10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For The Quarterly Period Ended July 31, 2017

Commission File No. 001-36610

KLX INC.

(Exact name of registrant as specified in its charter)

DELAWARE	47-1639172
(State of Incorporation)	(I.R.S. Employer Identification No.)

1300 Corporate Center Way

Wellington, Florida 33414

(Address of principal executive offices)

(561) 383-5100

(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large accelerated filer [X] Accelerated filer [  ] Non-accelerated filer (do not check if a smaller reporting company) [  ] Smaller reporting company [  ] Emerging growth company [  ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [  ] NO [X]

The registrant has one class of common stock, $0.01 par value, of which, 51,423,614shares were outstanding as of August 21, 2017.

KLX INC.

Form 10-Q for the Quarter Ended July 31, 2017

Table of Contents

		Page
Part I	Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of July 31, 2017 and January 31, 2017	3
	Condensed Consolidated Statements of Earnings and Comprehensive Income (Loss) for the Three and Six Months Ended July 31, 2017 and 2016	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2017 and 2016	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25
Part II	Other Information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 5.	Other Information	27
Item 6.	Exhibits	28
Signatures		29

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PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

KLX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In Millions, Except Share Data)

	July 31,		January 31,
	2017		2017
ASSETS
Current assets:
Cash and cash equivalents	$	275.8	$	277.3
Accounts receivable–trade, less allowance for doubtful accounts ($10.6 at July 31, 2017 and $13.5 at January 31, 2017)		311.8		261.3
Inventories, net		1,398.1		1,381.4
Other current assets		47.1		39.6
Total current assets		2,032.8		1,959.6
Property and equipment, net of accumulated depreciation ($171.9 at July 31, 2017 and $149.4 at January 31, 2017)		257.5		248.3
Goodwill		1,022.7		996.4
Identifiable intangible assets, net		309.4		314.8
Deferred income taxes		135.3		147.0
Other assets		31.0		32.2
	$	3,788.7	$	3,698.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	186.0	$	166.0
Accrued liabilities		93.2		91.1
Total current liabilities		279.2		257.1
Long-term debt		1,183.2		1,182.0
Deferred income taxes		6.2		5.0
Other non-current liabilities		38.7		33.1
Commitments, contingencies and off-balance sheet arrangements (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value; 1.0 million shares authorized; no shares outstanding		—		—
Common stock, $0.01 par value; 250.0 million shares authorized; 53.5 million shares issued as of July 31, 2017 and 53.5 million shares issued as of January 31, 2017		0.5		0.5
Additional paid-in capital		2,700.9		2,686.5
Treasury stock: 2.1 million shares at July 31, 2017 and 1.5 million shares at January 31, 2017		(84.0)		(54.4)
Accumulated deficit		(287.8)		(328.0)
Accumulated other comprehensive loss		(48.2)		(83.5)
Total stockholders’ equity		2,281.4		2,221.1
	$	3,788.7	$	3,698.3

See accompanying notes to condensed consolidated financial statements.

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KLX INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In Millions, Except Per Share Data)

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
	2017		2016		2017		2016
Product revenues	$	357.1	$	346.5	$	704.6	$	662.3
Service revenues		73.5		32.4		137.3		69.4
Total revenues		430.6		378.9		841.9		731.7
Cost of sales - products		248.3		244.5		490.8		464.4
Cost of sales - services		63.7		41.9		119.6		91.3
Total cost of sales		312.0		286.4		610.4		555.7
Selling, general and administrative		66.3		60.1		130.6		120.4
Operating earnings		52.3		32.4		100.9		55.6
Interest expense		19.0		19.1		38.0		38.0
Earnings before income taxes		33.3		13.3		62.9		17.6
Income tax expense		12.6		5.3		23.8		7.1
Net earnings	$	20.7	$	8.0	$	39.1	$	10.5
Other comprehensive income (loss):
Foreign currency translation adjustment		30.5		(15.7)		35.3		5.3
Comprehensive income (loss)	$	51.2	$	(7.7)	$	74.4	$	15.8
Net earnings per share - basic	$	0.41	$	0.15	$	0.77	$	0.20
Net earnings per share - diluted	$	0.40	$	0.15	$	0.76	$	0.20

See accompanying notes to condensed consolidated financial statements.

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KLX INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Millions)

