more information regarding the tax opinion, see the section entitled "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution" included elsewhere in this information statement.

        If the distribution fails to qualify for tax-free treatment, B/E Aerospace would be subject to tax on gain, if any, as if it had sold our common stock in a taxable sale for its fair market value at the time of the distribution. In addition, if the distribution fails to qualify for tax-free treatment, each of our initial public shareholders would be treated as if the shareholder had received a distribution from B/E Aerospace in an amount equal to the fair market value of our common stock that was distributed to the shareholder, which generally would be taxed as a dividend to the extent of the shareholder's pro rata share of B/E Aerospace's current and accumulated earnings and profits and then treated as a non-taxable return of capital to the extent of the stockholder's basis in the B/E Aerospace common stock and finally as capital gain from the sale or exchange of B/E Aerospace common stock. Furthermore, even if the distribution were otherwise to qualify under Sections 355 and 368(a)(1)(D) of the Code, it may be taxable to B/E Aerospace (but not to B/E Aerospace's shareholders) under Section 355(e) of the Code, if the distribution were later deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in B/E Aerospace or us. For this purpose, any acquisitions of B/E Aerospace stock or of our common stock within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part of such a plan, although we or B/E Aerospace may be able to rebut that presumption, including through the use of certain safe harbors contained in U.S. Treasury Regulations under Section 355(e) of the Code. For a more detailed discussion, see the section entitled "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution" included elsewhere in this information statement.

        Under the Tax Sharing and Indemnification Agreement between B/E Aerospace and us, we would generally be required to indemnify B/E Aerospace against any tax resulting from the distribution to the

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extent that such tax resulted from any of the following events (among others): (1) an acquisition of all or a portion of our stock or assets, whether by merger or otherwise, (2) any negotiations, understandings, agreements or arrangements with respect to transactions or events that cause the distribution to be treated as part of a plan pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in us, (3) certain other actions or failures to act by us, or (4) any breach by us of certain of our representations or covenants. For a more detailed discussion, see the section entitled "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off—Tax Sharing and Indemnification Agreement" included elsewhere in this information statement. Our indemnification obligations to B/E Aerospace and its subsidiaries, officers and directors are not limited by any maximum amount. If we are required to indemnify B/E Aerospace or such other persons under the circumstances set forth in the Tax Sharing and Indemnification Agreement, we could be subject to substantial liabilities.

We may be unable to make, on a timely basis, the changes necessary to operate as an independent, publicly-owned company.

        As a public entity, we will be subject to the reporting requirements of the Exchange Act and requirements of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports about our business and financial condition. Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant resources and management oversight. We will implement additional procedures and processes to address the standards and requirements applicable to public companies. These activities may divert management's attention from other business concerns, which could have a material adverse effect on our financial position, results of operations or cash flows. If we cannot favorably assess the effectiveness of our internal control over financial reporting, or our independent registered public accounting firm cannot provide an unqualified attestation report on the effectiveness of our internal control over financial reporting, investor confidence and, in turn, the market price of our common stock could decline.

We do not have an operating history as an independent company and our historical and pro forma financial information may not be a reliable indicator of our future results.

        The historical financial information we have included in this information statement has been derived from B/E Aerospace's consolidated financial statements and accounting records and does not necessarily reflect what our financial position, results of operations and cash flows would have been had we been a separate, stand-alone entity during the periods presented. B/E Aerospace did not account for us, and we were not operated, as a single stand-alone entity for the periods presented. Actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. In addition, the historical information may not be indicative of what our results of operations, financial position and cash flows will be in the future. For example, following the spin-off, changes will occur in our cost structure, funding and operations, including changes in our tax structure and increased costs associated with becoming a public, stand-alone company.

        Additionally, in preparing our unaudited pro forma condensed financial information, we based the pro forma adjustments on available information and assumptions that we believe are reasonable and factually supportable; however, our assumptions may prove not to be accurate. Also, our unaudited pro forma condensed financial information may not give effect to various ongoing additional costs we may incur in connection with being an independent public company. Accordingly, our unaudited pro forma condensed financial information does not reflect what our financial condition, results of operations or

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cash flows would have been as an independent public company and is not necessarily indicative of our future financial condition or future results of operations. Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Financial Statements" and our historical audited combined financial statements and the notes to those statements included elsewhere in this information statement.

The spin-off may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.

        The spin-off is subject to review under various state and federal fraudulent conveyance laws. Fraudulent conveyance laws generally provide that an entity engages in a constructive fraudulent conveyance when (1) the entity transfers assets and does not receive fair consideration or reasonably equivalent value in return, and (2) the entity (a) is insolvent at the time of the transfer or is rendered insolvent by the transfer, (b) has unreasonably small capital with which to carry on its business, or (c) intends to incur or believes it will incur debts beyond its ability to repay its debts as they mature. An unpaid creditor or an entity acting on behalf of a creditor (including, without limitation, a trustee or debtor-in-possession in a bankruptcy by us or B/E Aerospace or any of our respective subsidiaries) may bring a lawsuit alleging that the spin-off or any of the related transactions constituted a constructive fraudulent conveyance. If a court accepts these allegations, it could impose a number of remedies, including, without limitation, voiding our claims against B/E Aerospace, requiring our shareholders to return to B/E Aerospace some or all of the shares of our common stock issued in the spin-off, or providing B/E Aerospace with a claim for money damages against us in an amount equal to the difference between the consideration received by B/E Aerospace and the fair market value of our company at the time of the spin-off.

        The measure of insolvency for purposes of the fraudulent conveyance laws will vary depending on which jurisdiction's law is applied. Generally, an entity would be considered insolvent if (1) the present fair saleable value of its assets is less than the amount of its liabilities (including contingent liabilities); (2) the present fair saleable value of its assets is less than its probable liabilities on its debts as such debts become absolute and matured; (3) it cannot pay its debts and other liabilities (including contingent liabilities and other commitments) as they mature; or (4) it has unreasonably small capital for the business in which it is engaged. We cannot assure you what standard a court would apply to determine insolvency or that a court would determine that we, B/E Aerospace or any of our respective subsidiaries were solvent at the time of or after giving effect to the spin-off.

        The distribution of our common stock is also subject to review under state corporate distribution statutes. Under the General Corporation Law of the State of Delaware (the "DGCL"), a corporation may only pay dividends to its shareholders either (1) out of its surplus (net assets minus capital) or (2) if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although B/E Aerospace intends to make the distribution of our common stock entirely from surplus, we cannot assure you that a court will not later determine that some or all of the distribution to B/E Aerospace shareholders was unlawful.

        The B/E Aerospace board of directors expects that B/E Aerospace and KLX each will be solvent at the time of the spin-off (including immediately after the distribution of shares of KLX common stock), will be able to repay its debts as they mature following the spin-off and will have sufficient capital to carry on its businesses and the spin-off and the distribution will be made entirely out of surplus in accordance with Section 170 of the DGCL. The expectations of the B/E Aerospace board of directors in this regard are based on a number of assumptions, including its expectations as to the post-spin-off operating performance and cash flow of each of B/E Aerospace and KLX and its analysis of the post-spin-off assets and liabilities of each company. We cannot assure you, however, that a court would reach the same conclusions as B/E Aerospace's board of directors in determining whether

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B/E Aerospace or we were insolvent at the time of, or after giving effect to, the spin-off, or whether lawful funds were available for the separation and the distribution to B/E Aerospace's shareholders.

A court could require that we assume responsibility for obligations allocated to B/E Aerospace under the Separation and Distribution Agreement.

        Under the Separation and Distribution Agreement, from and after the spin-off, each of B/E Aerospace and we will be responsible for the debts, liabilities and other obligations related to the business or businesses which it owns and operates following the consummation of the spin-off. Although we do not expect to be liable for any obligations that are not allocated to us under the Separation and Distribution Agreement, a court could disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to B/E Aerospace (including, for example, environmental liabilities), particularly if B/E Aerospace were to refuse or were unable to pay or perform the allocated obligations. See "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off—Separation and Distribution Agreement."

We might have been able to receive better terms from unaffiliated third parties than the terms we receive in our agreements with B/E Aerospace.

        The agreements related to the spin-off, including the Separation and Distribution Agreement, the Employee Matters Agreement, the Tax Sharing and Indemnification Agreement, the Transition Services Agreement, the IT Services Agreement and any other agreements, will be negotiated in the context of our separation from B/E Aerospace while we are still part of B/E Aerospace. Although these agreements are intended to be on an arm's-length basis, they may not reflect terms that would have resulted from arm's-length negotiations among unaffiliated third parties. The terms of the agreements being negotiated in the context of our separation concern, among other things, allocations of assets, liabilities, rights, indemnifications and other obligations among B/E Aerospace and us. See "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off" for more detail.

After the spin-off, certain of our executive officers and directors may have actual or potential conflicts of interest because of their current or former positions in B/E Aerospace or their ownership of B/E Aerospace equity.

        Certain of the persons who will be our executive officers and directors will be former directors, officers or employees of B/E Aerospace and thus have professional relationships with B/E Aerospace's executive officers and directors. Three of our directors, including our Chairman and Chief Executive Officer, will continue to serve on the board of directors of B/E Aerospace following the spin-off. Our Chairman and Chief Executive Officer will continue to chair the board of directors of B/E Aerospace and will also serve as its Executive Chairman following the spin-off. In addition, several of our executive officers and directors have a financial interest in B/E Aerospace as a result of their ownership of B/E Aerospace stock and restricted stock. These relationships and financial interests may create, or may create the appearance of, conflicts of interest when these directors and officers face decisions that could have different implications for B/E Aerospace than for us.

After the spin-off, B/E Aerospace's insurers may deny coverage to us for losses associated with occurrences prior to the spin-off.

        In connection with the separation, we will enter into agreements with B/E Aerospace to address several matters associated with the spin-off, including insurance coverage. See "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off." After the spin-off, B/E Aerospace's insurers may deny coverage to us for losses associated with occurrences prior

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to the spin-off. Accordingly, we may be required to temporarily or permanently bear the costs of such lost coverage.

Risks Relating to Our Common Stock

There is no existing market for our common stock and we cannot be certain that an active trading market will develop or be sustained after the spin-off. If the price of our common stock fluctuates significantly following the spin-off, stockholders could incur substantial losses of any investment in our common stock.

        There currently is no public market for our common stock. We cannot assure you that an active trading market for our common stock will develop as a result of the spin-off or be sustained in the future. The lack of an active market may make it more difficult for you to sell our common stock and could lead to the price of our common stock being depressed or more volatile. We cannot predict the prices at which our common stock may trade after the spin-off. The price of our common stock could fluctuate widely in response to:

    our quarterly operating results;

    changes in earnings estimates by securities analysts;

    changes in our business;

    changes in the market's perception of our business;

    changes in the businesses, earnings estimates or market perceptions of our competitors or customers;

    changes in airline industry or business jet industry conditions;

    delays in new aircraft certification, production or order rates;

    changes in oil and gas prices or the E&P industry;

    changes in our key personnel;

    changes in general market or economic conditions; and

    changes in the legislative or regulatory environment.

        In addition, the stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securities of many companies, including companies in our industry. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our stock price.

Substantial sales of our common stock may occur in connection with the spin-off, which could cause the price of our common stock to decline.

        The shares of our common stock that B/E Aerospace distributes to its shareholders may be sold immediately in the public market. B/E Aerospace shareholders could sell our common stock received in the distribution if we do not fit their investment objectives or, in the case of index funds, if we are not part of the index in which they invest. Sales of significant amounts of our common stock or a perception in the market that such sales will occur may reduce the market price of our common stock.

We cannot assure you that we will pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.

        We do not currently intend to pay dividends. Our dividend policy will be established by our Board based on our financial condition, results of operations and capital requirements, as well as applicable

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law, regulatory constraints, industry practice and other business considerations that our Board considers relevant. In addition, the terms of the agreements governing debt that we incur in connection with the spin-off or in the future may limit or prohibit the payments of dividends. For more information, see "Dividend Policy." We cannot assure you that we will pay dividends in the future or continue to pay any dividends if we do commence the payment of dividends.

        Additionally, our indebtedness could have important consequences for holders of our common stock. If we cannot generate sufficient cash flow from operations to meet our debt-payment obligations, then our Board's ability to declare dividends on our common stock will be impaired and we may be required to attempt to restructure or refinance our debt, raise additional capital or take other actions such as selling assets, reducing or delaying capital expenditures or reducing any proposed dividends. We cannot assure you that we will be able to effect any such actions or do so on satisfactory terms, if at all, or that such actions would be permitted by the terms of our debt or our other credit and contractual arrangements.

Certain provisions that our amended and restated certificate of incorporation and amended and restated bylaws will contain, certain provisions of Delaware law and our agreements with B/E Aerospace may prevent or delay an acquisition of our Company or other strategic transactions, which could decrease the trading price of our common stock.

        Prior to the distribution date, our Board and B/E Aerospace, as our sole stockholder, will approve and adopt amended and restated versions of our certificate of incorporation and bylaws. Our amended and restated certificate of incorporation and amended and restated bylaws will contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirors to negotiate with our Board rather than to attempt a hostile takeover. These provisions include, among others:

    the inability of our stockholders to call a special meeting;

    rules regarding how stockholders may present proposals or nominate directors for election at annual meetings;

    the division of our Board into three classes of directors, with each class serving a staggered three-year term;

    a provision that our stockholders may only remove directors with cause and by the affirmative vote of at least at least 662/3 percent of our voting stock;

    the ability of our directors, and not stockholders, to fill vacancies on our Board; and

    the requirement of the affirmative vote of stockholders holding at least 662/3 percent of our voting stock to amend our amended and restated bylaws and certain provisions in our amended and restated certificate of incorporation, including those provisions providing for a classified board, provisions regarding the filling of vacancies on the Board and provisions providing for the removal of directors.

        In addition, because we have not chosen to be exempt from Section 203 of the DGCL, this provision could also delay or prevent a change of control that some stockholders may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliates becomes the holder of more than 15 percent of the corporation's outstanding voting stock.

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        We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board determines is not in the best interests of our Company and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors. See "Description of Capital Stock" for a more detailed description of these provisions.

        Provisions in our agreements with B/E Aerospace may also delay or prevent a merger or acquisition that some stockholders may consider favorable. To preserve the tax free treatment to B/E Aerospace of the distribution and certain related transactions, under the Tax Sharing and Indemnification Agreement that we will enter into with B/E Aerospace, we will be prohibited from taking or failing to take any action that prevents the distribution and certain related transactions from being tax-free. Further, for the two-year period following the distribution, we may be prohibited, except in specified circumstances, from: (i) entering into any transaction resulting in an acquisition of our stock or our assets beyond certain thresholds, whether by merger or otherwise; (ii) merging, consolidating or liquidating; (iii) issuing equity securities beyond certain thresholds; (iv) repurchasing our common stock; and (v) ceasing to actively conduct our aerospace consumables and energy technical services businesses. These restrictions may limit our ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of our business. For more information, see the sections entitled "The Spin Off—Material U.S. Federal Income Tax Consequences of the Distribution" and "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin Off—Tax Sharing and Indemnification Agreement" included elsewhere in this information statement.

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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

        We make forward-looking statements throughout this information statement, including in, among others, the sections entitled "Summary," "Risk Factors," "The Spin-Off," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," reflect our current expectations and projections about our future results, performance and prospects. Forward-looking statements include all statements that are not historical in nature or are not current facts. We have tried to identify these forward-looking statements by using forward-looking words including "believe," "expect," "plan," "intend," "anticipate," "estimate," "predict," "potential," "continue," "may," "might," "should," "could," "will" or the negative of these terms or similar expressions.

        These forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause our actual results, performance and prospects to differ materially from those expressed in, or implied by, these forward-looking statements. These factors include the risks, uncertainties, assumptions and other factors discussed under "Risk Factors," including the following factors:

    regulation of and dependence upon the aerospace and energy industries;

    the cyclical nature of the aerospace and energy industries and the deterioration of general economic conditions;

    market prices for fuel, oil and natural gas;

    competitive conditions;

    legislative or regulatory changes and potential liability under federal and state laws and regulations;

    risks inherent in international operations, including compliance with anti-corruption laws and regulations of the U.S. government and various international jurisdictions;

    doing business with the U.S. government;

    reduction in government military spending;

    JIT contracts and LTAs having no guarantee of future customer purchase requirements;

    dependence on suppliers and on third-party package delivery companies;

    decreases in the rate at which oil or natural gas reserves are discovered or developed;

    impact of technological advances on the demand for our products and services;

    delays of customers obtaining permits for their operations;

    hazards and operational risks that may not be fully covered by insurance;

    significant backlog that may be deferred or may not be entirely realized;

    the write-off of a significant portion of intangible assets;

    the need to obtain additional capital or financing, and the cost of obtaining such capital or financing;

    limitations that our organizational documents, debt instruments and U.S. federal income tax requirements may have on our financial flexibility, our ability to engage in strategic transactions or our ability to declare and pay cash dividends on our common stock;

    failure to have the spin-off qualified as a reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code;

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    our credit profile;

    changes in supply and demand of equipment;

    oilfield anti-indemnity provisions;

    severe weather;

    reliance on information technology resources and the inability to implement new technology;

    increased labor costs or the unavailability of skilled workers;

    inability to manage inventory;

    inability to successfully consummate acquisitions or inability to manage potential growth; and

    inability to achieve some or all of the benefits of the spin-off.

        In light of these risks and uncertainties, you are cautioned not to put undue reliance on any forward-looking statements in this information statement. These statements should be considered only after carefully reading this entire information statement. Except as required under the federal securities laws and rules and regulations of the SEC, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additional risks that we may currently deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in this information statement not to occur.


MARKET AND INDUSTRY DATA

        Unless otherwise indicated, the industry data included in this information statement is from the June 2014 issue of the Airline Monitor, June 2014 mid-year report from the IATA, the Current Boeing Market Outlook 2014, the April 2014 report from Spears & Associates, the Aircraft Analytical System ("ACAS") database, or the Airbus or Boeing corporate websites.

        Unless otherwise indicated, market and certain other industry data included in this information statement, including all market share and market size data, are based on estimates of our management. These estimates have been derived from our management's knowledge and experience in the markets in which we operate, as well as information obtained from internal research and surveys, our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate. Although we believe that these sources are generally reliable, we have not independently verified data from these sources or obtained third-party verification of market share data. Data regarding market position and market share within our industry is intended to provide general guidance but is inherently imprecise.

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THE SPIN-OFF

Background

        On November 25, 2014, the board of directors of B/E Aerospace approved the spin-off of KLX from B/E Aerospace, following which we will be an independent, publicly-owned company. To complete the spin-off, B/E Aerospace will, following an internal reorganization, distribute to its shareholders all of the outstanding shares of our common stock. The distribution will occur on the distribution date, which is December 16, 2014. Each holder of B/E Aerospace common stock will receive one share of our common stock for every two shares of B/E Aerospace common stock held on December 5, 2014, the record date.

        Holders of B/E Aerospace common stock will continue to hold their shares in B/E Aerospace. We do not require and are not seeking a vote of B/E Aerospace's shareholders in connection with the spin-off, and B/E Aerospace's shareholders will not have any appraisal rights in connection with the spin-off or the internal reorganization.

        The distribution of our common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. In addition, B/E Aerospace has the right not to complete the spin-off if, at any time prior to the distribution, its board of directors determines, in its sole discretion, that the spin-off is not in the best interests of B/E Aerospace or its shareholders, or that it is not advisable for us to separate from B/E Aerospace. For a more detailed description, see "—Conditions to the Spin-Off."

Reasons for the Spin-Off

        B/E Aerospace's board of directors has regularly reviewed the businesses that comprise B/E Aerospace to confirm that its resources are being put to use in a manner that is in the best interests of B/E Aerospace and its shareholders. In reaching the decision to pursue the spin-off, B/E Aerospace's board of directors considered a range of potential structural alternatives for the aerospace solutions and energy technical services business and its manufacturing business, including maintaining all businesses as part of the same consolidated company or selling or merging some of the businesses to or with third parties. In evaluating these alternatives with the goal of enhancing stockholder value, B/E Aerospace's board of directors considered input and advice from members of B/E Aerospace management and other advisors/parties. As part of this evaluation, the board of directors of B/E Aerospace considered a number of factors, including the strategic clarity and flexibility for the ASG and ESG businesses, on the one hand, and B/E Aerospace's manufacturing business, on the other hand, after the spin-off, the ability of KLX and B/E Aerospace to compete and operate efficiently and effectively (including the ability of KLX to retain and attract management talent) after the spin-off, the financial profile of each company, the potential reaction of investors and the probability of successful execution of the various structural alternatives and the risks associated with those alternatives.

        As a result of this evaluation, B/E Aerospace's board of directors determined that proceeding with the spin-off would be in the best interests of B/E Aerospace and its shareholders.

        B/E Aerospace's board of directors considered the following potential benefits of the spin-off:

    Strategic Focus and Clarity.  Following the spin-off, B/E Aerospace and KLX each will have a simplified, more focused business and will be better able to dedicate resources to pursue unique growth opportunities and execute strategic plans best suited to their respective business and customers. KLX will be well positioned to pursue value creation strategies in the distribution business through, for example, diversifying product portfolios and geographic expansion, and B/E Aerospace will be well positioned to focus on the manufacturing business, research and development and further innovation in its product offerings. Furthermore, the spin-off will allow

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      management of each independent company to concentrate its time and attention on the development and implementation of corporate strategies and policies that are based primarily on the specific business characteristics of their respective companies, particular market segments, customers and core businesses.

    Business Appropriate Allocation of Capital.  The spin-off will permit each of B/E Aerospace and KLX to concentrate its financial resources solely on its own operations without having to compete with each other for investment capital. This will provide each company with greater flexibility to invest capital in its business in a time and manner appropriate for its distinct strategy and business needs and facilitate a more company specific allocation of capital.

    Strategic Flexibility.  The spin-off will provide each independent company increased strategic flexibility to make acquisitions and form partnerships and alliances in its target markets, unencumbered by considerations of the potential impact on the businesses of the other company; and allow each company to affect future acquisitions utilizing its own stock for all or part of the consideration, the value of which will be more closely aligned with the performance of its business.

    Investor Choice.  The spin-off will provide investors in each company with a more targeted investment opportunity with different investment and business characteristics, including different opportunities for growth, capital structure, business models and financial returns. This will allow investors to evaluate the separate and distinct merits, performance and future prospects of each company.

        B/E Aerospace's board of directors also considered a number of potentially negative factors in evaluating the spin-off, including the following:

    One-Time and Ongoing Costs of the Spin-Off:  KLX will incur costs in connection with the transition to being a stand-alone public company that relate primarily to accounting, legal and other professional fees; compensation, such as modifications to certain bonus awards, upon completion of the separation; recruiting and relocation costs associated with hiring key senior management personnel new to the Company; costs related to establishing a new brand in the marketplace; and costs associated with the eventual separation of information systems. In addition, B/E Aerospace will incur costs in connection with the refinancing of B/E Aerospace's existing indebtedness, including prepayment premiums and bank fees.

    Potential Effect on Debt Servicing Costs.  The smaller relative size of the remaining B/E Aerospace and KLX as compared to B/E Aerospace prior to the spin-off may adversely affect the liquidity in the debt issued by both companies to capitalize KLX and to refinance B/E Aerospace's existing debt in connection with the spin-off. Lower liquidity would tend to increase debt servicing costs, thus potentially reducing the benefits associated with a more tailored capital structure.

    Uncertainty of Shareholder Reaction.  As in the case of other spin-offs, during the initial period following the spin-off, the market price of KLX's common stock may fluctuate, depending on many factors, some of which may be beyond KLX's control, including the sale of our shares by some B/E Aerospace shareholders after the distribution because KLX's business profile or market capitalization may not fit their investment objectives.

        Notwithstanding these considerations, however, B/E Aerospace's board of directors determined that the potential benefits of the spin-off outweighed these negative factors.

        The foregoing discussion is not intended to be exhaustive, but we believe it addresses the material information and factors considered by the B/E Aerospace board of directors in its consideration of the spin-off, including factors that may support the spin-off, as well as factors that may weigh against it. In

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view of the variety of factors and the amount of information considered, the B/E Aerospace board of directors did not find it practicable to quantify or otherwise assign relative weights to the factors considered in reaching its determination.

Manner of Effecting the Spin-Off

        The general terms and conditions relating to the spin-off will be set forth in a Separation and Distribution Agreement between us and B/E Aerospace.

    Internal Reorganization

        Prior to the distribution, as described under "—Distribution of Shares of Our Common Stock," B/E Aerospace will complete an internal reorganization. Following the reorganization, which is a condition to the spin-off, KLX will own all the operations comprising and the companies that conduct B/E Aerospace's aerospace consumables and energy technical services businesses. The reorganization will include various restructuring transactions in preparation for the spin-off, including restructuring transactions involving the non-U.S. subsidiaries of B/E Aerospace that conduct its aerospace consumables business.

    Distribution of Shares of Our Common Stock

        Under the Separation and Distribution Agreement, the distribution will be effective as of 11:59 p.m., Eastern time, on December 16, 2014, the distribution date. As a result of the spin-off, on the distribution date, each holder of B/E Aerospace common stock will receive one share of our common stock for every two shares of B/E Aerospace common stock that the shareholder owns as of the record date. In order to receive shares of our common stock in the spin-off, a B/E Aerospace shareholder must be a shareholder at the close of business of NASDAQ on December 5, 2014, the record date.

        On the distribution date, B/E Aerospace will release the shares of our KLX common stock to our distribution agent to distribute to B/E Aerospace shareholders as of the record date. Our distribution agent will establish book-entry accounts for record holders of B/E Aerospace common stock and credit to such accounts the shares of our common stock distributed to such holders. Our distribution agent will send these shareholders, including any registered holder of shares of B/E Aerospace common stock represented by physical share certificates on the record date, a statement reflecting their ownership of our common stock. Book-entry refers to a method of recording stock ownership in our records that does not use physical stock certificates. For shareholders who own B/E Aerospace common stock through a broker or other nominee, their broker or nominee will credit their shares of our common stock to their accounts. We expect that it will take the distribution agent up to one week to electronically issue shares of our common stock to B/E Aerospace shareholders or their bank or brokerage firm by way of direct registration in book-entry form. Any delay in the electronic issuance of KLX shares by the distribution agent will not affect trading in KLX common stock. As further discussed below, we will not issue fractional shares of our common stock in the distribution. Following the spin-off, shareholders who hold shares in book-entry form may request that their shares of our common stock be transferred to a brokerage or other account at any time.

        B/E Aerospace shareholders will not be required to make any payment or surrender or exchange their shares of B/E Aerospace common stock or take any other action to receive their shares of our common stock.

Treatment of Fractional Shares

        The distribution agent will not distribute any fractional shares of our common stock to B/E Aerospace shareholders. Instead, as soon as practicable on or after the distribution date, the

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distribution agent will aggregate fractional shares of our common stock held by holders of record into whole shares, sell them in the open market at the prevailing market prices and then distribute the aggregate sale proceeds ratably to B/E Aerospace shareholders who would otherwise have received fractional shares of our common stock. The amount of this payment will depend on the prices at which the distribution agent sells the aggregated fractional shares of our common stock in the open market shortly after the distribution date. The distribution agent will, in its sole discretion, without any influence by B/E Aerospace or us, determine when, how, through which broker-dealer and at what price to sell the whole shares. The distribution agent is not, and any broker-dealer used by the distribution agent will not be, an affiliate of either B/E Aerospace or us. We will be responsible for payment of any brokerage fees, which we do not expect will be material to us. Your receipt of cash in lieu of fractional shares of our common stock generally will result in a taxable gain or loss for U.S. federal income tax purposes, as described in more detail under "—Material U.S. Federal Income Tax Consequences of the Distribution."

Material U.S. Federal Income Tax Consequences of the Distribution

        The following is a summary of the material U.S. federal income tax consequences relating to the distribution by B/E Aerospace. This summary is based on the Code, the U.S. Treasury regulations promulgated thereunder, and interpretations of the Code and the U.S. Treasury regulations by the courts and the IRS, in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. This summary does not discuss all the tax considerations that may be relevant to B/E Aerospace shareholders in light of their particular circumstances, nor does it address the consequences to B/E Aerospace shareholders subject to special treatment under the U.S. federal income tax laws (including, for example, non-U.S. persons, insurance companies, dealers or brokers in securities or currencies, tax-exempt organizations, banks, financial institutions, mutual funds, pass-through entities and investors in such entities, holders who have a functional currency other than the U.S. dollar, holders who hold their stock as a hedge or as part of a hedging, straddle, conversion, synthetic security, integrated investment or other risk-reduction transaction or who are subject to alternative minimum tax or holders who acquired their stock upon the exercise of employee stock options or otherwise as compensation). In addition, this summary does not address the U.S. federal income tax consequences to those B/E Aerospace shareholders who do not hold their B/E Aerospace common stock as a capital asset. Finally, this summary does not address any U.S. federal taxes other than U.S. federal income tax, and does not discuss any state, local or foreign tax consequences. B/E AEROSPACE SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM.

        B/E Aerospace has not requested a private letter ruling from the IRS in respect of the distribution because in 2013 the IRS announced in public guidance that it generally will no longer issue private letter rulings to the effect that, for U.S. federal income tax purposes, a spin-off transaction (similar to the distribution together with certain related transactions) will qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code. However, the distribution is conditioned upon, among other matters, B/E Aerospace's receipt of an opinion from Shearman & Sterling LLP to the effect that (1) the distribution, together with certain related transactions, will qualify as a reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, (2) the distribution generally will not result in any taxable income, gain or loss to B/E Aerospace, and (3) no gain or loss will be recognized by (and no amount will be included in the income of) B/E Aerospace shareholders upon their receipt of KLX common stock in the distribution, except with respect to cash received in lieu of fractional shares. B/E Aerospace expects to receive an opinion from Shearman & Sterling LLP to the effect that the distribution, together with certain related transactions, will so qualify. The opinion will be based on, among other things, certain representations, assumptions, undertakings and covenants made by B/E Aerospace and us, which if incorrect, not completed or not complied with may adversely

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affect the conclusions reached by Shearman & Sterling LLP in its opinion. These representations, assumptions, undertakings and covenants are expected to relate to, among other things, (i) B/E Aerospace's business reasons for proceeding with the distribution, (ii) the nature and value of the assets to be contributed to us by B/E Aerospace in connection with the distribution and the assets to remain with B/E Aerospace, (iii) the nature and amount of any indebtedness maintained by us and by B/E Aerospace before and after the distribution, (iv) B/E Aerospace's historical active conduct of our businesses and the businesses to remain with B/E Aerospace and B/E Aerospace's and our current plans and intentions to continue the active conduct of such businesses, and (v) B/E Aerospace's historical ownership and capital structures, and our and B/E Aerospace's current plans and intentions to not materially modify our and B/E Aerospace's respective ownership and capital structures following the distribution. The opinion will not be binding on the IRS or the courts.

        A result of the distribution qualifying as a reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, as discussed above, would be that: (1) the aggregate basis of the B/E Aerospace common stock and the KLX common stock (including any fractional shares of KLX common stock for which cash is received) in the hands of each B/E Aerospace shareholder after the distribution will equal the aggregate basis of B/E Aerospace common stock held by the shareholder immediately before the distribution, allocated between the B/E Aerospace common stock and the KLX common stock (including any fractional shares of KLX common stock for which cash is received) in proportion to the relative fair market value of each immediately following the distribution, and (2) the holding period of the KLX common stock received by each B/E Aerospace shareholder (including any fractional shares of KLX common stock for which cash is received) will include the holding period at the time of the distribution for the B/E Aerospace common stock on which the distribution is made, provided that the B/E Aerospace common stock is held as a capital asset on the date of the distribution.

        Notwithstanding receipt by B/E Aerospace of the opinion of Shearman & Sterling LLP, the IRS could assert that the distribution does not qualify for tax-free treatment for U.S. federal income tax purposes. If the IRS were successful in taking this position, our initial public shareholders and B/E Aerospace could be subject to significant U.S. federal income tax liabilities. In general, B/E Aerospace would be subject to tax on gain, if any, as if it had sold our common stock in a taxable sale for its fair market value at the time of the distribution. In addition, each of our initial public shareholders would be treated as if the shareholder had received a distribution from B/E Aerospace in an amount equal to the fair market value of our common stock that was distributed to the shareholder, which generally would be taxed as a dividend to the extent of the shareholder's pro rata share of B/E Aerospace's current and accumulated earnings and profits and then treated as a non-taxable return of capital to the extent of the shareholder's basis in the B/E Aerospace common stock and finally as capital gain from the sale or exchange of B/E Aerospace common stock. Furthermore, even if the distribution were otherwise to qualify under Sections 355 and 368(a)(1)(D) of the Code, it may be taxable to B/E Aerospace (but not to B/E Aerospace's shareholders) under Section 355(e) of the Code, if the distribution were later deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in B/E Aerospace or us. For this purpose, any acquisitions of B/E Aerospace stock or of our common stock within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part of such a plan, although we or B/E Aerospace may be able to rebut that presumption, including through the use of certain safe harbors contained in U.S. Treasury Regulations under Section 355(e) of the Code.

        We and B/E Aerospace will enter into a Tax Sharing and Indemnification Agreement pursuant to which we will agree to be responsible for certain liabilities and obligations following the distribution. In general, under the terms of the Tax Sharing and Indemnification Agreement, in the event the distribution and certain related transactions were to fail to qualify for tax-free treatment for U.S.

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federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code (including as a result of Section 355(e) of the Code) and if such failure was the result of actions taken by B/E Aerospace or us, the party responsible for such failure would be responsible for all taxes imposed on B/E Aerospace to the extent that such taxes result from such actions. However, if such failure was the result of any acquisition of our stock, we may be responsible for all taxes imposed on B/E Aerospace as a result of such acquisition. In addition, if the distribution and/or certain related transactions fail to qualify as tax-free transactions for reasons other than those for which B/E Aerospace or ourselves would be responsible for pursuant to the indemnification provisions in the Tax Sharing and Indemnification Agreement, we expect to be responsible for a portion of the liability for any taxes imposed on B/E Aerospace in respect of the distribution and such related transactions based on a predetermined metric. Further, under certain circumstances, if the distribution and certain related transactions become taxable to B/E Aerospace, we may be required to reimburse B/E Aerospace for certain costs on account of any resulting tax benefits to us. For a more detailed discussion, see the section entitled "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Relating to the Spin-Off—Tax Sharing and Indemnification Agreement" included elsewhere in this information statement. Our indemnification obligations to B/E Aerospace and its subsidiaries, officers and directors are not limited in amount or subject to any cap. If we are required to indemnify B/E Aerospace and its subsidiaries and their respective officers and directors under the circumstances set forth in the Tax Sharing and Indemnification Agreement, we may be subject to substantial liabilities.

        B/E Aerospace may incur some tax cost in connection with the distribution (as a result of certain intercompany transactions or as a result of certain differences between federal, on the one hand, and state, local and foreign tax rules, on the other) or the related restructuring of its foreign operations, whether or not the distribution qualifies for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Code and, under the Tax Sharing and Indemnification Agreement, we expect to be responsible for a portion of those taxes.

        U.S. Treasury regulations require certain shareholders that receive stock in a distribution to attach to their U.S. federal income tax return for the year in which the distribution occurs a detailed statement setting forth certain information relating to the tax-free nature of the distribution. U.S. Treasury regulations also generally provide that if a B/E Aerospace shareholder holds different blocks of B/E Aerospace common stock (generally shares of B/E Aerospace common stock purchased or acquired on different dates or at different prices), the aggregate basis for each block of B/E Aerospace common stock purchased or acquired on the same date and at the same price will be allocated, to the greatest extent possible, between the shares of KLX common stock received in the distribution in respect of such block of B/E Aerospace common stock and such block of B/E Aerospace common stock, in proportion to their respective fair market values, and the holding period of the shares of KLX common stock received in the distribution in respect of such block of B/E Aerospace common stock will include the holding period of such block of B/E Aerospace common stock, provided that such block of B/E Aerospace common stock was held as a capital asset on the date of the distribution. If a B/E Aerospace common stockholder is not able to identify which particular shares of KLX common stock are received in the distribution with respect to a particular block of B/E Aerospace common stock, for purposes of applying the rules described above, the stockholder may designate which shares of KLX common stock are received in the distribution in respect of a particular block of B/E Aerospace common stock, provided that such designation is consistent with the terms of the distribution. Holders of B/E Aerospace common stock are urged to consult their own tax advisors regarding the application of these rules to their particular circumstances.

        THE FOREGOING IS A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW. THE FOREGOING DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OF OTHER JURISDICTIONS OR

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THAT MAY APPLY TO PARTICULAR CATEGORIES OF SHAREHOLDERS. EACH B/E AEROSPACE SHAREHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

Results of the Spin-Off

        After the spin-off, we will be an independent, publicly-owned company. Immediately following the spin-off, we expect to have approximately 1,700 record holders of shares of our common stock and approximately 52,652,752 shares of our common stock outstanding, based on the number of shareholders of record and outstanding shares of B/E Aerospace common stock on October 23, 2014. The figures assume no exercise of outstanding options and exclude any shares of B/E Aerospace common stock held directly or indirectly by B/E Aerospace. The actual number of shares to be distributed will be determined on the record date and will reflect any exercise of B/E Aerospace options and repurchase by B/E Aerospace of B/E Aerospace shares between the date the B/E Aerospace board of directors declares the dividend for the distribution and the record date for the distribution.

        For information about options to purchase shares of our common stock that will be outstanding after the distribution, see "—Treatment of Equity Awards" and "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off—Employee Matters Agreement."

        Before the spin-off, we will enter into several agreements with B/E Aerospace to effect the spin-off and provide a framework for our relationship with B/E Aerospace after the spin-off. These agreements will govern the relationship between us and B/E Aerospace after completion of the spin-off and provide for the allocation between us and B/E Aerospace of B/E Aerospace's assets, liabilities and obligations. For a more detailed description of these agreements, see "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off."

Trading Market for Our Common Stock

        There is no public market for our common stock, and an active trading market may not develop or may not be sustained. We anticipate that trading of our common stock will commence on a "when-issued" basis beginning on or shortly before the record date and continuing through the distribution date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. When-issued trades generally settle within four trading days after the distribution date. If you own shares of B/E Aerospace common stock at the close of business on the record date, you will be entitled to receive shares of our common stock distributed in the spin-off. You may trade this entitlement to receive shares of our common stock, without the shares of B/E Aerospace common stock you own, on the when-issued market. On the first trading day following the distribution date, any when-issued trading of our common stock will end and "regular-way" trading will begin. We have applied for authorization to list KLX common stock on NASDAQ under the ticker symbol "KLXI." A condition to the distribution is the listing of our common stock on NASDAQ or another national securities exchange approved by B/E Aerospace. We will announce our when-issued trading symbol when and if it becomes available.

        We also anticipate that, beginning on or shortly before the record date and continuing up to and including the distribution date, there will be two markets in B/E Aerospace common stock: a "regular-way" market and an "ex-distribution" market. Shares of B/E Aerospace common stock that trade on the regular-way market will trade with an entitlement to shares of our common stock

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distributed in the distribution. Shares that trade on the ex-distribution market will trade without an entitlement to shares of our common stock distributed in the distribution. Therefore, if you sell shares of B/E Aerospace common stock in the regular-way market up to and including the distribution date, you will be selling your right to receive shares of our common stock in the distribution. However, if you own shares of B/E Aerospace common stock at the close of business on the record date and sell those shares on the ex-distribution market up to and including the distribution date, you will not be selling the right to receive shares of our common stock in connection with the spin-off and you will still receive such shares of our common stock.

        We cannot predict the prices at which our common stock may trade before the spin-off on a "when-issued" basis or after the spin-off. Those prices will be determined by the marketplace. Prices at which trading in our common stock occurs may fluctuate significantly. Trading prices for our common stock may be influenced by many factors, including anticipated or actual fluctuations in our operating results or those of other companies in our industry, investor perception of our company and the aerospace consumables and energy technical services industries, market fluctuations and general economic conditions. In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the performance of many stocks and that have often been unrelated or disproportionate to the operating performance of these companies. These are just some of the factors that may adversely affect the market price of our common stock. See "Risk Factors—Risks Relating to Our Common Stock" for further discussion of risks relating to the trading prices of our common stock.

Treatment of Equity Awards

        B/E Aerospace has outstanding equity awards relating to its common stock in the form of restricted stock units and restricted stock granted under the 2005 Long-Term Incentive Plan. In addition, B/E Aerospace directors hold deferred share units under the Amended and Restated Non-Employee Directors Stock and Deferred Compensation Plan. Pursuant to the Employee Matters Agreement between us and B/E Aerospace, B/E Aerospace will continue to maintain the 2005 Long-Term Incentive Plan, the Amended and Restated Non-Employee Directors Stock and Deferred Compensation Plan on and after the distribution date, and we will establish a separate stock compensation plan (the "KLX Stock Plan").