	SIX MONTHS ENDED
	JULY 31,		JULY 31,
	2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	39.1	$	10.5
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization		33.0		33.7
Deferred income taxes		21.0		5.3
Non-cash compensation		13.0		9.8
Amortization of deferred financing fees		2.2		2.1
Provision for inventory write-downs		9.1		10.5
Change in allowance for doubtful accounts and sales returns		4.8		3.3
Loss on disposal of property and equipment		0.5		3.5
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		(54.8)		7.6
Inventories		(25.6)		3.3
Other current and non-current assets		(13.7)		8.8
Accounts payable		19.4		8.4
Other current and non-current liabilities		5.3		(29.4)
Net cash flows provided by operating activities		53.3		77.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(32.6)		(25.3)
Acquisitions, net of cash acquired		-		(221.5)
Net cash flows used in investing activities		(32.6)		(246.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock		(29.6)		(8.8)
Cash proceeds from stock issuance		1.0		0.8
Net cash flows used in financing activities		(28.6)		(8.0)
Effect of foreign exchange rate changes on cash and cash equivalents		6.4		-
Net decrease in cash and cash equivalents		(1.5)		(177.4)
Cash and cash equivalents, beginning of period		277.3		427.8
Cash and cash equivalents, end of period	$	275.8	$	250.4
Supplemental disclosures of cash flow information:
Cash paid during period for:
Income taxes paid, net of refunds	$	0.1	$	2.9
Interest		36.2		35.9
Supplemental schedule of non-cash activities:
Accrued property additions	$	6.1	$	3.5

See accompanying notes to condensed consolidated financial statements.

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KLX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - In Millions, Except Per Share Data)

Note 1.Description of Business and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown are of a normal recurring nature and have been reflected in the condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or for any future period. The information included in these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the KLX Inc. (the “Company” or “KLX”) Annual Report on Form 10-K (the “2016 Form 10-K”) for the fiscal year ended January 31, 2017 (“Fiscal 2016”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates. The provision for inventory write downs has been reclassified and separately disclosed in the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2016 to conform to current year presentation.

Note 2.Recent Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09, Compensation–Stock Compensation (Topic 718). This ASU was issued to provide clarity and reduce diversity in practice regarding the application of guidance on the modification of equity awards. The ASU states that an entity should account for the effects of a modification unless all of the following are met: the fair value, vesting conditions and the classification of the instrument as equity or liability of the modified award is the same as that of the original award immediately before such award is modified. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual reporting periods with early adoption permitted and should be applied prospectively to an award modified on or after the adoption date. The Company does not expect a material impact upon adoption of this ASU to its condensed consolidated financial statements as the Company historically has accounted for all modifications in accordance with Topic 718 and has not been subject to the exception described under this ASU.

In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC Topic 842, Leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Earlier adoption is permitted. ASU 2016-02 requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the effect of this update on its condensed consolidated financial statements.

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which updated the guidance in ASC Topic 606, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

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To achieve that core principle, an entity should identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this update deferred the effective date for implementation of ASU 2014-09 by one year and is now effective for annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period.  In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, and in May 2016, ASU 2016-12, Revenues from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients both of which provide supplemental adoption guidance and clarification to ASU 2014-09. ASU 2016-10 and ASU 2016-12 must be adopted concurrently with the adoption of ASU 2014-09. The Company has not determined the impact this guidance will have on the financial statements.  However, the identification of implementation project team members and the inventorying of contracts with customers, particularly large customer contracts, has begun. Other than increased disclosures, the impact of the revised accounting guidance to the results of operations and cash flows of the Company cannot be determined until the assessment process is complete.

Note 3.Business Combinations

On May 17, 2016, the Company acquired Herndon Aerospace & Defense LLC (“Herndon”), an aftermarket aerospace supply chain management and consumables hardware distributor servicing principally aftermarket military depots as well as the commercial aerospace aftermarket, for an aggregate purchase price of $220.8 (net of cash acquired). The excess of the purchase price of the fair value of the net identifiable assets acquired approximated $119.6, of which $68.9 was allocated to identifiable intangible assets consisting of customer contracts and relationships and covenants not to compete and $50.7 is included in goodwill. The primary items that generated the goodwill recognized were the premium paid by the Company for future earnings potential and the value of the assembled workforce that does not qualify for separate recognition. The useful life assigned to the customer contracts and relationships is 20 years, and the covenants not to compete are being amortized over their contractual periods of five years.

The Herndon acquisition was accounted for as a purchase under FASB ASC 805, Business Combinations. The assets acquired and liabilities assumed have been reflected in the accompanying condensed consolidated balance sheets as of July 31, 2017 and January 31, 2017, and the results of operations are included in the accompanying condensed consolidated statements of earnings and comprehensive income (loss) from the date of acquisition.

The following table summarizes the fair values of assets acquired and liabilities assumed in the Herndon acquisition in accordance with ASC 805:

Accounts receivable-trade	$	12.3
Inventories		103.8
Other current and non-current assets		3.7
Property and equipment		2.1
Goodwill		50.7
Identified intangibles		68.9
Accounts payable		(9.7)
Other current and non-current liabilities		(11.0)
Total consideration paid	$	220.8

The majority of goodwill and intangible assets are expected to be deductible for tax purposes.

On a pro forma basis to give effect to the Herndon acquisition as if it occurred on February 1, 2016, revenues, net earnings and earnings per diluted share for the three months ended July 31, 2016 were

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$385.0, $8.4 and $0.16, respectively, and $782.0, $14.0 and $0.27, respectively, for the six months ended July 31, 2016.

The Company has substantially integrated Herndon into its Aerospace Solutions Group (“ASG”) segment systems. As a result, it is not practicable to report stand-alone revenues or operating earnings of the acquired business since the acquisition date.