        We anticipate that the outstanding B/E Aerospace equity awards held by employees who will transfer employment to KLX will be converted to equity awards with respect to KLX common stock and the outstanding B/E Aerospace equity awards held by employees who will continue employment with B/E Aerospace will remain equity awards with respect to B/E Aerospace common stock and will be equitably adjusted. At or following the distribution, each outstanding time-based restricted stock award, restricted stock unit and deferred share unit that is held by a continuing B/E Aerospace employee or a continuing B/E Aerospace non-employee director will continue as a B/E Aerospace restricted stock award, restricted stock unit or deferred share unit, as applicable, each appropriately adjusted to preserve the intrinsic value of the original award as of the distribution date. Each outstanding time-based B/E Aerospace restricted stock award and restricted stock unit held by a B/E Aerospace employee who will become a KLX employee after completion of the distribution will be converted into a similar KLX restricted stock award or restricted stock unit, as applicable, each appropriately adjusted to preserve the intrinsic value of the original award. Generally, each time-based B/E Aerospace equity award will be subject to the same terms and conditions as were in effect prior to the distribution. Performance-based vesting equity awards will also be adjusted, and, if applicable, assumed and converted in the same manner as described above, and will remain subject to the same terms and conditions as were in effect prior to the distribution, except that performance goals for any portion of the performance period after the distribution will be set by the KLX Compensation Committee for employees transferring to KLX and by the B/E Aerospace Compensation Committee for

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employees continuing employment with B/E. All outstanding equity awards held by Amin Khoury will be treated as though Mr. Khoury were solely an employee of B/E Aerospace following the distribution.

        See "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off—Employee Matters Agreement" for more information.

Debt Incurrence

        We expect that, in connection with the spin-off, we will incur indebtedness in an amount estimated to be approximately $1.2 billion by an issuance of senior unsecured notes, of which we will distribute up to $750 million to B/E Aerospace, leaving KLX with expected net proceeds of approximately $430 million after transaction costs. B/E Aerospace will use the funds so received, together with funds B/E Aerospace expects to raise through new borrowing, to retire all or substantially all of B/E Aerospace's existing indebtedness and pay related fees and expenses. KLX will use the net proceeds for general corporate purposes, including approximately $102 million to settle deferred payments associated with acquisitions we made in 2014. B/E Aerospace's board of directors has determined that this will result in each company being capitalized in a manner that is most appropriate given its particular business, strategy and cash flow profile.

Conditions to the Spin-Off

        We expect that the spin-off will be effective as of 11:59 p.m., Eastern time, on December 16, 2014, the distribution date, provided that the following conditions shall have been either satisfied or waived by B/E Aerospace:

    the board of directors of B/E Aerospace, in its sole and absolute discretion, shall have authorized and approved the spin-off (including the internal reorganization) and not withdrawn such authorization and approval, and shall have declared the dividend of our common stock to B/E Aerospace shareholders;

    the Separation and Distribution Agreement and each ancillary agreement contemplated by the Separation and Distribution Agreement shall have been executed by each party thereto;

    our registration statement on Form 10, of which this information statement is a part, shall have become effective under the Exchange Act, no stop order suspending that effectiveness shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the SEC;

    our common stock shall have been accepted for listing on NASDAQ or another national securities exchange approved by B/E Aerospace, subject to official notice of issuance;

    the transfer of the aerospace consumables and energy technical services businesses to KLX (including the internal reorganization (as described in "The Spin-Off—Manner of Effecting the Spin-Off—Internal Reorganization"), the issuance of KLX stock to B/E Aerospace and the payment by KLX of the cash proceeds contemplated to be paid to B/E Aerospace shall have been completed;

    B/E Aerospace shall have received an opinion of Shearman & Sterling LLP, which shall remain in full force and effect at the time of distribution, to the effect that the distribution, together with certain related transactions, will qualify as a tax-free reorganization for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, and such opinion shall be in form and substance satisfactory to B/E Aerospace, in its sole discretion;

    this information statement shall have been mailed to the B/E Aerospace shareholders;

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    KLX's amended and restated certificate of incorporation and bylaws, each in the form filed as exhibits to the Form 10 of which this information statement is a part, shall be in effect;

    KLX's board of directors shall consist of the individuals identified in this information statement as directors of KLX;

    arrangements shall have been made to ensure that, except for Amin Khoury, no individual who will be an officer or employee of KLX or any of its subsidiaries immediately following the distribution will remain a director, officer or employee of B/E Aerospace or any of its non-KLX subsidiaries immediately following the distribution, and, except for Amin Khoury, no individual who will be an officer or employee of B/E Aerospace or any of its non-KLX subsidiaries immediately following the distribution will remain an officer or director of KLX or any of its subsidiaries immediately following the distribution;

    any debt financing contemplated to be obtained in connection with the spin-off shall have been obtained and be in full force and effect;

    no order, injunction or decree of any governmental authority of competent jurisdiction that would prevent the consummation of the distribution shall be in effect, no other legal restraint or prohibition preventing consummation of the distribution shall be in effect and no other event outside the control of B/E Aerospace shall have occurred or failed to occur that would prevent the consummation of the distribution;

    any material governmental approvals and other consents necessary to consummate the spin-off shall have been obtained; and

    no event or development shall have occurred prior to the distribution that, in the judgment of the board of directors of B/E Aerospace, would result in the distribution having a material adverse effect on B/E Aerospace or its shareholders.

        The fulfillment of the foregoing conditions will not create any obligation on B/E Aerospace's part to effect the spin-off. Except as described in the foregoing conditions, we are not aware of any material federal or state regulatory requirements that must be complied with or any material approvals that must be obtained. B/E Aerospace has the right not to complete the spin-off if, at any time prior to the distribution, the board of directors of B/E Aerospace determines, in its sole discretion, that the spin-off is not in the best interests of B/E Aerospace or its shareholders or that it is not advisable for us to separate from B/E Aerospace.

Reason for Furnishing this Information Statement

        We are furnishing this information statement to you, as a B/E Aerospace shareholder entitled to receive shares of our common stock in the spin-off, for the sole purpose of providing you with information about us. This information statement is not, and you should not consider it, an inducement or encouragement to buy, hold or sell any of our securities. We believe that the information in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither B/E Aerospace nor we undertake any obligation to update the information except in the normal course of our respective public disclosure obligations.

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DIVIDEND POLICY

        We do not currently intend to pay dividends. Our Board will establish our dividend policy based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board considers relevant. We anticipate that the terms of the debt agreements that we expect to enter into in connection with the spin-off will contain restrictions on our ability to pay dividends. The terms of agreements governing debt that we may incur in the future may also limit or prohibit dividend payments. Accordingly, we cannot assure you that we will either pay dividends in the future or continue to pay any dividend that we may commence in the future.

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CAPITALIZATION

        The following table presents our cash and cash equivalents and capitalization as of September 30, 2014 on a historical basis and on a pro forma basis as of that date reflecting the spin-off and the related transactions and events described in this information statement as if the spin-off and the related transactions and events had occurred on September 30, 2014.

        The capitalization table below may not reflect the capitalization or financial condition that would have resulted had we been operated as a separate, independent entity at that date or our future capitalization or financial condition.

        You should read the table below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical combined financial statements and accompanying notes included elsewhere in this information statement.

 
  As of September 30, 2014  
 
  Historical   Pro Forma  
 
  (in millions)
 

Cash and cash equivalents(1)

  $ 37.2   $ 466.2  
           
           

Indebtedness:

             

Senior unsecured notes

      $ 1,200.0  

Secured revolving credit facility

   
   
 
           

Total indebtedness

        1,200.0  
           

Equity:

             

Parent company investment

    3,375.8      

Accumulated other comprehensive income

    14.1      

Common stock(2)

        0.5  

Additional paid-in capital(2)

        2,639.4  
           

Total equity

    3,389.9     2,639.9  
           

Total capitalization

  $ 3,389.9   $ 3,839.9  
           
           

(1)
Cash and cash equivalents is expected to increase by $429.0 million as a result of the proceeds from the issuance of $1,200.0 million of senior unsecured notes net of a distribution of $750 million to B/E Aerospace and $21.0 million of debt issuance costs.

(2)
For purposes of pro forma presentation, we assumed approximately 53 million shares of KLX Inc. common stock were issued at a par value of $0.01 per share determined using the one-to-two distribution ratio to Parent's 105.9 million common shares outstanding at September 30, 2014. Additional paid-in capital of $2,639.4 million resulted from the elimination of approximately $3,389.9 million of parent company equity and accumulated other comprehensive income offset by the distribution of $750 million to B/E Aerospace and the $0.5 million of common stock discussed previously.

        KLX has not yet finalized its post-spin-off capitalization. The above pro forma financial information reflects our estimated post-spin-off capitalization. We currently expect that, in connection with the spin-off, we will incur indebtedness in an amount estimated to be approximately $1,200.0 million by an issuance of senior unsecured notes, of which we will distribute up to $750 million to B/E Aerospace, leaving KLX with expected net proceeds of approximately $430 million after transaction costs. KLX will use the net proceeds for general corporate purposes, including approximately $102 million to settle deferred payments associated with acquisitions we made in 2014. We also expect to establish a $500 million secured revolving credit facility for general corporate purposes, none of which is expected to be outstanding on the distribution date. We cannot assure you that we will be able to enter into this new secured revolving credit facility on favorable terms or at all.

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SELECTED HISTORICAL COMBINED FINANCIAL DATA

        The following tables present a summary of selected historical combined financial data for the periods indicated below. We derived the selected historical condensed combined statements of earnings data for the nine months ended September 30, 2014 and 2013 and the balance sheet data as of September 30, 2014 from our unaudited condensed combined financial statements included elsewhere in this information statement. We derived the selected historical condensed combined balance sheet data as of September 30, 2013 from our unaudited condensed combined balance sheets that are not included in this information statement. We derived the selected historical combined financial data as of December 31, 2013 and 2012, and for each of the fiscal years in the three-year period ended December 31, 2013, from our audited combined financial statements included elsewhere in this information statement. We derived the selected historical combined financial data as of December 31, 2011, and as of and for the fiscal years ended December 31, 2010 and 2009, from B/E Aerospace's accounting records. In our management's opinion, the unaudited combined financial statements have been prepared on the same basis as the audited combined financial statements and include all adjustments, consisting only of ordinary recurring adjustments, necessary for a fair presentation of the information for the periods presented. The selected historical condensed combined financial data as of and for the nine months ended September 30, 2014 and 2013 are not necessarily indicative of the results that may be obtained for a full year.

        The historical combined statements of earnings and comprehensive income reflect allocations of general corporate expenses from B/E Aerospace including, but not limited to, executive management, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, procurement, and other shared services. The allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues generated, costs incurred, headcount or other measures. Our management and the management of B/E Aerospace consider these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to KLX. The allocations may not, however, reflect the expense we would have incurred as a stand-alone company for the periods presented. Actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.

        The financial statements included in this information statement may not necessarily reflect our financial position, results of operations and cash flows as if we had operated as a stand-alone public company during all periods presented. Accordingly, our historical results should not be relied upon as an indicator of our future performance.

        In presenting the financial data in conformity with GAAP, we are required to make estimates and assumptions that affect the amounts reported. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies," included elsewhere in this information statement for detailed discussion of the accounting policies that we believe require subjective and complex judgments that could potentially affect reported results.

        The following selected historical financial and other data should be read in conjunction with "Capitalization," "Unaudited Pro Forma Condensed Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Certain Relationships and Related

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Party Transactions" and our audited and unaudited combined financial statements and related notes included elsewhere in this information statement.

 
  Year Ended December 31,   Nine-Month Period
Ended September 30,
 
 
  2013   2012   2011   2010   2009   2014   2013  
 
  (in millions)
  (in millions)
 

Statements of Earnings Data:

                                           

Revenues

  $ 1,291.6   $ 1,180.7   $ 947.3   $ 778.4   $ 798.5   $ 1,255.0   $ 967.2  

Cost of sales

    872.8     803.5     635.9     510.4     539.0     872.6     650.8  

Selling, general and administrative

    180.3     159.3     129.4     114.8     108.4     167.5 (1)   131.4  
                               

Operating earnings

    238.5     217.9     182.0     153.2     151.1     214.9 (1)   185.0  

Operating margin

    18.5 %   18.5 %   19.2 %   19.7 %   18.9 %   17.1 %   19.1 %

Other (income) expense, net

    (1.0 )   0.2     (3.8 )   2.1         (0.3 )   (0.9 )
                               

Earnings before income taxes

    239.5     217.7     185.8     151.1     151.1     215.2     185.9  

Income tax expense

    89.1     80.8     69.3     55.6     55.9     94.5     69.2  
                               

Net earnings

  $ 150.4   $ 136.9   $ 116.5   $ 95.5   $ 95.2     120.7     116.7  
                               
                               

Balance Sheet Data (end of period):

                                           

Working capital

  $ 1,366.1   $ 1,300.3   $ 1,080.5   $ 1,056.7   $ 907.3   $ 1,375.3   $ 1,391.2  

Goodwill, intangible and other assets, net

    1,417.6     1,349.4     768.4     763.5     692.6     1,806.8     1,382.7  

Total assets

    3,064.0     2,845.9     2,017.5     1,976.2     1,716.8     3,824.2     3,033.8  

Stockholders' equity

    2,798.7     2,635.5     1,878.0     1,864.8     1,611.3     3,389.9     2,823.9  

Other Data:

                                           

Depreciation and amortization

  $ 27.8   $ 22.8   $ 16.9   $ 14.7   $ 13.7   $ 47.3   $ 19.8  

(1)
Includes approximately $16.3 of business separation and acquisition-related costs ($14.0 in 2013).

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UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

        The following unaudited pro forma combined financial statements (together with the related notes) should be read in conjunction with the sections entitled "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," our historical annual and interim combined financial statements and accompanying notes included elsewhere within this information statement.

        The unaudited pro forma combined financial statements set forth below are based on and have been derived from our historical annual and interim combined financial statements, including the unaudited combined balance sheet as of September 30, 2014, the unaudited combined statement of earnings and comprehensive income for the nine months ended September 30, 2014, and the audited combined statement of earnings and comprehensive income for the fiscal year ended December 31, 2013, which are included elsewhere within this information statement. Our historical combined financial statements include allocations of certain expenses from B/E Aerospace, including expenses for costs related to functions such as treasury, tax, accounting, legal, internal audit, human resources, public and investor relations, general management, real estate, shared information technology systems, corporate governance activities and centrally managed employee benefit arrangements. These costs may not be representative of the future costs we will incur as an independent, public company, and do not include certain additional costs we may incur as an independent public company.

        The unaudited pro forma combined statements of earnings for the nine months ended September 30, 2014 and the fiscal year ended December 31, 2013 give effect to the spin-off as if it had occurred on January 1, 2013. The unaudited pro forma combined balance sheet gives effect to the spin-off as if it had occurred on September 30, 2014. In management's opinion, the unaudited pro forma combined financial statements reflect adjustments that are both necessary to present fairly the unaudited pro forma combined statement of earnings and the unaudited combined financial position of our business as of and for the periods indicated and that the pro forma adjustments are based on currently available information and assumptions we believe are reasonable, factually supportable, directly attributable to our separation from B/E Aerospace, and for purposes of the statements of earnings, are expected to have a continuing impact on us.

        The unaudited pro forma combined financial statements are not necessarily indicative of what our results from operations or financial position would have been had the spin-off occurred on the dates indicated. The unaudited pro forma combined financial statements also should not be considered indicative of our future results of operations or financial position as an independent, public company.

        The following unaudited pro forma combined statement of earnings and unaudited pro forma combined balance sheet give pro forma effect to the following:

    the completion by B/E Aerospace of an internal reorganization and a contribution to KLX, as a result of which we will own, directly or indirectly, the operations comprising and the entities that conduct B/E Aerospace's aerospace consumables and energy technical services businesses, including all liabilities of such businesses at the distribution date;

    the distribution of our common stock to B/E Aerospace shareholders (assuming a one to two distribution ratio); and

    our incurrence of $1.2 billion of indebtedness by an issuance of senior unsecured notes and the distribution of $750 million of the net proceeds related thereto to B/E Aerospace.

        As a stand-alone public company, we expect to incur additional recurring costs. Our preliminary estimates of the recurring costs expected to be incurred annually are approximately $20 million higher than the expenses historically allocated to us from B/E Aerospace. In connection with the spin-off, we are bringing some of the functions that were previously provided to us through corporate allocations

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from B/E Aerospace in-house. In addition, we will enter into certain agreements with B/E Aerospace relating to transition services and IT services for a transitional period of approximately 24 months following the distribution. We currently estimate that the annual charges we will incur under those agreements for services provided to us by B/E Aerospace will be approximately $10 million. However, as noted above, we expect that due to the additional costs associated with being a stand-alone public company, our total recurring costs will be approximately $20 million higher annually than the expenses historically allocated to us from B/E Aerospace. In addition, we will enter into an Employee Matters Agreement and a tax sharing and indemnification agreement with B/E Aerospace in connection with the spin-off. We do not expect those agreements to have a material effect on our financial statements. For a description of the material terms of our agreements with B/E Aerospace following the spin-off, see "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off."

        The significant assumptions involved in determining our estimates of recurring costs of being a stand-alone public company include:

    costs to perform financial reporting, tax, regulatory compliance, corporate governance, audit, Sarbanes-Oxley compliance, treasury, legal, internal audit, and investor relations activities;

    compensation, including equity-based awards, and benefits with respect to incremental corporate level executive positions such as CEO, President & COO, Vice President—CFO and Treasurer, Vice President—Law and Human Resources;

    inefficiencies associated with obtaining insurance coverage for smaller businesses;

    costs under a Transition Services Agreement and an IT Services Agreement with B/E Aerospace;

    depreciation and amortization related to information technology infrastructure investments; and

    the type and level of other costs expected to be incurred.

        No pro forma adjustments have been made to our financial statements to reflect the additional costs and expenses described above because they are projected amounts based on judgmental estimates and would not be factually supportable.

        We currently estimate non-recurring expenses that we will incur during our transition to being a stand-alone public company to be approximately $25 million. We have not adjusted the accompanying unaudited pro forma combined statements of earnings for these estimated expenses as they are not expected to have an ongoing impact on our operating results. We anticipate that substantially all of these expenses will be incurred within 18 months of the distribution. These expenses primarily relate to the following:

    accounting, tax and other professional costs pertaining to our separation and establishment as a stand-alone public company;

    recruiting and relocation costs associated with hiring key senior managers;

    costs related to establishing our new brand in the marketplace; and

    costs to establish separate information systems.

        Due to the scope and complexity of these activities, the amount of these costs could increase or decrease materially and the timing of incurrence could change.

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KLX INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014

(In millions, except per share data)

 
  Historical   Financing
Adjustments
  Note   Other
Pro Forma
Adjustments
  Note   Pro Forma  

Product revenues

  $ 993.2   $         $         $ 993.2  

Services revenues

    261.8                         261.8  
                           

Total revenues

    1,255.0                         1,255.0  
                           

Cost of sales—products

    693.0                         693.0  

Cost of sales—services

    179.6                         179.6  
                           

Total cost of sales

    872.6                         872.6  

Selling, general and administrative

    167.5               (16.3 )     (2)   151.2  
                           

Operating earnings

    214.9               16.3           231.2  

Interest expense

    (0.3 )   56.8       (1)             56.5  
                           

Earnings before income taxes

    215.2     (56.8 )         16.3           174.7  

Income tax expense

    94.5     (21.9 )     (1)   2.0       (2)   74.6  
                           

Net earnings

  $ 120.7   $ (34.9 )       $ 14.3         $ 100.1  
                               
                               

Pro forma net earnings per common share:

                                     

Basic

                                $ 1.89  

Diluted

                                $ 1.89  

Weighted average common shares:

                                     

Basic

                                  53.0  

Diluted

                                  53.0  

   

See accompanying notes to unaudited pro forma combined financial statements.

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KLX INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS

FOR THE YEAR ENDED DECEMBER 31, 2013

(In millions, except per share data)

 
  Historical   Financing
Adjustments
  Note   Other
Pro Forma
Adjustments
  Note   Pro Forma  

Revenues

  $ 1,291.6   $         $         $ 1,291.6  

Cost of sales

    872.8                         872.8  

Selling, general and administrative

    180.3                         180.3  
                           

Operating earnings

    238.5                         238.5  

Interest expense

    (1.0 )   75.7       (1)             74.7  
                           

Earnings before income taxes

    239.5     (75.7 )                   163.8  

Income tax expense

    89.1     (29.1 )     (1)             60.0  
                           

Net earnings

  $ 150.4   $ (46.6 )       $         $ 103.8  
                               
                               

Pro forma net earnings per

                                     

Basic

                                $ 1.96  

Diluted

                                $ 1.96  

Weighted average common

                                     

Basic

                                  53.0  

Diluted

                                  53.0  

   

See accompanying notes to unaudited pro forma combined financial statements.

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KLX INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2014

(In millions)

 
  Historical   Financing
Adjustments
  Note   Other Pro
Forma
Adjustments
  Note   Pro Forma  

ASSETS

                                     

Current assets:

                                     

Cash and cash equivalents

  $ 37.2   $ 1,179.0       (3) $ (750.0 )     (4) $ 466.2  

Accounts receivable

    330.0                         330.0  

Inventories

    1,298.0                         1,298.0  

Deferred income taxes

    20.3                         20.3  

Other current assets

    29.0                         29.0  
                           

Total current assets

    1,714.5     1,179.0           (750.0 )         2,143.5  
                           

Property and equipment

    295.2                         295.2  

Goodwill

    1,380.3                         1,380.3  

Identifiable intangible assets

    426.5                         426.5  

Other assets

    7.7     21.0       (3)             28.7  
                           

  $ 3,824.2   $ 1,200.0         $ (750.0 )       $ 4,274.2  
                           
                           

LIABILITIES AND PARENT COMPANY EQUITY

                                     

Current liabilities:

                                     

Accounts payable

  $ 175.4   $         $         $ 175.4  

Accrued liabilities

    163.8                         163.8  
                           

Total current liabilities

    339.2                         339.2  
                           

Deferred income taxes

    83.9                         83.9  

Other non-current liabilities

    11.2                         11.2  

Long-term debt

        1,200.0       (3)             1,200.0  

Equity:

                                     

Common Stock

                  0.5       (5)   0.5  

Additional paid-in capital

                  2,639.4       (4)(5)   2,639.4  

Parent company investment

    3,375.8               (3,375.8 )     (5)    

Accumulated other comprehensive income

    14.1               (14.1 )     (5)    
                           

Total equity

    3,389.9               (750.0 )         2,639.9  
                           

  $ 3,824.2   $ 1,200.0         $ (750.0 )       $ 4,274.2  
                           
                           

   

See accompanying notes to unaudited pro forma combined financial statements.

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KLX INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

(1)
The adjustment to our historical interest expense for the nine months ended September 30, 2014 and the fiscal year ended December 31, 2013 to give effect to the issuance of $1.2 billion of 5.875% senior unsecured notes and the planned $500 million secured revolving credit facility in connection with the separation is presented below.

 
  Nine Months
Ended
September 30, 2014
  Year Ended
December 31, 2013
 
 
  (In millions)
 

Interest on $1.2 billion of borrowings

  $ 52.9   $ 70.5  

Amortization of debt issuance costs and commitment fees on secured revolving credit facility

    3.9     5.2  
           

Total pro forma adjustments to interest expense

  $ 56.8   $ 75.7  
           
           

    The target outstanding balance of borrowings at the time of the spin-off will be determined by senior management based on a review of a number of factors including credit rating considerations, forecasted liquidity and capital requirements, expected operating results and general economic conditions. Cash on hand following the separation is expected to be used for general corporate purposes.

    The adjustments for borrowings were tax effected using an incremental tax rate of 38.5% based on the blended federal and statutory income tax rates.

(2)
Reflects the elimination of non-recurring separation costs of approximately $11.2 million and acquisition costs of approximately $5.1 million related to the spin-off of KLX to B/E Aerospace shareholders that were incurred during the historical period. These costs were primarily for legal, tax and accounting fees, and other related expenses. The separation costs were non-deductible for tax purposes, and acquisition costs were taxed at 38.5% based on the blended federal and statutory income tax rates.

(3)
The adjustment to cash reflects the issuance of $1.2 billion of senior unsecured notes net of debt issuance costs of $21.0 million. The debt issuance costs are capitalized as other assets and are amortized over eight years, the term of the notes.

(4)
Reflects the distribution to Parent of $750 million.

(5)
The adjustment to common stock, additional-paid-in capital and parent company investment represents: (a) the elimination of approximately $3.39 billion of parent company investment and accumulated other comprehensive income, (b) the $750 million distribution to Parent and (c) the establishment of our capital structure. For purposes of these unaudited pro forma combined financial statements, we assumed approximately 53.0 million shares of KLX Inc. common stock were issued at a par value of $0.01 per share determined using the one-to-two distribution ratio to

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KLX INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (Continued)

    Parent's 105.9 million common shares outstanding at September 30, 2014. The preceding information presented in tabular form is as follows:

Eliminate Parent company investment and accumulated other comprehensive income in KLX to reflect distribution of KLX common stock to Parent's shareholders

  $ 3,389.9  

Distribution to Parent

    (750.0 )

Common stock, $.01 par value; 53.0 million shares issued using the one-to-two distribution ratio to Parent's 105.9 million common shares outstanding at September 30, 2014

    (0.5 )
       

Pro forma recapitalization of KLX equity—additional paid-in capital

  $ 2,639.4  
       
       

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        You should read the following discussion of our results of operations and financial condition together with our audited and unaudited historical combined financial statements and accompanying notes that we have included elsewhere in this information statement as well as the discussion in the section of this information statement entitled "Business." This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on our current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those we discuss in the sections of this information statement entitled "Risk Factors" and "Special Note About Forward-Looking Statements."

        Our combined financial statements, which we discuss below, reflect our historical financial condition, results of operations and cash flows. The financial information discussed below and included in this information statement, however, may not necessarily reflect what our financial condition, results of operations or cash flows would have been had we been operated as a separate, independent entity during the periods presented, or what our financial condition, results of operations and cash flows may be in the future.

        In this section, dollar amounts are shown in millions, except for per share data or as otherwise specified.

The Spin-off

        On November 25, 2014, the board of directors of B/E Aerospace approved the distribution of KLX common stock in the spin-off. Upon completion of the spin-off, B/E Aerospace shareholders will own 100% of the outstanding shares of common stock of KLX. The distribution of the KLX common stock is intended to be tax-free to us and our initial shareholders for U.S. federal income tax purposes (other than with respect to any cash received in lieu of fractional shares).

        We currently estimate expenses that we will incur during our transition to being a stand-alone public company to be approximately $25. We anticipate that substantially all of these expenses will be incurred within 18 months of the distribution. These expenses primarily relate to accounting, tax, and professional costs, costs related to hiring new executives, branding for the new company, and costs related to information technology and systems. We also expect to record a business repositioning charge during the fourth quarter of 2014 of approximately $26 related to a number of planned facility consolidations, rationalization of headcount, employee transfers and other related costs and expenses.

        Selling, general and administrative ("SG&A") expense includes allocations of general corporate expenses from B/E Aerospace. The historical combined statements of earnings and comprehensive income reflect allocations of general corporate expenses from B/E Aerospace including, but not limited to, executive management, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, procurement, and other shared services. The allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues generated, costs incurred, headcount or other measures. Our management and the management of B/E Aerospace consider these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to KLX. The allocations may not, however, reflect the expense we would have incurred as a stand-alone company for the periods presented. Actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. Please see Note 1 of the Combined Financial Statements, "Description of Business and Summary of Significant Accounting Policies—Basis of Presentation," for a description of the costs allocated, the

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methods of allocation, the reasons for the allocations, and how future actual costs may differ from the amounts allocated under the ownership of our Parent.

        As a stand-alone public company, we expect to incur additional recurring costs. Our preliminary estimates of the recurring costs expected to be incurred annually are approximately $20 higher than the expenses historically allocated to us from B/E Aerospace. In connection with the spin-off, we are bringing some of the functions that were previously provided to us through corporate allocations from B/E Aerospace in-house. In addition, we will enter into certain agreements with B/E Aerospace relating to transition services and IT services for a transitional period of approximately 24 months following the distribution. We currently estimate that the annual charges we will incur under those agreements for services provided to us by B/E Aerospace will be approximately $10. However, as noted above, we expect that due to the additional costs associated with being a stand-alone public company, our total recurring costs will be approximately $20 higher annually than the expenses historically allocated to us from B/E Aerospace. In addition, we will enter into an Employee Matters Agreement and a tax sharing and indemnification agreement with B/E Aerospace in connection with the spin-off. This transitional support will enable KLX, Inc. to establish its stand-alone processes for various activities that were previously provided by B/E Aerospace and does not constitute significant continuing support of KLX, Inc.'s operations. We do not expect those agreements to have a material effect on our financial statements. For a description of the material terms of our agreements with B/E Aerospace following the spin-off, see "Certain Relationships and Related Party Transactions—Agreements with B/E Aerospace Related to the Spin-Off."

        We also expect to enter into new financing arrangements in connection with the spin-off. See "—Liquidity and Capital Resources—New Financing Arrangements."

Company Overview

        We believe, based on our experience in the industry, that we are the world's leading distributor and value-added service provider of aerospace fasteners and consumables, and that we offer one of the broadest ranges of aerospace hardware and consumables and inventory management services worldwide. Through organic growth and a number of strategic acquisitions beginning in 2001, we believe we have become our industry's leading provider of aerospace fasteners, consumable products and supply chain management services. Through our global facilities network and advanced information technology systems, we offer unparalleled service to commercial airliners, business jet and defense OEMs, airlines, MRO operators, and FBOs. With a large and diverse global customer base, including virtually all of the world's commercial airliners, business jet and defense OEMs, OEM subcontractors, major airlines and major MRO operators across five continents, we provide access to over one million SKUs. We serve as a distributor for every major aerospace fastener manufacturer. In order to support our vast range of custom products and services, we have invested over $100 in proprietary IT systems to create a superior technology platform. Our systems support both internal distribution processes and part attributes, along with customer services, including JIT deliveries and kitting solutions, which we believe are unmatched by any competitor. This business is operated within our ASG segment.

        In 2013, we initiated an expansion into the energy sector. Over the past two years, we have acquired seven companies in the rapidly growing business of providing technical and logistics services and related rental equipment to oil and gas exploration and production companies. As a result, we now provide a broad range of technical solutions and equipment that brings value-added resources to a new customer base, often in remote locations. Our customers include independent and major oil and gas companies that are engaged in the E&P and development of oil and gas properties in North America, including in the Northeast (Marcellus and Utica Shale), Rocky Mountains (Bakken and Piceance Basins), Southwest (Permian Basin and Eagle Ford) and Mid-Continent. This business is operated within our ESG segment.

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        We generally derive our revenues from aerospace products and consumable products for both the new build market and the aftermarket. For the nine month periods ended September 30, 2014 and 2013 and each of the years in the three year period ended December 31, 2013, approximately 39%, 40%, 41%, 35% and 34% of our revenues, respectively, were derived from the aftermarket. While military customers, specifically defense OEMs, have made up a significant share of ASG revenues historically, this share began to decline from approximately 16% in 2012 to approximately 14% in 2013 and for the nine months ended September 30, 2014 as a result of reductions in defense spending, including under the sequestration program.

        Revenues for the nine month periods ended September 30, 2014 and 2013 and for each of the years in the three-year period ended December 31, 2013 were $1,255.0, $976.2, $1,291.6, $1,180.7 and $947.3, respectively.

        Substantially all of our sales and purchases are denominated in U.S. dollars. Revenues by domestic and foreign operations for the nine month periods ended September 30, 2014 and 2013 and the years ended December 31, 2013, 2012 and 2011 were as follows:

 
  Nine Months Ended
September 30,
  Year Ended
December 31,
 
 
  2014   2013   2013   2012   2011  

Domestic

  $ 1,111.7   $ 828.9   $ 1,116.6   $ 1,044.4   $ 854.3  

Foreign

    143.3     138.3     175.0     136.3     93.0  
                       

Total revenues

  $ 1,255.0   $ 967.2   $ 1,291.6   $ 1,180.7   $ 947.3  
                       
                       

        Revenues by geographic region (based on destination) for the nine month periods ended September 30, 2014 and 2013 and for each of the years in the three-year period ended December 31, 2013 were as follows:

 
  Nine Months Ended September 30,   Year Ended December 31,  
 
  2014   2013   2013   2012   2011  
 
  Revenues   % of
Revenues
  Revenues   % of
Revenues
  Revenues   % of
Revenues
  Revenues   % of
Revenues
  Revenues   % of
Revenues
 

U.S. 

  $ 817.3     65.1 % $ 568.4     58.8 % $ 749.1     58.0 % $ 733.2     62.1 % $ 686.9     72.5 %

Europe

    280.5     22.4 %   258.4     26.7 %   350.6     27.1 %   294.2     24.9 %   208.4     22.0 %

Asia, Pacific Rim, Middle East and other

    157.2     12.5 %   140.4     14.5 %   191.9     14.9 %   153.3     13.0 %   52.0     5.5 %
                                           

Total revenues

  $ 1,255.0     100.0 % $ 967.2     100.0 % $ 1,291.6     100.0 % $ 1,180.7     100.0 % $ 947.3     100.0 %
                                           
                                           

        Founded in 1974 as M&M Aerospace Hardware, KLX, formerly the consumables management segment of B/E Aerospace, Inc. (our parent company), has evolved into an industry leader through multiple acquisitions and strong organic growth. As of September 30, 2014, ASG's global presence consists of more than 1.2 million square feet in 20 principal facilities with approximately 2,000 employees worldwide. We have substantially expanded the size, scope and nature of our business as a result of a number of acquisitions. B/E Aerospace acquired M&M in 2001. Between 2002 and 2011, we completed 4 acquisitions, for an aggregate purchase price of approximately $1.2 billion. We believe our organic growth together with these acquisitions enabled us to position ourselves as a preferred global supplier to our customers.

        In January 2012, we acquired UFC, a leading provider of complex supply chain management and inventory logistics solutions, for a net purchase price of approximately $405. In July 2012, we acquired Interturbine for a net purchase price of approximately $245. Interturbine's product range includes chemicals, lubricants, hydraulic fluids, adhesives, coatings and composites. Interturbine also supplies

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fasteners, cables and wires, electronic components, electrical and electromechanical materials, tools, hot bonding equipment and ground equipment to its primary customer base of airlines and MROs globally.

        The Company initiated an expansion into the oilfield support services and associated rental equipment business during the second half of 2013. During the third and fourth quarters of 2013, we acquired the assets of Blue Dot Energy Services, LLC ("Blue Dot") and Bulldog Frac Rentals, LLC ("Bulldog"), providers of on-site services, parts distribution, and rental equipment to the oil and gas industry, for a net purchase price of $114.0. As a result of these transactions, we established our oilfield support services and associated rental equipment businesses in both the northeast and southwest regions of the United States.

        In January 2014, we acquired the assets of the LT Energy Services group of companies, an Eagle Ford Basin-based provider of rental equipment and services, for a net purchase price of approximately $102.5. In February 2014, we acquired the assets of Wildcat Wireline LLC ("Wildcat Wireline"), a provider of wireline services primarily in the Eagle Ford Basin, and also in the Marcellus/Utica Basin for a net purchase price of approximately $153.4.

        In April 2014, we acquired the assets of Vision Oil Tools, LLC, a provider of oilfield support services and associated rental equipment. Vision established a new geographical base of operations for us in the North Dakota (Williston/Bakken) and Rocky Mountain regions. The purchase price was approximately $140.7 with the potential for an additional $35.0 in 2015 if certain 2014 financial results are achieved. In April 2014, we acquired the assets of the Marcellus group of companies ("MGS"), an oilfield support services and associated rental equipment business based in the northeast U.S. In June 2014, we acquired the assets of the Cornell group of companies ("Cornell"), an oilfield support services and associated rental equipment business based in the southwest U.S. The combined net purchase price of acquiring MGS and Cornell is approximately $115.7 with the potential for an additional $67.0 in 2015 if certain 2014 financial results are achieved.

        Through these energy services acquisitions, we have established a base of North American operations from which we are able to offer our oilfield support services and associated rental equipment in the major oil and gas regions of the U.S., including, Northeastern U.S., Southwestern U.S., North Dakota and Rocky Mountains.

        The Company is organized based on the products and services it offers. As a result of the recent acquisitions, we determined that ASG and ESG met the requirements of a reportable segment and that ESG's operations in 2013 were immaterial. Each segment regularly reports its results of operations and makes requests for capital expenditures and acquisition funding to the Company's chief operational decision-making group. Each operating segment has separate management teams and infrastructures dedicated to providing a full range of products and services to their customers.

Nine Months Ended September 30, 2014, as Compared to Nine Months Ended September 30, 2013

        The following is a summary of revenues by segment:

 
  Revenues   Pro Forma Revenues  
Segment
  2014   2013   % Change   PF 2014   PF 2013   % Change  

Aerospace Solutions Group

  $ 993.2   $ 959.1     3.6 % $ 993.2   $ 959.1     3.6 %

Energy Services Group

    261.8     8.1     3,132.1 %   328.7     237.5     38.4 %
                               

Total

  $ 1,255.0   $ 967.2     29.8 % $ 1,321.9   $ 1,196.6     10.5 %
                               
                               

        Revenues for the nine months ended September 30, 2014 were $1,255.0, an increase of 29.8% as compared with the same period of the prior year, primarily as a result of our expansion into the oilfield support services and associated rental equipment business.

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        Cost of sales for the nine months ended September 30, 2014 was $872.6 (69.5% of revenues) and increased by $221.8, or 34.1%, on the 29.8% increase in revenues. The lower gross margin is primarily the result of start-up costs associated with a number of ASG's recently awarded long-term customer contracts, which typically carry lower margins in the early stages of the contracts until we are able to procure the parts in a more cost-effective manner and in quantities which result in more customary margins. We expect these new programs will negatively impact its operating margins over approximately the next twelve months.

        SG&A expense includes allocations of general corporate expenses from B/E Aerospace, Inc. SG&A expenses for the nine months ended September 30, 2014 were $167.5, or 13.3% of revenues, as compared with $131.4, or 13.6% of revenues, in the prior year period. The higher level of SG&A expense in the current year is primarily due to costs and expenses associated with the 29.8% increase in revenues and $5.1 of acquisition costs and business separation costs of approximately $11.2 ($14.0 in the prior year).

        Operating earnings for the nine months ended September 30, 2014 were $214.9, an increase of 16.2%, and operating margin of 17.1% decreased by 200 basis points as compared with the prior year period primarily due to the 29.8% increase in revenues offset by acquisition and business separation costs of $16.3 and the aforementioned phase-in activities from newly awarded long-term agreements at its ASG segment.

        Income tax expense for the nine months ended September 30, 2014 of $94.5 (43.9% effective tax rate) increased by $25.3 as compared with prior year period income tax expense of $69.2 (37.2% effective tax rate) due to the higher level of earnings before income taxes and a higher tax rate. Due to non-deductible expenses associated with the spin-off, we currently expect an effective tax rate of approximately 44% for the year ending December 31, 2014. Going forward, we expect an effective tax rate of approximately 36% in 2015, declining further thereafter.

        Net earnings for the nine months ended September 30, 2014 were $120.7, an increase of 3.3% as compared with the prior year period for the reasons set forth above.

Segment Results

        The following is a summary of operating earnings by segment:

 
  Operating Earnings   Pro Forma Operating
Earnings
 
Segment
  2014   2013   % Change   PF 2014   PF 2013   % Change  

Aerospace Solutions Group

  $ 174.7   $ 184.7     -5.4 % $ 174.7   $ 184.7     -5.4 %

Energy Services Group

    40.2     0.3     13300.0 %   62.3     37.7     65.3 %
                               

Total

  $ 214.9   $ 185.0     16.2 % $ 237.0   $ 222.4     6.6 %
                               
                               

        For the nine months ended September 30, 2014, ASG revenues increased 3.6% and operating earnings of $174.7 decreased 5.4% reflecting business separation costs of $9.9 and the aforementioned new long-term customer contracts which initially carry lower margins. ESG's operating earnings for the nine months ended September 30, 2014 of $40.2 include $6.4 of acquisition and business separation costs. ESG operating earnings exclusive of such costs were $46.6, or 17.8% of revenues.

        Year-over-year comparisons of ESG results are not meaningful on a historical basis due to the timing of ESG acquisitions (the first of which closed in August 2013). On a pro forma basis giving effect to all ESG acquisitions as though all transactions were completed on January 1, 2013, ESG revenues of $328.7 increased by 38.4% as compared with the 2013 period, 2014 operating earnings of $62.3 increased by 65.3%, and 2014 operating margin of 21.2% expanded by 310 basis points, reflecting both the mix of revenues from its E&P customers and operating leverage at the higher revenue level.

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Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

        Revenues for the year ended December 31, 2013 were $1,291.6, an increase of 9.4% as compared to 2012, as a result of an increase in aftermarket revenues in the second half of 2013 and higher production levels of new aircraft.

        Cost of sales for 2013 was $872.8, which increased by $69.3, as compared with the prior year, primarily due to the higher level of revenues. Cost of sales as a percentage of revenues was 67.6% in 2013 and decreased by 50 basis points as compared with 2012, primarily due to a higher level of aftermarket revenues in 2013.

        Selling, general and administrative expenses for 2013 were $180.3, or 14.0% of revenues, as compared with $159.3, or 13.5% of revenues in 2012. The higher level of SG&A expense in 2013 is primarily due to costs and expenses associated with the 9.4% increase in revenues and a $7.0 increase in 2013 of acquisition, integration and transition ("AIT") costs associated with the acquisitions of the Satair Group ("Satair"), UFC, Interturbine, Blue Dot and Bulldog.

        For the year ended December 31, 2013, operating earnings of $238.5 increased 9.5% and operating margin of 18.5% was unchanged compared to the prior year.

        2013 income tax expense of $89.1 (37.2% effective tax rate) increased by $8.3 as compared with 2012 income tax expense of $80.8 (37.2% effective tax rate) due to the higher level of earnings before income taxes.

        Net earnings for the year ended December 31, 2013 of $150.4 increased by $13.5 or 9.9% for the reasons set forth above.

Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011

        Revenues for the year ended December 31, 2012 were $1,180.7, an increase of 24.6% as compared to 2011, reflecting the 2012 acquisitions of UFC and Interturbine. Organic revenue growth, excluding the UFC and Interturbine acquisitions was 6.6%.

        Cost of sales for 2012 of $803.5 increased by $167.6, as compared with the prior year, and was primarily due to the higher level of revenues. Cost of sales as a percentage of revenues was 68.1% in 2012 and increased by 100 basis points as compared with 2011, primarily due to a higher level of revenues from our customers that support the new build aircraft activity that typically carry lower margins than aftermarket revenues.

        SG&A expenses for 2012 were $159.3, or 13.5% of revenues, as compared with $129.4, or 13.7% of revenues in 2011. The higher level of SG&A expense in the current year is primarily due to costs and expenses associated with the 24.6% increase in revenues and AIT costs of $17.2 and $4.5 in 2012 and 2011, respectively.

        For the year ended December 31, 2012, operating earnings of $217.9 increased 19.7% and operating margin of 18.5% decreased by 70 basis points as compared with the prior year, reflecting the aforementioned AIT costs and the higher level of OEM-related revenues, which typically carry lower margins than aftermarket sales.

        2012 income tax expense of $80.8 (37.2% effective tax rate) increased by $11.5 as compared with 2011 income tax expense of $69.3 (37.2% effective tax rate) due to the higher level of earnings before income taxes.

        Net earnings for the year ended December 31, 2012 of $136.9 increased by $20.4 or 17.5% for the reasons set forth above.

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Liquidity and Capital Resources

Current Financial Condition

        Cash on hand at September 30, 2014 decreased by $41.4 as compared with cash on hand at December 31, 2013 primarily as a result of cash flows from operating activities of $124.1, less capital expenditures of $89.3. Acquisitions during the period totaled $512.3 and were funded by transfers from our parent company of $438.6. Our liquidity requirements consist of working capital needs and ongoing capital expenditure requirements. Our primary requirements for working capital are directly related to the level of our operations. Our sources of liquidity have historically been from cash on hand, advances from its parent company and cash flow from operations. At September 30, 2014, we had approximately $37.2 of cash and cash equivalents. The substantial majority of its cash is held within the United States, and we believe substantially all of our foreign cash may be brought back into the United States in a tax efficient manner.

        Our Board has authorized a stock repurchase program in which, after the distribution, we may purchase up to an aggregate of $250 of our common stock. All decisions regarding future stock repurchases will be at our sole discretion and will be evaluated from time to time in light of many factors, including our financial condition, earnings, capital requirements and debt covenants, if any, other contractual restrictions, as well as legal requirements (including compliance with published IRS guidelines for tax-free spin-offs), regulatory constraints, industry practice and other factors that we may deem relevant. The stock repurchase program may be modified, extended, suspended or discontinued by us at any time and we cannot provide any assurances that any shares will be repurchased.

Working Capital

        Working capital as of September 30, 2014 was $1,375.3, an increase of $9.2 as compared with working capital at December 31, 2013. As of September 30, 2014, total current assets increased by $160.4 and total current liabilities increased by $151.2. The increase in current assets related to the $41.4 decrease in cash as described above, offset by a $129.1 increase in accounts receivable, reflecting the strong revenue growth and recent ESG acquisitions, and an increase in inventories of $71.3 to support future revenue growth. The increase in total current liabilities was due to an increase in accounts payable and accrued liabilities of $151.2, primarily related to the acquisitions completed in 2014.

        Working capital as of December 31, 2013 was $1,366.1, an increase of $65.8 as compared with working capital at December 31, 2012. As of December 31, 2013, total current assets increased by $93.1 and total current liabilities increased by $27.3. The increase in current assets related to the $42.3 increase in cash as described above, a $26.6 increase in accounts receivable and an increase in inventories of $24.9 to support future revenue growth. The increase in total current liabilities was primarily due to an increase in accrued liabilities of $17.4.

        Working capital as of December 31, 2012 was $1,300.3, an increase of $219.8 as compared with working capital at December 31, 2011. As of December 31, 2012, total current assets increased by $268.2 and total current liabilities increased by $48.5. The increase in current assets related to a $47.6 increase in accounts receivable and an increase in inventories of $180.7 to support future revenue growth. The increase in total current liabilities was primarily due to an increase in accrued liabilities of $30.6.

Cash Flows

        As of September 30, 2014, cash and cash equivalents were $37.2 as compared to $78.6 at December 31, 2013. Cash provided by operating activities was $124.1 for the nine months ended September 30, 2014 as compared to $112.7 in the same period in the prior year. The primary sources

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of cash provided by operating activities during the nine months ended September 30, 2014 were net earnings of $120.7, adjusted by depreciation and amortization of $47.3 and deferred income taxes of $20.2, as well as an increase in accounts payable and accrued liabilities of $128.9. The primary uses of cash in operating activities during the nine months ended September 30, 2014 were related to a $94.8 increase in accounts receivable, $75.4 increase in inventories and an $18.9 decrease in other non-current liabilities. The primary uses of cash in investing activities during the nine months ended September 30, 2014 were related to capital expenditures of $89.3 and acquisitions of $512.3, primarily funded by our parent company.

        Cash and cash equivalents as of December 31, 2013 were $78.6 as compared to $36.3 at December 31, 2012. Cash provided by operating activities was $185.6 for the year ended December 31, 2013 as compared to $66.1 for the year ended December 31, 2012. The primary sources of cash provided by operating activities during 2013 were net earnings of $150.4, adjusted by depreciation and amortization of $27.8 and deferred income taxes of $32.0. The primary uses of cash in operating activities during the year ended December 31, 2013 were related to a $18.9 net increase in inventories and a $12.8 decrease in accounts payable and accrued liabilities. The primary uses of cash in investing activities during the year ended December 31, 2013 were related to capital expenditures of $29.4 and acquisitions of $117.5.

        Cash and cash equivalents as of December 31, 2012 were $36.3 as compared to $35.6 at December 31, 2011. Cash provided by operating activities was $66.1 for the year ended December 31, 2012 as compared to $138.3 for the year ended December 31, 2011. The primary sources of cash provided by operating activities during 2012 were net earnings of $136.9, adjusted by depreciation and amortization of $22.8 and a deferred income tax provision of $19.5. The primary uses of cash in operating activities during the year ended December 31, 2012 were related to a $87.9 net increase in inventories and a $12.9 increase in accounts receivable. The primary uses of cash in investing activities during the year ended December 31, 2012 were related to capital expenditures of $16.6 and acquisitions of $649.7.

Capital Spending

        Our capital expenditures were $89.3 and $19.3 during the nine months ended September 30, 2014 and 2013, respectively. Our capital expenditures were $29.4, $16.6 and $8.0 during the years ended December 31, 2013, 2012 and 2011, respectively. We expect to incur approximately $135 in capital expenditures for the year ended December 31, 2014 as compared to $29.4 in the prior year to support a higher level of demand at ESG. Because of the addition of the ESG business, we expect capital expenditures for rental equipment to be higher than the historical periods. We have no material commitments for capital expenditures. We have, in the past, generally funded our capital expenditures from cash from operations and funds available to us from B/E Aerospace, our parent company. We expect to fund future capital expenditures from cash on hand, cash flow from operations and from funds available to us from our parent company, and following the separation, from funds available from a planned revolving credit facility which is expected to be put in place at the date of distribution.

        All of our acquisitions over the past four years were financed with cash on hand, or funds made available by our parent company.

New Financing Arrangements

        We expect that, in connection with the spin-off, we will incur indebtedness in an amount estimated to be approximately $1,200 by an issuance of 5.875% senior unsecured notes due 2022 in an exempt offering that we priced on November 21, 2014. We expect to close this offering of senior unsecured notes on or about December 8, 2014. On the closing date, we will enter into an indenture governing the terms of the senior unsecured notes and the gross proceeds will be deposited into an escrow

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account pending consummation of the spin-off. We estimate that the net proceeds from this offering after transaction costs will be approximately $1,179, of which we will distribute up to $750 to B/E Aerospace, leaving KLX with expected net proceeds of approximately $430. KLX will use the net proceeds for general corporate purposes, including approximately $102 to settle deferred payments associated with acquisitions we made in 2014. For an analysis of the interest expense associated with this indebtedness, see Note 1 of our Unaudited Pro Forma Condensed Financial Statements included elsewhere in this information statement. We also plan to enter into a $500 secured revolving credit facility, although we do not expect to borrow any material amounts under that facility in connection with the spin-off. For a description of the terms of our new debt financing, see "Description of Material Indebtedness and Other Financing Arrangements."

        We believe that our cash flows, together with cash on hand and funds made available from our parent company, and following the separation, the net proceeds from the new financing arrangement discussed previously of approximately $430 after transaction costs following the distribution of $750 to B/E Aerospace, and funds available from a planned $500 secured revolving credit facility, which is expected to be put in place at the date of distribution, provide us with the ability to fund our operations, make planned capital expenditures payments, make deferred payments associated with acquisitions we made in 2014 and meet our debt service obligations for debt incurred in connection with the spin-off for at least the next twelve months.

Contractual Obligations

        The following chart reflects our contractual obligations and commercial commitments as of December 31, 2013. Commercial commitments include lines of credit, guarantees and other potential cash outflows resulting from a contingent event that requires performance by us or our subsidiaries pursuant to a funding commitment.

Contractual Obligations
  2014   2015   2016   2017   2018   Thereafter   Total  

Long-term debt and other non-current liabilities(1)

  $   $ 2.5   $ 0.4   $ 0.6   $ 0.9   $ 4.3   $ 8.7  

Operating leases

    14.8     14.0     12.8     11.1     9.3     35.1     97.1  
                               

Total

  $ 14.8   $ 16.5   $ 13.2   $ 11.7   $ 10.2   $ 39.4   $ 105.8  
                               
                               

Commercial Commitments

                                           

Letters of Credit

  $ 0.2                       $ 0.2  
                               
                               

(1)
Our liability for unrecognized tax benefits of $2.5 at December 31, 2013 has been omitted from the above table because we cannot determine with certainty when this liability will be settled. It is reasonably possible that the amount of liability for unrecognized tax benefits will change in the next twelve months; however, we do not expect the change to have a material impact on our combined financial statements.

        This chart does not reflect the $1,200 of senior unsecured notes that we expect to issue in connection with the spin-off, as further described above under "—New Financing Arrangements."

Off-Balance Sheet Arrangements

Lease Arrangements

        We finance our use of certain equipment under committed lease arrangements provided by various financial institutions. Since the terms of these arrangements meet the accounting definition of operating lease arrangements, the aggregate sum of future minimum lease payments is not reflected in our

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combined balance sheet. Future minimum lease payments under these arrangements aggregated approximately $97.1 at December 31, 2013.

Indemnities, Commitments and Guarantees

        During the normal course of business, we made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These indemnities include non-infringement of patents and intellectual property indemnities to our customers in connection with the delivery, design, manufacture and sale of our products, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnities to other parties to certain acquisition agreements. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. We believe that many of our indemnities, commitments and guarantees provide for limitations on the maximum potential future payments we could be obligated to make. However, we are unable to estimate the maximum amount of liability related to our indemnities, commitments and guarantees because such liabilities are contingent upon the occurrence of events that are not reasonably determinable. We believe that any liability for these indemnities, commitments and guarantees would not be material to our combined financial statements.

        For consumables contracts, we include in booked backlog open but unfulfilled purchase orders plus an amount that we believe necessary to support our customers' production activities under long-term contracts. In addition, purchase orders for end items and spares are generally received and recorded as backlog when we accept their terms. Our ASG backlog at December 31, 2013 was $985, as compared with backlog of $977 at December 31, 2012. Our ESG segment operates under MSAs with our E&P customers, which set forth the terms and conditions for the provision of services and the rental of equipment. Rental tool and service contracts are typically based on a day rate with rates based on the type of equipment and competitive conditions. As a result, ESG does not record backlog.

Critical Accounting Policies

        The discussion and analysis of our financial condition and results of operations is based upon our combined financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

        Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and potentially result in materially different results under different assumptions and conditions. We believe that our critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies, see Note 1 to our combined financial statements.

Revenue Recognition

        Sales of products and services are recorded when the earnings process is complete. This generally occurs when the products are shipped to the customer in accordance with the contract or purchase order, risk of loss and title has passed to the customer, collectability is reasonably assured and pricing is fixed and determinable. In instances where title does not pass to the customer upon shipment, the Company recognizes revenue upon delivery or customer acceptance, depending on the terms of the sales contract.

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        In connection with the sales of its products, we also provide certain supply chain management services to certain of its customers. These services include the timely replenishment of products at the customer site, while also minimizing the customer's on-hand inventory. 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. 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.

        Service revenues from oilfield technical services logistics and related rental equipment and services, and are recorded when services are performed and/or equipment is rented pursuant to a completed purchase order or MSA that sets forth firm pricing and payment terms.

Accounts Receivable

        We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current creditworthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain an allowance for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. If the actual uncollected amounts significantly exceed the estimated allowance, our operating results would be significantly adversely affected. While such credit losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past.

Inventories

        Inventories, made up of finished goods, primarily consist of aerospace fasteners and consumables. We value inventories at the lower of cost or market, using "first-in, first-out" (FIFO) or weighted average cost method. We regularly review inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on historical demand, estimated product demand to support contractual supply agreements with its customers and the age of the inventory among other factors. Demand for our products can fluctuate from period to period depending on customer activity. Our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess, obsolete and unmarketable inventories. In the future, if our inventories are determined to be overvalued, we would be required to recognize such costs in our cost of goods sold at the time of such determination. Likewise, if our inventories are determined to be undervalued, we may have over-reported our costs of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale. Inventory reserves were approximately $30.3 and $30.6 as of December 31, 2013 and December 31, 2012, respectively.

        Substantially all of our inventory is comprised of aerospace grade fasteners which support OEM production and the aftermarket over the life of the airframe. Inventory with a limited shelf life is continually monitored and reserved for in advance of expiration. The provision for inventory with limited shelf life is relatively insignificant and has not exceeded $0.5 during the past three years.

Long-Lived Assets and Goodwill

        To conduct our global business operations and execute our strategy, we acquire tangible and intangible assets, which affect the amount of future period amortization expense and possible impairment expense that we may incur. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect our combined financial statements.

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In accordance with ASC 350, Intangibles—Goodwill and Other ("ASC 350"), we assess potential impairment to goodwill of a reporting unit and to indefinite-lived intangible assets on an annual basis, or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying amount. In accordance with ASC 360, Property, Plant, and Equipment, we assess potential impairment to long-lived assets (property and equipment and amortized intangible assets) when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Our judgment regarding the existence of impairment indicators and future cash flows related to intangible assets is based on operational performance of our acquired businesses, expected changes in the global economy, aerospace industry projections, discount rates and other judgmental factors. Future events could cause us to conclude that impairment indicators exist and that goodwill or other acquired tangible or intangible assets associated with our acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on our results of operations. As of December 31, 2013 and 2012, management believes the estimated fair value of each of our reporting units with goodwill balances, our indefinite-lived intangible assets and each of our long-lived assets were substantially in excess of their carrying values. There were no indicators of goodwill or intangible asset impairment at December 31, 2013 or 2012.

Accounting for Income Taxes

        Significant management judgment is required in evaluating our tax positions and in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a valuation allowance of $12.8 as of December 31, 2013, due to uncertainties related to our ability to utilize our deferred tax assets, primarily consisting of our foreign net operating losses. The valuation allowance is based on our estimates of taxable income by jurisdiction in the jurisdictions in which we operate and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates, or we revise these estimates in future periods, we may need to adjust the valuation allowance which could materially impact our financial position and results of operations. We have not provided for any residual U.S. income taxes on approximately $53.9 of earnings from our foreign subsidiaries because such earnings are intended to be indefinitely reinvested. It is not practicable to determine the amount of U.S. income and foreign withholding tax payable in the event all such foreign earnings are repatriated.

Effect of Inflation

        Inflation has not had and is not expected to have a significant effect on our operations.

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BUSINESS

Company Overview

        We believe, based on our experience in the industry, that we are the world's leading distributor and value-added service provider of aerospace fasteners and consumables, and that we offer one of the broadest ranges of aerospace hardware and consumables and inventory management services worldwide. Through organic growth and a number of strategic acquisitions beginning in 2001, we believe we have become our industry's leading provider of aerospace fasteners, consumable products and supply chain management services. Through our global facilities network and advanced information technology systems, we offer unparalleled service to commercial airliners, business jet and defense OEMs, airlines, MRO operators, and FBOs. With a large and diverse global customer base, including virtually all of the world's commercial airliners, business jet and defense OEMs, OEM subcontractors, major airlines and major MRO operators across five continents, we provide access to over one million SKUs. We serve as a distributor for every major aerospace fastener manufacturer. In order to support our vast range of custom products and services, we have invested over $100 million in proprietary IT systems to create a superior technology platform. Our systems support both internal distribution processes and part attributes, along with customer services, including JIT deliveries and kitting solutions, which we believe are unmatched by any competitor. This business is operated within our ASG segment.

        In 2013, we initiated an expansion into the energy sector. Over the past two years, we have acquired seven companies in the rapidly growing business of providing technical and logistics services and related rental equipment to oil and gas exploration and production companies. As a result, we now provide a broad range of technical solutions and equipment that brings value-added resources to a new customer base, often in remote locations. Our customers include independent and major oil and gas companies that are engaged in the E&P and development of oil and gas properties in North America, including in the Northeast (Marcellus and Utica Shale), Rocky Mountains (Bakken and Piceance Basins), Southwest (Permian Basin and Eagle Ford) and Mid-Continent. This business is operated within our ESG segment.

        The charts below illustrate the breakdown of our segment revenues for the year ended December 31, 2013 on an actual and pro forma basis to account for acquisitions through June 30, 2014.


GRAPHIC
 
GRAPHIC

*
For the year ended December 31, 2013, we reported revenue of $1.3 billion. On a pro forma basis to give effect to acquisitions through June 30, 2014 as if they had been completed January 1, 2013, pro forma revenues for 2013 would have been $1.6 billion.

        Our ASG segment has maintained strong, collaborative, long-standing relationships with its customers. As a result of our operational and information technology systems, we have historically been

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able to ship approximately 60% of our orders within 24 hours of receipt of the order. Our seasoned purchasing and sales teams, coupled with state-of-the-art IT and automated parts retrieval systems, help us to sustain our reputation for rapid, on-time delivery.

        ASG sells fasteners and other consumable products to over 4,700 customers throughout the world. Its top five customers in 2013 collectively accounted for approximately 35% of ASG's 2013 revenues.

        ESG has over 120 MSAs with customers, including substantially all of the major, regional and independent E&P companies in North America. Its top five customers collectively represented approximately 41% of ESG's 2013 revenues on a pro forma basis to account for acquisitions through June 30, 2014 (approximately 45% on an actual basis).

        As of September 30, 2014, we had approximately 3,300 employees. None of our employees are unionized and we consider our employee relations to be good.

        Our management team has extensive industry experience and company tenure. Our executive officers have an average of more than 20 years in the aerospace consumables or energy technical services industries.

        Our principal executive offices and corporate headquarters are located at 1300 Corporate Center Way, Suite 200, Wellington, Florida 33414-2105 and our telephone number is (561) 383-5100.

Industry Overview

Aerospace Solutions Group

        According to Stax, the global market for C-class aerospace parts, which includes hardware, bearings, electronic components and machined parts for both commercial and military customers, was approximately $6.5 billion in 2010. This market is generally segmented by end customer or sales channel. Based on industry sources, we estimate that during 2013 the market for the products and services provided by ASG was approximately $4.7 billion; of this amount, we estimate that approximately 34% or $1.6 billion is served by the manufacturers of these products directly to the end customers and approximately 66% or $3.1 billion is served by stocking distributors such as ASG.

        We believe that there is a direct relationship between demand for fasteners and other consumable products and airliner fleet size, aircraft utilization and aircraft age, as well as the new aircraft production rates. All aircraft must be serviced at prescribed intervals, which drives aftermarket demand for aerospace fasteners and consumable products. ASG generated approximately 40% of its 2013 revenues from aftermarket sales to support the in-service fleet of commercial aircraft, business jets and the global fleet of military aircraft. Historically, aerospace fastener and consumable products revenues have been derived from the following sources:

    Support for commercial, business jet and military aircraft OEMs;

    Mandated maintenance and replacement of specified parts;

    Support for commercial aircraft, business jet and defense subcontractors, most of which tend to purchase through distributors; and

    Demand for structural modifications, cabin interior modifications and passenger-to-freighter conversions.

        In addition, suppliers in the aerospace, defense and related industries increasingly rely on companies such as ASG to provide a customized single point of contact for inventory management, customized invoicing, automated forecasting and usage monitoring, centralized communications and tracking across their broad and varied supply base.

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        During 2008 and 2009, our aerospace customers were impacted by the global recession and weak demand for air passenger travel, which resulted in significant losses for the global airline industry. The global economy began to recover beginning in 2010 and airline passenger traffic began to increase. Increased passenger traffic volumes and the return to profitability of the global airline industry have created significant demand for commercial aircraft.

        According to the Airline Monitor, 2013-global air traffic increased 5.7% as compared with increases of 4.8% in 2012 and 6.6% in 2011. The Airline Monitor forecasts a 2014 global passenger traffic increase of approximately 5.4% and projects long-term growth at an approximate CAGR of 5.7% during the 2013-2028 period. The Airline Monitor projects long-term capacity growth of approximately 5.5% over the same period.

        According to IATA, the global airline industry generated aggregate profits of approximately $10.6 billion in 2013, an increase of 74% compared to 2012. Overall performance in 2013 was positively impacted by strong passenger traffic growth of approximately 5.7% and near record airline load factors of 79.7%. For 2014, IATA expects global airline profits to improve to $18.0 billion, or 70% higher than 2013. 2014 is expected to be the fifth consecutive year of profitability for the global airline industry, a record for the industry.

        In addition, the airlines have used these strong economic conditions to substantially strengthen their balance sheets through operating profits and by accessing the capital markets. As a result, we believe airline balance sheets are much stronger now on average than at any time in the past thirty years.

        Many airlines deferred the replacement of a large number of aging aircraft over the 2008-2011 period. This, combined with recent more efficient new aircraft introductions, the growing requirements for more aircraft to support the approximate 5.7% CAGR in traffic growth during the 2013 - 2028 period, high fuel costs and the low cost of financing new aircraft drove the global airline industry to place record orders for new aircraft. Backlogs at Airbus and Boeing stood at record levels of approximately 5,907 and 5,552 aircraft, respectively, at September 30, 2014. During 2013, Airbus and Boeing delivered 626 and 648 new aircraft, respectively. They have reported that they each have an approximate eight-year backlog. As a result, most industry analysts believe the outlook for new aircraft deliveries will be strong for the foreseeable future, which bodes well for ASG.

        Through 2011, approximately 16% of our revenues were derived from support for military aircraft. Defense spending has historically been driven by the timing of military aircraft orders and evolving government strategies and policies. We also support military aircraft MRO providers. Defense spending began to decline in 2012 as the U.S. government implemented its sequestration program. As a result, we have seen demand from our military and defense customers decline from peak levels experienced prior to 2012 of approximately 16% of total ASG revenues to approximately 14% of 2013 revenues.

        We also support a large number of business jet manufacturers and a number of their principal suppliers. Demand for new business jets in 2013 was nearly 50% below peak demand levels realized in 2008. Industry analysts reported that new business jet deliveries began to increase in 2013, as the major business jet manufacturers began to introduce new and larger aircraft. We believe this long delayed uptick in deliveries should benefit ASG, given our strong presence in this market.

        Other factors expected to affect the industries served by ASG include the following:

        Long-Term Growth in Worldwide Fleet.    According to the Airline Monitor, new deliveries of large commercial aircraft increased to 1,274 aircraft in 2013, as compared to 1,189 aircraft in 2012 and 1,011 in 2011. According to the Airline Monitor, new aircraft deliveries are expected to total 1,410 in 2014 and 1,530 in 2015. In addition, the Airline Monitor has forecasted revenue passenger miles to increase at a CAGR of approximately 5.7% during the 2013-2028 period, increasing from 3.5 trillion jet revenue

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passenger miles in 2013 to approximately 8.1 trillion revenue passenger miles by 2028. As a result, the Airline Monitor expects the worldwide fleet of passenger aircraft to increase by approximately 90% from approximately 21,200 regional, single-aisle and twin-aisle aircraft at December 31, 2013 to approximately 40,400 aircraft at December 31, 2028.

        Increase in Existing Installed Base.    According to industry sources, the world's active commercial passenger aircraft fleet consisted of approximately 21,200 aircraft as of December 31, 2013 and is expected to increase by approximately 90% to approximately 40,400 aircraft at December 31, 2028. Additionally, based on industry sources, there are approximately 18,400 business jets currently in service and approximately 13,000 business jets are expected to be delivered over the next ten years. The growth in the world-wide fleet is expected to generate additional and continued demand for consumables and spare parts.

        Aging of Existing Fleet.    Aerospace regulations prescribe frequency standards for repairs, maintenance and overhaul of airframes, engines and other aircraft components, which frequencies increase with the age of these aircraft. ASG and other aerospace aftermarket suppliers experienced a lower level of demand over the 2012-2013 period as airlines retired and replaced older aircraft with new aircraft that were still under warranty. We expect our customers to have a higher demand for our consumables and spare parts, as well as the other services we offer as the fleets of commercial, military and business jets age and as the warranty periods roll off of recently added aircraft.

        Expected Improvement in Business Jet Market.    ASG supplies the majority of business jet aircraft manufacturers. Conditions in the business jet industry have been depressed since 2008, with production levels having fallen by nearly 50% from their peak levels immediately prior to the downturn. According to industry sources, some approximately 13,000 business jets are expected to be delivered over the next ten years. Nearly two thirds of these aircraft by value are projected to be large-cabin and ultra-long-range jets. Industry sources' forecast calls for essentially no growth in 2014, followed by a four-year recovery period with an average of 9% annual growth.

Energy Services Group

        The services and equipment we provide to our customers in the energy sector include wireline services, fishing (retrieval) services and equipment, pressure control and rental equipment such as frac stacks, accommodations and surface rentals and other related components. According to Spears & Associates, the market for providers of technical and logistics services and related rental equipment and other similar products and services to the oil and gas industry in North America is valued at approximately $15 billion, and growing at approximately 10% annually.

        Demand for our technical services and products is determined by the number of oil and gas wells drilled and completed each year, and the level of production / work over activity in North America on existing wells.

    With 223 billion barrels of technically recoverable shale oil reserves and 2,431 trillion cubic feet of recoverable shale gas reserves contained within the United States, combined with the United States' long-term goal of energy independence, E&P activity in North America has been, and is expected, to remain strong. Furthermore, any significant increase in natural gas prices is expected to expand natural gas development activity and to expand the market for our services.

    Almost all E&P companies rent or lease the equipment and services required by them to drill wells and maintain production. Drilling and completion activities require numerous products and services from time to time on an "as needed" basis.

    The decline of conventional North American oil and natural gas reservoirs, together with the development of new recovery technologies, is leading to a shift toward the drilling and

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      development of onshore unconventional oil and natural gas resources that require more wells to be drilled and maintained. We believe the increased drilling requirements of these unconventional resources will lead to continued drilling activity.

    Technologically driven breakthroughs, including (i) continued drilling activity supported by unconventional resources, (ii) the expanding use of horizontal drilling techniques, and (iii) longer lateral lengths and increasing number of stages per well, have all created growing demand for technical services and products to support these advanced drilling activities, much of which are in remote areas with harsh environments.

    The increasing complexity of technology used in the oil and natural gas development process requires additional technicians on location during drilling and, therefore, additional workforce accommodations. In particular, the increasing trend of pursuing horizontal and directional wells as opposed to vertical wells requires additional expertise on location and, typically, longer drilling times. In some cases, up to six to nine workforce accommodation units are used during a drilling project, an increase over traditional utilization levels.

        We believe that ESG offers services and products which create value for our customers by reducing their exposure to NPT during the drilling and production phases. We provide equipment and services that assist our customers with increasing the permeability of the reservoir. We provide specialized experts and equipment to locate and remove blockages or lost equipment from the reservoir that impede drilling or production operations. We also provide accommodations and associated surface rentals such as portable light towers, generators, and pumping systems, in remote drilling sites, thereby facilitating more efficient staffing of the drilling and production activities.

        Other factors expected to affect the industry served by our ESG segment include:

        Higher Demand for Natural Gas in the United States.    We believe that natural gas will be in high demand in the United States over the next several years because of its growing popularity as a cleaner burning fuel. Additionally, according to the International Energy Agency's 2014 World Energy Outlook, North America has been at the center of the surge in global investment in recent years and will remain the region with the largest oil and gas investment requirement until 2035.

        Increasing Focus on Working Conditions and Safety.    Due to the increase in rig count and the corresponding increase in demand for labor in the oil and gas industry, our customers continue to attempt to improve living and working conditions at the wellsite to help retain employees. We believe our workforce accommodations solutions and associated surface rentals for crew quarters contribute to improved living and working conditions at the wellsite. Our customers also continue to enhance their safety procedures to help reduce injuries and to help ensure compliance with more stringent regulatory requirements.

        Continued Outsourcing of Ancillary Services.    Some of the services we provide have been historically handled by drilling contractors themselves. In many instances, these services are only ancillary to the primary activity of drilling and completing wells and represent only a minor portion of the total well drilling cost. Many drilling contractors are increasingly electing to outsource these services to suppliers who can provide high-quality and reliable services.

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Competitive Strengths

Aerospace Solutions Group

        With a deep understanding of our customers' needs and goals, we believe that we have a strong competitive position attributable to a number of factors, including the following:

        Unmatched Depth and Breadth of Products and Services.    We provide a comprehensive line of products and services to a broad global customer base. We offer the broadest and deepest product portfolio in the world with over one million SKUs valued at over $1 billion. We are an authorized distributor for more than 200 manufacturers, including every major aerospace fastener manufacturer, and offer products for more than 3,000 other manufacturers. Through the combination of our value-added services and unmatched depth and breadth of our inventory, we offer our aerospace customers a compelling value proposition. Our services can significantly improve on-time delivery performance, enabling our customers to reduce their inventory and total acquisition cost, while at the same time decreasing the frequency of production interruptions caused by part shortages. Due to the high levels of precision and engineering standards in the aerospace industry, our customers must ensure the highest levels of quality assurance which is provided by our rigorous quality control processes. We track quality in a number of ways via quality process review, quality objectives review, process performance and product conformity, and internal and external audits, and we report on our results and necessary corrective actions in regular meetings with our dedicated quality control staff. We have been granted Quality Assurance Inspection Authority by our customers and are authorized by the FAA and Honeywell to ship our products directly where they are needed for efficiency and accuracy. We meet certain ISO and FAA standards in order to fulfill customer and contractual obligations; no product is sold by us without a certificate of compliance. While our wide array of value-added services aids in developing and maintaining strong customer relationships, we believe our broad product and services offering and large customer base make us less vulnerable to the loss of any one customer or program.

        Premier Technology and Logistics Platform.    We believe we have unrivaled management information systems for optimal execution of customer orders. We have invested over $100 million in our proprietary IT systems to create a superior technology platform. We book approximately 16,000 orders daily and manage 750,000 customer bins with greater than 99% on-time delivery. Our information technology systems and highly refined automated parts retrieval systems allow us to ship approximately 60% of orders placed within 24 hours of receipt.

        Industry Leading Customer Satisfaction.    We believe we provide outstanding customer service. Customer recognition awards for 2013 included, among others: Supplier of the Year at Aviation Partners Boeing (third consecutive year), Elite Supplier Award at Korean Aviation Industry, Silver Supplier Award at Erickson, Best Supplier Award at ANA, Supplier Responsiveness Award at Nordam Group and Platinum Supplier Award at SIA Engineering Company.

        Long-standing Customer Partnerships.    Through the unmatched depth and breadth of our products and services offering, consistent on-time delivery and focus on operational excellence and customer service, we have successfully developed long-standing partnerships with several of our top ASG customers. The average length of our partnership with our top ten customers, based on expected revenues for 2014, is approximately ten years. Additionally, during the year ended December 31, 2013, we renewed or extended over 200 existing LTAs with our customers.

        Exposure to International Markets with a Balanced, Global Footprint.    We are a leading global provider of aerospace fasteners and other consumables and of logistics services to the airline and aerospace industries, serving a diverse worldwide customer base of over 4,700 customers that includes all major commercial, business jet and military OEMs, aftermarket MRO providers and airlines. In 2013, 57% of ASG's revenue was derived from North America, 28% from Europe and 15% in the rest

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of the world, which is primarily comprised of Asia, the Pacific Rim, and the Middle East. We serve our ASG customers with sales, marketing, customer service and program management specialists in 60 countries globally. We believe that our geographic diversification makes us less susceptible to a downturn in a specific geographic region and allows us to take advantage of regional growth trends.

Energy Services Group

        Strong Footprint in Key Energy Producing Geographies.    Following a series of acquisitions completed in 2013 and 2014, we now provide a comprehensive range of technical services and associated rental equipment to North American E&P businesses that operate in geographies with strong drilling and production economics. We have established business presence in the Bakken formation of North Dakota, Permian Basin, Eagle Ford, Haynesville, Marcellus and Utica Shales, Piceance Basin, Mid-Continent, Oklahoma, and other key energy-producing geographies. Our operations service Arkansas, Colorado, Louisiana, New Mexico, New York, North Dakota, Ohio, Oklahoma, Montana, Pennsylvania, Texas, Utah, West Virginia and Wyoming. According to the U.S. Energy Information Administration, these states account for approximately 78% of U.S. on-shore oil production and 84% of U.S. on-shore natural gas withdrawals. We believe ESG will best serve its customers, and therefore our stockholders, by maintaining a focus on domestic oil and natural gas production areas that include both the highest concentrations of existing hydrocarbons and the largest prospective acreage for new drilling activity. We believe our well-developed geographic presence, together with our mission of being a best-in-class leading provider of our specialized services and products, provides ESG with a competitive advantage. Further, we believe our thoughtful geographic presence and carefully selected range of services and products positions our business to generate superior returns on assets deployed.

        24/7 Availability of Just-in-Time Services.    Our experienced industry professionals are available 24 hours a day, seven days a week to respond to customer needs, which has helped to differentiate us from many of our competitors. We specialize in just-in-time support for customers facing critical and time-sensitive operating issues in well drilling or production, leveraging our technical expertise to resolve issues encountered by our E&P customers. As an example, we are often called to wellsites in order to remove obstructions that impede drilling activities or reduce the flow of fluids and gases, often in remote locations and under harsh conditions. These obstructions could be as far as two miles or more from the wellsite. These technical services almost always require the use of various tools or equipment from our large and growing portfolio of specialized rental equipment.

        Vast Range of High Quality Equipment.    We supply a vast range of drilling and completion rental tools and equipment for a variety of onshore services, including well stimulation and completion, wirelines for access to the well bore, fishing intervention at the wellsite, and pressure control. We routinely refurbish and recertify our equipment to maintain the quality of our service and to provide a safe working environment for our personnel. For this purpose, we maintain dedicated on-site remanufacturing shops in several of our operations facilities.

        Experienced Management Team with Proven Track Records.    Our ESG management team has an average of more than 20 years of industry experience, having served as key managers in various energy service companies, including some of the largest energy service companies in the world. Through their collective expertise, we have developed a Houston, Texas-based group of industry experts responsible for maintaining a unified infrastructure to support our operations through standardized safety environmental, maintenance processes and controls and financial and accounting policies and procedures.

        Extensive Local Market Knowledge.    We operate on a geographic basis with technical sales and product line management personnel to support the geographic leaders. As a result, our regional managers are responsible for operational execution including cost control, policy compliance and

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training and other aspects of quality control. With the majority of our regional managers having over 15 years of industry experience, each regional manager has extensive knowledge of the customer base, job requirements and working conditions in each local market. Our product-line managers are directly responsible for asset management, customer relationships, execution of the services provided, personnel management, technology, accident prevention and equipment maintenance, all of which are key drivers of our operating profitability. This management structure allows us to monitor operating performance on a daily basis, maintain financial, accounting and asset management controls, prepare timely financial reports and manage contractual risk.

        Standardized, Young Fleets of Specialized and Certified Equipment Create Competitive Advantages.    Through the use of newly-acquired specialized and certified equipment, we believe we are able to create a number of competitive advantages, including:

    training and operational efficiencies arising from a skilled workforce that is trained using the same equipment and procedures, thereby increasing their familiarity with operating and troubleshooting the units and facilitating a common training platform throughout our business;

    efficient maintenance due to standardized parts and components, and a reduction in equipment-driven failures due to the young age of our equipment rental portfolio; and

    higher levels of employee retention; skilled operators generally prefer to work with newer equipment which facilitates better job performance, and therefore their overall compensation.

        We believe having newer, well maintained equipment provides companies such as ours with an advantage in employee development and retention in tight employment markets such as the oil field services sector.

        Strong Safety Culture Creates Competitive Advantages and Barriers to Entry.    Safety in our ESG segment is driven top-down. All safety-related incidents are reviewed by senior management and appropriate corrective actions are taken as necessary. We conduct standardized safety and orientation training for new employees, monthly safety meetings and annual safety trainings, which are tailored to address any unique requirements of our various product and service offerings. Safety requirements for MSAs with our customers must be reviewed and verified annually. Compliance with the safety requirements set forth by the major oil companies typically requires suppliers to maintain an effective, dedicated HSE function. Complying with these requirements is expensive to establish, implement and maintain. Our Vice President—HSE has more than 20 years of industry experience and acts as our in-house expert on applicable HSE requirements, developing and maintaining segment-wide policies and procedures at the recently acquired companies and monitoring compliance with our MSAs. We are aligning our policies and procedures and adopting best practices as recommended by our advisors, Leggette, Brashears & Graham, Inc., an independent HSE consulting firm, and representatives from our insurance carrier. Our HSE compliance is also monitored by ISN, an independent, for-profit provider of an online contractor management database. ISN collects health and safety, procurement, quality and regulatory information such as HSE policies and procedures, incident logs, safety meetings, and training information. Maintaining an adequate rating with ISN is a key requirement in order to work for many of our customers. We believe some of the companies we compete against lack the infrastructure and financial resources to provide an effective safety program, thereby providing ESG with a competitive advantage and a further barrier to entry.

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Growth Opportunities

Aerospace Solutions Group

        We believe that our ASG segment will benefit from the following industry trends:

        Growing Worldwide Fleet Creates Demand for Aftermarket Services and Products.    The worldwide fleet of commercial airliners is expected to continue to grow over the long-term, reflecting the expected growth in passenger travel over the 2014 through 2028 period. The size of the worldwide fleet is important to us since the proper maintenance of the fleet generates ongoing demand for spare parts, including fasteners and other consumables products, to support the active fleets of commercial aircraft, business jets and military aircraft. For the years ended December 31, 2013 and 2012, approximately 40% and 35%, respectively, of ASG's revenues were derived from the aftermarket. In addition, aftermarket revenues are generally driven by aircraft usage, and as such, have historically tended to recover more quickly than revenues from OEM production.

        Opportunity to Substantially Expand our Addressable Aerospace Consumables Markets.    Our ASG segment leverages our key strengths, including marketing and service relationships, with most of the world's airlines, commercial aircraft OEMs and their suppliers, business jet OEMs and their suppliers, MRO providers and the military. Nearly 40% of ASG's demand is generated by the aftermarket. As a result, demand for aerospace hardware, fasteners, bearings, seals, gaskets, lighting products, electrical components and other consumables is expected to increase over time as the fleet expands and ages. The aerospace and military OEMs are increasingly outsourcing to subcontract manufacturers, which benefits distributors such as ASG, as many of these subcontractors tend to purchase through distributors. In addition, aerospace manufacturers, airlines, MRO providers and suppliers are increasingly seeking companies such as ASG to provide a customized single point of contact for inventory management, automated forecasting and usage monitoring, centralized communications and tracking across their supply base.

Energy Services Group

        We believe that our ESG segment will benefit from the following industry trends:

        Large, Highly Fragmented and Rapidly Growing Energy Technical Services Market.    Recent shale gas and oil discoveries and new methods of extraction have uncovered vast untapped oil and gas reserves in North America, contributed to a drilling boom and created demand for products and services to support advanced drilling activities, most of which are in remote areas with harsh environments. Currently, there are 24 states with land-based drilling activity and, according to Spears & Associates, the market for providers of technical and logistics services and related rental equipment and other similar products and services to the oil and gas industry in North America is valued at approximately $15 billion, and growing at approximately 10% annually. This market segment is highly fragmented with hundreds of small companies providing technical and logistics services and related rental equipment to E&P companies. With our entry into this market through several strategic acquisitions, we are providing high quality services and products to remote drilling sites using our manufacturing, certification, IT and logistics capabilities to prepare for deployment and store, locate and deliver equipment and services as needed by our customers.

        Acquisition Opportunities.    The highly fragmented and growing oilfield technical services, equipment rental, and logistics and services industry offers numerous acquisition opportunities to expand our existing product and service offerings in the various geographies in which we currently operate. In addition, we believe we can grow organically, both through product line expansions in each of the key geographies in which we are currently operating and through geographic expansions into other emerging markets within North America.

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Business Strategy

Aerospace Solutions Group

        Our business strategy is to maintain a leadership position and to best serve our customers by:

        Continued Focus on Operational Excellence and Maintenance of Market Leadership.    We have built strong relationships with our existing ASG customers and suppliers through a relentless focus on operational excellence. We intend to continue providing our customers with best-in-class on-time delivery performance and quality assurance. We also intend to continue investing in our integrated, highly customized IT systems and process automation technologies. We believe that by focusing on operational excellence, we will be able to further improve our already high customer satisfaction, our industry-leading operating metrics and our global market leading position in this industry.

        Winning New Business from Existing Aerospace Consumables Customers.    We will continue our strategy of expanding our relationships with existing ASG customers by transitioning them to our JIT and kitting supply chain management services, as well as expanding our programs to include additional customer sites and SKUs. We are a key partner supplying fasteners and consumables to support the launch of new aircraft programs. We will continue to support our customers in the launch of new aircraft programs by introducing new supply chain solutions that minimize costs, improve productivity, lower inventory investment and ensure a seamless supply of parts for production and aftermarket support. In addition, we have expanded, and expect to continue to expand, our product offerings with existing customers. We believe we create value for our customers through our industry leading on-time delivery capabilities, our continuous focus on quality, our global sourcing capabilities and our ability to get the parts where they need to be when the customer needs them. In doing so, we offer a competitive value proposition by reducing our customers' investments in working capital and ensuring that our customers' state-of-the art production systems are properly supported throughout their production processes. We believe we will be rewarded by our customers with incremental business as a result of delivering our high quality services, as promised, where they want it, when they want it and for a lower total acquisition cost.

        As an example, we first began supplying consumables and other products for a portion of one division of UTC in 2004. Over time, we have substantially expanded our relationship with UTC and been awarded significantly larger portions of UTC's consumables spending. While we have served certain business units of UTC over the past ten years, we did not operate under a corporate-wide LTA. In December 2013, we expanded the scope and length of our LTA, valued at approximately $950 million, to support a number of UTC's aerospace and defense operations, including UTC Aerospace Systems, Sikorsky, and Pratt & Whitney through 2022.

        Expanding our Customer Base.    We believe that our services and capabilities are attractive to potential new ASG customers and we plan to expand our customer base. For example, we have succeeded in winning business after competitors were unable to meet customer service level requirements and after customers outsourced work that was previously performed internally. Historically, we have focused our activities on the major OEMs and their subcontractors, but we believe there is a significant opportunity to expand our commercial MRO presence and that we can have a greater overall presence in the commercial airline maintenance market.

        Further Expansion into International Markets.    We have established a presence in international locations such as the United Arab Emirates, Australia, China, Singapore, India, Germany, Mexico and Italy to support new and existing ASG customers. We will continue our international expansion efforts to more effectively serve our existing customer base and to reach new customers, as the manufacture of aircraft and aircraft structures continues to become more global and interconnected. We believe that we mitigate many of the risks associated with international expansion by entering into customer contracts before we establish

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a new stocking facility. We believe the depth and breadth of product offerings and our logistics capabilities allow us to initially serve customers from our central warehouses, without providing on site inventories and personnel. This allows us to explore new business opportunities with minimum initial investments, allowing us to demonstrate our capabilities and the value of our services over time, prior to making significant site-specific investments. Smaller competitors without resources similar to ours are unable to do so and either must pass on these opportunities or make substantial upfront investments to try to win the business, thereby increasing the amount of risk prior to winning an LTA.

        Selectively Pursuing Strategic Acquisitions.    Our industry is fragmented and we believe that there are opportunities for continued consolidation. In January 2012, we acquired UFC, a leading provider of complex supply chain management and inventory logistics solutions. In July 2012, we acquired Interturbine, a provider of material management logistical services to global airlines and MRO providers. We believe that we are well positioned to expand our product offering and geographical footprint through strategic acquisitions. Consistent with this strategy, we continue to evaluate potential acquisition opportunities for ASG. We seek to manage liability, integration and other risks associated with acquisitions through due diligence, favorable acquisition contracts and careful planning and execution of the integration of the acquired businesses.

Energy Services Group

        Our business strategy is to develop a leadership position in a niche of the technical services and related equipment rental for the North American onshore energy sector and to best serve our customers by:

        Extending our Services and Product Line Offerings in Each Geographical Area.    We believe we have built strong relationships with our existing ESG customers by offering both a broad range of quality services and products in a safe, competent and consistent manner on a 24 hours a day, seven days a week availability basis. Through the seven acquisitions completed since August 2013, we have assembled an impressive portfolio of products, services and capabilities covering the key oil and gas geographies. Following each acquisition, we have increased capital spending to address unmet customer demand while focusing on customer service, quality of service and safety.

        Pursuing Acquisition Opportunities that Meet Our Disciplined Acquisition Criteria.    We expect to leverage our existing position in the energy services industry by strategically deploying capital to accelerate our revenue and earnings growth rates through acquisitions. We intend to pursue strategic opportunities in the highly fragmented and growing market for high-quality providers of technical and logistic services and associated rental equipment. We believe that we are well positioned to expand our geographical footprint in North America, as well as to expand our services and product offerings through both capital investment and strategic acquisitions to address our customers' needs, enhance the breadth and quality of our services and assets and to help to further improve stockholder value.

        Develop Market Leadership in Niche Sectors Through Operational Excellence.    Our customers are increasingly sophisticated consumers of the services we seek to provide. They require, among other things, standardized procedures and equipment, as well as health and safety practices that can be counted upon on a just-in-time basis. We compete against a large number of smaller, regional businesses who may not have either the capital investment capacity to offer the range of up-to-date equipment that we do across multiple wells and multiple geographies, nor the database and operating practices to meet the current HSE requirements. We compete based upon being a best-in-class leading provider of specialized services delivered on a consistent basis for both local customers and larger, multi-region oil & gas companies.

Products and Services

        We conduct our business through two operating segments: ASG and ESG. Information about each of our operating segments is included below.

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Aerospace Solutions Group

        We believe, based on our experience in the industry, that we are the world's leading distributor and value-added service provider of aerospace fasteners and consumables, and that we offer one of the broadest ranges of aerospace hardware, consumables and inventory management services worldwide. We achieved this industry leading position through both organic growth and the strategic acquisitions of Honeywell's Consumables Solution business in 2008, Satair's aerospace fastener distribution business in 2010, UFC and Interturbine in 2012. We have historically shipped approximately 60% of our orders within 24 hours of receipt of the order. With a large and diverse global customer base, including virtually all of the world's commercial airlines, business jet and defense OEMs, OEM subcontractors, major airlines and major MRO operators across five continents, we provide access to over one million SKUs. Our service offerings include inventory management and replenishment, creative and differential supply chain solutions such as third-party logistics programs, special packaging and bar-coding, sophisticated parts kitting, quality assurance testing and a wide variety of purchasing assistance programs, plus the latest in electronic data interchange capability. Our seasoned purchasing and sales teams, coupled with state-of-the-art IT and automated parts retrieval systems, help us to sustain our reputation for high-quality products and rapid, on-time delivery.

        We believe we are the leading provider of aerospace fasteners and consumables, and of logistics services, to every major aerospace OEM, airline, and MRO business globally, with over 400 sales, marketing and customer service specialists worldwide. Approximately 40% of our 2013 ASG segment revenues are derived from aftermarket customers and approximately 60% from sales to OEMs and their suppliers. We stock over one million SKUs, are the authorized distributor for more than 200 manufacturers and distribute products for over 3,000 manufacturers. Based on industry sources, we estimate that during 2013, the market for the products and services provided by ASG was approximately $4.7 billion; of this amount, approximately 34% or $1.6 billion is served by the manufacturers of consumable products directly to the end customers and approximately 66% or $3.1 billion is served by stocking distributors such as ASG.

        We offer an extensive range of products, which we believe serves as a key competitive advantage for our business. Our all-inclusive portfolio consists of:

    Fasteners.  We stock inventory to support all commercial and military aircraft, business jets, and helicopters. Our inventory position is the most diversified in the industry, supplying bolts, clips, hinges, rings, screws, carbon-faced seals, gaskets, O-rings and more.

    Chemicals.  We stock 100,000 chemical SKUs from 100 manufacturers, which we distribute to over 750 customers globally. Among these products are chemicals, sealants and adhesives, lubricants, paints, cleaners and degreasers.

    Honeywell Proprietary Parts.  We hold an exclusive 20-year license (with 14 years remaining on the original license), which will renew for two successive five-year periods if certain operating metrics are achieved, on over 36,000 Honeywell proprietary parts. Among the product lines supported by these parts are auxiliary power units, propulsion engines, electrical/electro-mechanical and airframe and engine accessories. We are also the primary supplier of these parts to Honeywell for their use during the manufacturing of the aforementioned products.

    Bearings, Electrical, Clamps and Lighting.  We sell lighting products to both OEMs and aftermarket customers. Other product families, such as bearings, tooling, electrical components and clamps are more recent additions to our product line.

        Our product lines, which are deep and diverse, have an inventory valuation of approximately $1 billion with over one million SKUs.

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        We offer best-in-class customer service, with over 60% of all orders shipped within 24 hours of order receipt. Among the core services we offer are:

    Sales and Technical Support.  We routinely source alternate replacement parts, support part standardization, support our customers by avoiding stock outs, mitigating obsolete parts, making recommendations when only part type and parameters are known, actively defining and planning new products, locating suppliers who produce these engineered parts and increasing cost savings and operational and logistics readiness.

    Delegated Inspection Authority.  This service eliminates receiving inspection and reduces costs through lower record retention expenses, lower inspection expenses, and less peer-to-peer engineering support and supplier oversight. Additionally, it allows for a better alignment of configuration and increases throughput.

    Electronic Data Interchange ("EDI").  Reduces costs as it automatically places orders, processes documents, reduces lead times and stockholding, and eliminates data entry errors. We offer two different systems, which are designed for specific customer types and/or their specific needs.

    Symphony Direct Ship.  Customers can place orders with us and then Symphony, our proprietary inventory management system, routes these orders automatically to the appropriate supplier of these parts. The supplier will ship the parts directly to the customer by the date requested, eliminating a process queue and thus allowing for a data base to be built over time. Products are stocked based on historical usage and forecasts. Through this process, we become the single point of contact for multiple approved suppliers to reduce our customers' inventory and supplier base. Furthermore, we are able to offer a seamless order and billing process, while allowing full traceability of parts.

    E-Commerce.  This service provides our customers with real-time connection to our systems and inventory, where they can cross-reference part numbers and also see product price and availability. It also allows us to price based upon order quantity. E-Commerce also allows customers to view usage reports for part planning and forecasting.

Energy Services Group

        Our E&P customers require numerous technical services and products on an "as needed" basis. Much like the need for just-in-time delivery of consumables by ASG, ESG often is faced with just-in-time support requirements for our E&P customers that may be experiencing critical operating issues such as servicing an operating well under high pressures, or removing blockages during well drilling or production. As a result, our industry specialists (many with over 40 years of experience) are on-call (on a rotational basis) 24 hours a day, 7 days a week to meet our customer needs. Providing this level of customer support, together with a well-rounded product and service offering, has been well received in this rapidly growing market segment. According to Spears & Associates, the market for providers of technical and logistics services and related rental equipment and other similar products and services to the oil and gas industry in North America is valued at approximately $15 billion, and growing at approximately 10% annually. This growth is due primarily to technological advancements that allow for oil and gas recovery from previously unrecoverable shale formations.

        We initiated our expansion in this sector in August 2013 when we acquired the assets of Blue Dot, a provider of on-site technical services and rental equipment to exploration and production companies in the oil and gas industry with operations primarily in the Marcellus/Utica Basins. In December 2013, we acquired the assets of Bulldog, an Eagle Ford Basin based provider of high-quality pressure control valves and related rental equipment, operating primarily in the Eagle Ford and the Marcellus/Utica Basins. In January 2014, we acquired the assets of LT Energy Services group of companies, an Eagle Ford Basin-based provider of accommodation and related surface equipment. In February 2014, we

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acquired the assets of Wildcat Wireline, a provider of wireline services primarily in the Eagle Ford and Marcellus/Utica Basins. In April 2014, we acquired the assets of Vision Oil Tools LLC, an established provider of technical services and rental equipment to oil and gas E&P companies with operations located in the Bakken formation in North Dakota, the Piceance and DJ Basins in Colorado, the Permian Basin in Texas, and in Wyoming. In April 2014, we acquired the assets of MGS, an oilfield support services and associated rental equipment business based in the northeast U.S. In June 2014, we acquired the assets of Cornell, an oilfield support services and associated rental equipment business based in the southwest U.S. As a result of these acquisitions, we have established a solid presence in the Northeast (Marcellus and Utica Shales), Rocky Mountains (Bakken, DJ and Piceance Basins), Southwest (Permian Basin and Eagle Ford) and Mid-Continent regions in North America. We provide high-quality services and products (new and remanufactured after use and American Petroleum Institute ("API") certified) to remote drilling sites using our manufacturing, certification, logistics, and IT capabilities to properly prepare for deployment, store, locate and deliver, as needed, while continually providing services to support our customers drilling operations.

        Our key service and product offerings include:

    Onshore Completion Services:  Includes a variety of technical services and equipment related to the initial well stimulation, completion, and production. These services include the placement and removal of flow control nipples and valves, completion packers, bridge plugs, composite flow through frac plugs, as well as a full line of downhole services tools to optimize oil and gas recovery. These tools and services coupled with our technical expertise assist our clients in performing operations to optimize oil and gas recovery.

    Wireline Services:  Our wireline services are provided through mobile units that contain large spools of wire. This large spool of wire will spool and unspool, which in turn allows tools and equipment to be quickly conveyed in and out of a wellbore. These wireline units and personnel provide a variety of different downhole services. These services include composite frac plug pump downs, pipe recovery, perforation, as well as well evaluation and logging services.

    Fishing Services and Tools:  We provide a wide range of tools and services to assist our clients when intervention is required at the wellsite. We specialize in providing technically-sound solutions to our clients and having the personnel and equipment to carry out these operations. Through the use of overshots, spears, jarring equipment, internal and external cutters, Venturi tools, magnets, and wash over equipment, we provide solutions for our customers. These specialized tools, combined with our expertise and knowledge base, make us a well-positioned company in this industry segment. In addition to our fishing services, we also provide drill-out services to our clients consisting of downhole motors used to drill out frac plugs and sliding sleeves.

    Pressure Control:  We offer a full line of pressure control services and rental equipment to assist our clients at the wellsite. When a client moves on a well to perform any form of operations, they are required to have some means of containing pressure of the wellbore. Through the use of frac stacks, pressure valves, and blow out preventers properly sized for the operation, operators are able to contain any release of pressure from the wellbore. We provide a full line of hydraulic and manual equipment, as well as services to keep them in proper working condition. We service this equipment at our operations facilities to ensure our equipment performs at the wellsite. As part of this service, we also provide rental pipe, power swivels, reverse units and other equipment used to perform well service operations.

    Remanufacturing Shop:  Our operations facilities are positioned around the U.S., and allow our personnel to properly service, restore, and test all pressure control equipment, valves, choke manifolds, and closing units. By properly servicing our equipment we can ensure our equipment works when it is deployed to a wellsite. In several of the operations facilities, we also offer

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      machine shop services which consist of CNC lathes, milling machines, spindle lathes and other machining equipment to rework and rectify damaged equipment and to design / build specialized fit for purpose tools.

    Accommodations and related surface rental equipment:  We provide a variety of mobile, customizable workforce accommodations and offices and associated rental equipment to our customers at their remote field locations to keep crews comfortable and dedicated to the job at hand. Our turnkey solutions can be designed for complex requirements, conditions and personnel. We provide a comprehensive range of value-added offerings, including workforce housing and office systems, light towers, generators, pressure washers, pumps, fork lifts, manlifts, transformers, satellite systems, water and sewer systems and waste management. Along with our product offerings, we provide on-site customer service.

Customers, Competition and Marketing

Aerospace Solutions Group

        We market our aerospace fasteners and other consumables directly to the airlines, aircraft leasing companies, MRO providers, general aviation, first-tier suppliers to the commercial, military and defense airframe manufacturers, the airframe manufacturers and other distributors. We believe that our key competitive advantages are the breadth of our product offerings and our ability to deliver our products on a timely basis. We believe that those advantages, coupled with our core competencies in information management, purchasing and logistics management, provide strong barriers to entry. Customers for our ASG segment include all major commercial aircraft, business jet and military OEMs, aftermarket MRO providers and airlines. Sales to ASG's top five customers in 2013 accounted for approximately 35% of ASG's revenues. See "Risk Factors—General—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." Approximately 57% of our ASG revenues in 2013 were to customers in the U.S. with 28% to customers in Europe and the balance to customers in Asia, the Pacific and the Middle East.

        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 quality assurance program. Our competitors include both U.S. and foreign companies. Our largest competitors include Wesco Aircraft, Pattonair, Align, AAA, Adept, Herndon, Boeing, Airbus, PCC, Alcoa, Wencor, Champion, Heico, Jamaica Bearings, Avnet and Avio.

        As of September 30, 2014, we employed over 200 sales personnel with an average of over seven years of experience at our ASG segment. Our sales professionals as of that date were located mostly in the United States and in Europe.

        At our ASG segment, we maintain both inside and outside sales representatives who have superior knowledge of the technical details of our products. As of September 30, 2014, we had 100 inside sales representatives who both sell our products and provide technical expertise regarding those products.

Energy Services Group

        ESG provides services and products and competes in a variety of distinct sub-segments with a number of competitors. Substantially all of our ESG customers are engaged in the energy industry. Most of our sales are to regional or independent oil companies and these sales have resulted in a diversified and geographically balanced portfolio of approximately 120 customers within North America. On a pro forma basis, for the year ended December 31, 2013 to give effect to the acquisitions completed through June 30, 2014, revenues from ESG's five largest customers collectively represented

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approximately 41% of ESG's pro forma revenues (45% on an actual basis). No single customer accounted for more than 10% of ESG's pro forma 2013 revenues.

        Our primary competitors are regional, which provide a more limited range of services and rental equipment. With respect to certain of our services, we also compete with Weatherford, Schlumberger, Halliburton, Baker Hughes, Superior Energy Services, Stallion Oilfield Services, and HB Rentals. Competition is based on a number of factors, including performance, safety, quality, reliability, service, price, response time and, increasingly, breadth of services and products.

        ESG maintains both regional and product/services specialist sales teams. Although sales employees tend to be based locally in regions and field locations, we have established a corporate sales team based in Houston, Texas and Denver, Colorado to coordinate sales and marketing efforts with our key accounts. As of September 30, 2014, we had 13 corporate sales representatives and 47 regional sales representatives with an average of over 15 years of experience.

Suppliers and Procurement

Aerospace Solutions Group

        We do not believe we are dependent on any single supplier or assembler for our raw materials or specified and designed component parts and, based upon the existing arrangements with vendors, our current and anticipated requirements, we believe that we have made adequate provisions for acquiring raw materials.

        We have assembled a number of focused procurement teams which effectively source our broad range of products.

    Planning/Forecasting.  We plan and forecast to individual part number level for global demand, as well as forecast for each customer contract part number, utilizing customized software planning tools.

    Commodity Procurement.  We have specific commodity strategies with industry experts leading each team and key supplier partnership.

    Program Procurement.  We have a single supply chain point of contact for each major program coordinating supply, supplier health, forecasting gap buys and cost targets.

    Advanced Sourcing.  We have quick turnaround for customer demand on non-stock items. If a customer has emergency requests such as an aircraft hold of service pending receipt of hardware, we will procure for immediate need. We also source new items and qualify alternative parts.

Energy Services Group

        We purchase a wide variety of materials, components and partially completed and finished products from manufacturers and suppliers for our use. We are not dependent on any single source of supply for those parts, supplies, materials or equipment.

Backlog

Aerospace Solutions Group

        Our Aerospace Solutions Group backlog at December 31, 2013 was $985 million, as compared with backlog of $977 million at December 31, 2012. We include in backlog, open but unfulfilled purchase orders plus the part of LTA that we believe necessary to support our customers' production activities.

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Energy Services Group

        Our Energy Services Group operates under MSAs with our E&P customers, which set forth the terms and conditions for the provision of services and the rental of equipment. Rental tool and service contracts are typically based on a day rate with rates based on the type of services, equipment and competitive conditions. As a result, ESG does not record backlog.

Customer Service

Aerospace Solutions Group

        We believe that our customers place a very high value on customer service, on-time delivery and product support, and that the level of customer service we provide is a critical differentiating factor in our industry. In our ASG segment, we bring the resources of an integrated global network, real-time inventory systems and one-on-one personal attention to our customer relationships everywhere in the world. The key elements of such service include:

    on-time delivery;

    immediate availability of spare parts for a broad range of products; and

    prompt attention to customer needs, including unanticipated problems and on-site customer training.

        Customer service is particularly important to the airlines due to the high costs associated with incorrect or late deliveries.

Energy Services Group

        We are highly differentiated in each of the geographic markets which we serve with our products and services. This is achieved by being responsive to our customers with both quality and on-time delivery. The key elements include:

    24 / 7 operations;

    responsiveness to our customers' requirements for ready-to-deploy API certified equipment and a "can do" philosophy;

    technical interface with customers via product line management personnel; and

    client intimacy.

Warranty Product Liability, Insurance

Aerospace Solutions Group

        We warrant our ASG products, or specific components thereof, for periods ranging from one to three years, depending on product and component type. We receive appropriate product warranties and certifications from the manufacturer, and in the event of a defective part, we look to the manufacturer for reimbursement. Historically, warranty costs have not been material at ASG.

Energy Services Group

        The use of certain of our ESG rental equipment or the provision of technical services in connection therewith could involve operational risk and thereby expose us to liabilities. An accident involving our services or equipment, or the failure of a product, could result in personal injury, loss of life, and damage to property, equipment or the environment. Although none of our acquired businesses have ever experienced such a claim, damages from a catastrophic occurrence, such as a fire or

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explosion, could result in substantial claims for damages. We generally attempt to negotiate the terms of our MSAs consistent with industry practice. In general, we attempt to take responsibility for our own personnel and property, while our customers, such as the E&P companies and well operators, take responsibility for their own personnel, property and all liabilities arising from well and subsurface operations. Given the nature of the services and equipment we provide to our customers, none of our businesses have incurred any significant claim for damages arising from the use of our services or products, either individually or in the aggregate.

        We maintain a risk management program that covers operating hazards, including product liability, property damage and personal injury claims as well as certain limited environmental claims. Our risk management program includes primary and excess umbrella liability policies of $75 million per occurrence, including sudden and accidental pollution claims. We believe that our insurance is sufficient to cover product liability claims.

Information Technology

Aerospace Solutions Group

        We have invested over $100 million in proprietary IT systems to create an unparalleled IT platform for ASG. Our IT systems provide a powerful, highly distributed computing environment that enables us to quickly scale on demand as business dictates. Some of the benefits of our IT platform to our customers include services such as:

    Planning and Forecasting

    Customized System / Database

    Supplier and Customer Portals

    EDI

    E-Commerce

    Support of Value-Added Services

        Our information technology infrastructure is based on a proprietary enterprise resource planning ("ERP") application that has been highly customized for the aerospace consumables management business over the last 20 years. Our IT systems support our order-to-cash, procure-to-pay, warehouse management and accounting processes on a global basis. Our ERP application interfaces with leading specialty software packages such as JDA (Demand Planning), Sterling (EDI) and Oracle (Business Intelligence, Financial Consolidations and Financial Reporting).

        We also employ virtualization technology to increase system availability, reduce hardware and maintenance costs and respond efficiently to market dynamics. Our entire data services infrastructure runs 24/7 and is protected by network security technologies, an uninterrupted power supply and a backup generator. Remote access to our systems is provided via separate, high speed connections.

Energy Services Group

        We have been and will continue to invest in integrating our acquisitions onto a single platform using an industry leading rental asset management software "TrakQuip" along with financial software "Microsoft Dynamics". Our integrated TrakQuip/Microsoft Dynamics application will provide us with a scalable integrated platform that facilitates highly efficient operations, consolidated invoicing and optimal equipment utilization at a site and segment basis. Based on our current expectations, the ESG IT integration effort with respect to our ESG acquisitions to date is expected to be completed by early 2016 at a cost of approximately $20 million.

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Government Regulation

Aerospace Solutions Group

        Governmental agencies throughout the world, including the 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, equipment 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 are 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 other government rules and regulations that include the Foreign Corrupt Practices Act of 1977, as amended, International Traffic in Arms Regulations and the False Claims Act.

Energy Services Group

        Our ESG operations are subject to extensive and changing federal, state and local laws and regulations establishing health, safety and environmental quality standards, including those governing discharges of pollutants into the air and water and the management and disposal of hazardous substances and wastes. We may be subject to liabilities or penalties for violations of those regulations. We are also subject to laws and regulations, such as the Federal Superfund Law and similar state statutes, governing remediation of contamination which could occur or might have occurred at facilities that we own or operate, or which we formerly owned or operated, or to which we send or have sent hazardous substances or wastes for treatment, recycling or disposal. We believe that we are currently compliant, in all material respects, with applicable environmental laws and regulations. However, we could become subject to future liabilities or obligations as a result of new or more stringent interpretations of existing laws and regulations. In addition, we may have liabilities or obligations in the future if we discover any environmental contamination or liability relating to our facilities or operations.

Employees

        As of September 30, 2014, we had approximately 3,300 employees. As of September 30, 2014, our ASG segment had approximately 2,000 employees. Approximately 61% of ASG's employees are engaged in distribution operations, quality and purchasing, 28% in sales, marketing and product support and 11% in finance, human resources, IT, and general administration. As of September 30, 2014, our ESG segment had approximately 1,300 employees. Approximately 83% of ESG's employees are engaged in operations, quality and purchasing, 5% in sales, marketing and product support and 12% in finance, human resources, IT, and general administration. None of our employees are unionized and we consider our employee relations to be good.

Environmental Matters

        Our operations are subject to extensive and changing federal, state, local, and foreign laws and regulations establishing health, safety, and environmental quality standards, including those governing discharges of pollutants into the air and water and the management and disposal of hazardous

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substances and wastes. We may be subject to liabilities or penalties for violations of those laws and regulations. We are also subject to laws and regulations, such as the Federal Superfund Law and similar state statutes, governing remediation of contamination at facilities that we currently or formerly owned or operated or to which we send or have sent hazardous substances or wastes for treatment, recycling or disposal. We believe that we are currently compliant, in all material respects, with applicable environmental laws and regulations. However, we could become subject to future liabilities or obligations as a result of new or more stringent interpretations of existing laws and regulations. In addition, we may have liabilities or obligations in the future if we discover any environmental contamination or liability relating to our facilities or operations. Clean-up costs and other damages resulting from any contamination-related liabilities and costs associated with changes in and compliance with environmental laws and regulations could result in the reduction or discontinuation of our or our customers' operations, and in a material adverse effect on our financial condition and results of operations.

        Due to ASG's European operations, we are subject to, among other environmental, health, and safety regulations, REACH in the European Union, which regulates the production and use of chemical substances. In July 2014, one of our German businesses, ITL, which was acquired by B/E Aerospace Systems Holding GmbH in July 2012, was informed by the LLUR that it had allegedly violated certain provisions of REACH related to the import and sale of certain chemical products for the period of 2009 through 2013. We are cooperating with the LLUR and currently investigating the amounts of chemical products that were allegedly imported and sold in violation of REACH. These violations could result in an administrative monetary penalty and a disgorgement of profits from the sale of products allegedly sold in violation of REACH, which could be material. We are not currently able to determine the amount of liability, if any, that we may ultimately be found to be responsible for that is not covered by any indemnity claims against the seller of ITL.

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Properties

        As of September 30, 2014, we had 32 principal operating facilities, which comprise an aggregate of approximately 1.5 million square feet of space. The following table describes the principal facilities and indicates the location, function, approximate size, and ownership type of each location.

City
  Segment   Sq. Feet   Ownership

Doral, FL

  ASG     506,600   Lease

Kaltenkirchen, Germany

  ASG     90,500   Lease

Wichita, KS

  ASG     80,000   Lease

Hamburg, Germany

  ASG     80,000   Lease

Bridgeport, WV

  ESG     70,800   Lease

Evans City, PA

  ESG     68,300   Own

Stratford, CT

  ASG     67,000   Lease

Burgess Hill, UK

  ASG     60,000   Lease

Carson, CA

  ASG     56,500   Lease

Earth City, MO

  ASG     48,600   Lease

Chandler, AZ

  ASG     47,400   Lease

Grand Prairie, TX

  ASG     38,800   Lease

Senlis, France

  ASG     32,900   Lease

Simpson District, WV

  ESG     27,300   Lease

Boothwyn, PA

  ASG     25,000   Lease

Charleroi, PA

  ESG     20,000   Lease

Banyo QLD, Australia

  ASG     19,400   Lease

Kenedy, TX

  ESG     17,800   Lease

Cotulla, TX

  ESG     17,800   Own

San Angelo, TX

  ESG     16,800   Lease

Singapore

  ASG     16,700   Lease

Williston, ND

  ESG     16,500   Own

Paramus, NJ

  ASG     15,500   Lease

South Marshall, TX

  ESG     13,500   Lease

Greensboro, NC

  ASG     12,000   Lease

Dickinson, ND

  ESG     11,600   Lease

Rzeszow, Poland

  ASG     11,520   Lease

Cambridge, OH

  ESG     10,800   Lease

London-Heathrow, UK

  ASG     10,520   Lease

Singapore

  ASG     10,400   Lease

Waco, TX

  ASG     10,000   Lease

Wellington, FL

  Corporate Administrative Headquarters     9,100   Lease

        We believe that our facilities are suitable for their present intended purposes and are adequate for our present and anticipated level of operations.

Legal Proceedings

        We are a defendant in various legal actions arising in the normal course of business, the outcomes of which, in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect on our business, results of operations or financial condition.

        Except as mentioned below, there are no material pending legal proceedings, other than the ordinary routine litigation incidental to the business discussed above, to which we, or any of our subsidiaries, are a party or of which any of our property is the subject.

        We are currently cooperating with the authorities in investigating an alleged violation of regulations governing the production and use of chemical substances in our German operations that could result in an administrative monetary penalty and a disgorgement of profits from the sale of products allegedly sold in violation of the regulations, which could be material. For a more detailed description of this matter, see "—Environmental Matters."

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MANAGEMENT

Our Executive Officers

        The following table sets forth information regarding individuals who are currently expected to serve as our executive officers, including their positions after the spin-off.

Name and Title
  Business Experience

Amin J. Khoury
Chief Executive Officer

  Amin J. Khoury co-founded B/E Aerospace in July 1987 and has served as its Chairman of the Board since that time. Mr. Khoury served as Chief Executive Officer of B/E Aerospace from December 31, 2005 through December 31, 2013. Mr. Khoury also served as the Co-Chief Executive Officer of B/E Aerospace from January 1, 2014 to the date of the distribution. Following the spin-off, Mr. Khoury will serve as the Executive Chairman of B/E Aerospace. Mr. Khoury was a Trustee of the Scripps Research Institute from May 2008 until his retirement in July 2014. Mr. Khoury holds an Executive Masters Professional Director Certification, the highest level, from the American College of Corporate Directors.

Thomas P. McCaffrey
President and
Chief Operating Officer

 

Thomas P. McCaffrey served as Senior Vice President and Chief Financial Officer of B/E Aerospace from May 1993 until the date of distribution. Prior to joining B/E Aerospace, Mr. McCaffrey was an Audit Director with Deloitte & Touche LLP from August 1989 through May 1993, and from 1976 through 1989 served in several capacities, including Audit Partner, with Coleman & Grant LLP. Mr. McCaffrey is a Certified Public Accountant licensed to practice in the states of Florida, California and Colorado.

Michael F. Senft
Vice President—Chief Financial
Officer and Treasurer

 

Michael F. Senft served on the Board of Directors of B/E Aerospace from February 2012 until the date of distribution. Mr. Senft most recently was a Managing Director of Moelis & Company. For more than 20 years, he has advised on B/E Aerospace's long-term capital transactions and strategic acquisitions. Mr. Senft has also served on the Board of Directors of Moly Mines Ltd. and Del Monte Foods. Mr. Senft's prior positions include Global Head of Leveraged Finance at CIBC and Global Co-Head of Leveraged Finance at Merrill Lynch.

John Cuomo
Vice President and
General Manager,
Aerospace Solutions Group

 

John Cuomo has been Vice President and General Manager, Consumables Management business since July 2014. He has over 14 years of experience in the aerospace consumables distribution market and served in multiple roles and functions at B/E Aerospace Consumables Management from April 2000 to February 2014, with the most recent being Senior Vice President, Sales, Marketing and Business Development. Prior to joining B/E Aerospace, Mr. Cuomo served as an Associate Attorney to a large multi-national law firm practicing commercial law, mergers and acquisitions and litigation. He has a Bachelor of Science in International Business, a Juris Doctorate from the University of Miami and a Master of Business Administration from the University of Florida.

   

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Name and Title
  Business Experience

Gary Roberts
Vice President and
General Manager,
Energy Services Group

 

Gary J. Roberts served as Vice President and General Manager, Energy Services business of B/E Aerospace from April 2014 until the date of distribution. Prior to joining B/E Aerospace, Mr. Roberts was the Chief Executive Officer of Vision Oil Tools, LLC, a private energy services company, from 2010 until its acquisition by B/E Aerospace. Before that, Mr. Roberts was General Manager for Complete Production Services, Inc. and worked for Weatherford International from 1991 to 2008, holding management positions with increasing levels of responsibility in Singapore, China, Indonesia and Qatar. Mr. Roberts brings to KLX over 30 years of oilfield experience.

Roger Franks
General Counsel, Vice President—Law and Human Resources

 

Roger Franks served as Associate General Counsel of B/E Aerospace until the date of distribution. Since joining the B/E Aerospace Legal Department in January 2010, Mr. Franks has helped develop its efforts in employee matters, commercial disputes, compliance and general corporate law. Prior to joining B/E Aerospace, he was on the Board of Directors of a mid-size California law firm where he focused on commercial matters including employment law and litigation.

Heather Floyd
Vice President—Finance and Corporate Controller

 

Heather Floyd served as Vice President—Internal Audit of B/E Aerospace until the date of distribution. Ms. Floyd has over 12 years of combined accounting, auditing, financial reporting and Sarbanes-Oxley compliance experience. Ms. Floyd joined B/E Aerospace in November 2010 as Director of Financial Reporting and Internal Controls. Prior to joining B/E Aerospace, Ms. Floyd served as an Audit Manager with Ernst & Young and in various accounting roles at Corporate Express, now a subsidiary of Staples.

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Our Board of Directors

        Following the spin-off, we expect that our Board will consist of the directors set forth below. The table contains each person's biography as well as the qualifications and experience each person would bring to our Board. As of the date of the distribution, our Board will consist of eight members, seven of whom will meet applicable regulatory and exchange listing independence requirements.

Name and Title
  Age   Business Experience and Director Qualifications

Amin J. Khoury
Chairman

    75   Amin J. Khoury, our Chief Executive Officer, co-founded B/E Aerospace in July 1987 and has served as its Chairman of the Board since that time. Mr. Khoury served as Chief Executive Officer of B/E Aerospace from December 31, 2005 through December 31, 2013. Mr. Khoury also served as the Co-Chief Executive Officer of B/E Aerospace from January 1, 2014 to the date of the distribution. Following the spin-off, Mr. Khoury will serve as the Executive Chairman of B/E Aerospace. Mr. Khoury was a Trustee of the Scripps Research Institute from May 2008 until his retirement in July 2014. Mr. Khoury holds an Executive Masters Professional Director Certification, the highest level, from the American College of Corporate Directors. During his time at B/E Aerospace, Mr. Khoury was primarily responsible for the development and execution of B/E Aerospace's business strategies that resulted in its growth from a single product line business with $3.0 million in annual sales, to the leading global manufacturer of commercial aircraft and business jet cabin interior products and the world's leading distributor of aerospace consumable products, with annual revenues in 2013 of $3.5 billion. Mr. Khoury led the strategic planning and acquisition strategy of B/E Aerospace as well as its operational integration and execution strategies. He is a highly effective leader in organizational design and development matters and has been instrumental in identifying and attracting both our managerial talent and Board members. He has an intimate knowledge of the Company, its industry and its competitors which he has gained over the last 27 years at B/E Aerospace. All of the above experience and leadership roles uniquely qualify him to serve as our Company's Chairman of the Board.

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Name and Title
  Age   Business Experience and Director Qualifications

John T. Collins
Director

    67  

John T. Collins has been Chairman and Chief Executive Officer of The Collins Group, Inc., a manager of a private securities portfolio and minority interest holder in several privately held companies, since 1992. From 1986 to 1992, Mr. Collins served as the President and Chief Executive Officer of Quebecor Printing (USA) Inc., which was formed in 1986 by a merger with Semline Inc., where he had served in various positions, including since 1973 as President, since 1968. During his term, Mr. Collins guided Quebecor Printing (USA) Inc. through several large acquisitions and situated the company to become one of the leaders in the industry. Mr. Collins previously served on the Board of Directors for several public companies including Federated Investors, Inc., Bank of America, and FleetBoston Financial. In addition, Mr. Collins has served on the Board of Trustees of his alma mater, Bentley College. We expect our Board to benefit from Mr. Collins' many years of experience in the management, acquisition, and development of several companies.

Peter V. Del Presto
Director

   
64
 

Peter V. Del Presto is an adjunct professor of finance at the University of Pittsburgh, where he teaches courses covering capital markets, advanced valuation methods and private equity. From 1985 until his retirement in 2010, Mr. Del Presto was a partner with PNC Equity Partners, a private equity firm and an affiliate of PNC Bank targeting middle-market companies for acquisition and investment. During his 25 years at PNC Equity Partners, Mr. Del Presto led the firm's investment in 35 companies and participated as a member of the firm's Investment Committee in over 275 investments. Mr. Del Presto was PNC Equity Partner's representative on the boards of 24 companies where he was responsible for the development of value creation strategies in each. Mr. Del Presto is also a licensed private pilot. We expect that our Board will benefit from Mr. Del Presto's background in engineering and business administration, his expertise in the field of finance, and 25 years of experience in the acquisition, investment and development of numerous companies.

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Name and Title
  Age   Business Experience and Director Qualifications

Richard G. Hamermesh
Director

    66  

Richard G. Hamermesh has served on the Board of Directors of B/E Aerospace since July 1987. Dr. Hamermesh has been a Professor of Management Practice at Harvard Business School since July 1, 2002, where he was also a member of the faculty from 1976 to 1987. From 1987 to 2001, he was a co-founder and a Managing Partner of The Center for Executive Development, an executive education and development consulting firm. He is also an active investor and entrepreneur, having pa