Note 4.Inventories

Inventories, made up of finished goods, consist primarily of aerospace fasteners and consumables. The Company values inventories at the lower of cost and net realizable value, using first‑in, first‑out or weighted average cost method. The Company reviews inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on historical demand, estimated product demand to support contractual supply agreements with its customers and the age of the inventory, among other factors. Demand for the Company’s products can fluctuate from period to period depending on customer activity.In accordance with industry practice, inventories include amounts relating to long-term contracts with long production cycles, some of which are not expected to be realized within one year. In addition, the Company supports a substantial portion of the global fleet of aircraft in service, and in its capacity as a stocking distributor will acquire and hold inventories for aircraft maintenance at periodic intervals as mandated by the Federal Aviation Administration (“FAA”) or similar regulatory agencies. Based on historical experience, the support of the aftermarket activities with products such as those which the Company sells will necessitate holding inventory in excess of the amount required to support new build production activity contracts.  Obsolescence has historically been immaterial for the Company due to the long life of an aircraft and nature of the products sold by the Company. Inventory with a limited shelf life is continually monitored and reserved for in advance of expiration. The annual provision for inventory with limited shelf life has historically been immaterial. Reserves for excess and obsolete inventory were approximately $63.8and $56.4 as of July 31, 2017 and January 31, 2017, respectively.

Note 5.Goodwill and Intangible Assets

The table below sets forth the intangible assets by major asset class, all of which were acquired through business purchase transactions:

				July 31, 2017						January 31, 2017
	Useful Life			Original		Accumulated		Net Book		Original		Accumulated		Net Book
	(Years)			Cost		Amortization		Value		Cost		Amortization		Value
Customer contracts and relationships	8	-	30	$	404.3	$	118.1	$	286.2	$	422.0	$	129.1	$	292.9
Covenants not to compete	5				2.2		0.5		1.7		5.5		3.6		1.9
Developed technologies	15				3.3		0.4		2.9		3.3		0.2		3.1
Trade names	Indefinite				18.6		-		18.6		16.9		-		16.9
				$	428.4	$	119.0	$	309.4	$	447.7	$	132.9	$	314.8

Amortization expense associated with identifiable intangible assets was $4.8 and $5.2 for the three months ended July 31, 2017 and 2016, respectively, and $9.6 and $9.9 for the six months ended July 31, 2017 and 2016, respectively. The Company currently expects to recognize amortization expense related to intangible assets of approximately $20.0 in each of the next five fiscal years (primarily related to our ASG business). The future amortization amounts are estimates. Actual future amortization expense may be different due to future acquisitions, impairments, changes in amortization periods or other factors such as changes in exchange rates for assets acquired outside the United States. The Company expenses costs to renew or extend the term of a recognized intangible asset.  Goodwill increased by $26.3 as compared to January 31, 2017 primarily as a result of foreign currency translation adjustments.

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Note 6. Related Party Transactions

On December 17, 2014, B/E Aerospace, Inc. (“B/E Aerospace”) created an independent public company through a spin-off of its ASG and Energy Services Group (“ESG”) businesses to B/E Aerospace’s stockholders (“Spin-Off”).  Following the Spin-Off, the Company created in-house substantially all of the functions that were previously provided to it by B/E Aerospace. The Company entered into certain agreements with B/E Aerospace related to transition services and IT services through April 2017. In addition, the Company entered into an employee matters agreement and a tax sharing and indemnification agreement with B/E Aerospace in connection with the Spin-Off. Expenses incurred under those agreements were not material for the three and six months ended July 31, 2017 and were $2.3 and $5.0 for the three and six months ended July 31, 2016, respectively.

On April 13, 2017, B/E Aerospace was sold to Rockwell Collins, Inc. and is no longer a related party. Sales to B/E Aerospace were $4.4 through April 12, 2017 and $7.5 and $13.2 for the three and six months ended July 31, 2016, respectively.

Note 7.Accrued Liabilities

Accrued liabilities consisted of the following:

	July 31,		January 31,
	2017		2017
Accrued salaries, vacation and related benefits	$	28.9	$	31.6
Accrued commissions		6.3		8.7
Income taxes payable		13.6		10.3
Accrued interest		11.7		11.7
Other accrued liabilities		32.7		28.8
	$	93.2	$	91.1

Note 8.Long-Term Debt

As of July 31, 2017, long-term debt consisted of $1,200.0 aggregate principal amount of the Company’s 5.875% senior unsecured notes due 2022 (the “5.875% Notes”). On a net basis, after taking into consideration the debt issue costs for the Term Loan Facility, total debt was $1,183.2.  As of July 31, 2017, the Company also had a $750.0 undrawn secured revolving credit facility pursuant to a credit agreement dated as of December 16, 2014 and amended and restated on May 19, 2015 (the “Revolving Credit Facility”).

Borrowings under the Revolving Credit Facility bear interest at an annual rate equal to the London interbank offered rate (“LIBOR”) (as defined in the Revolving Credit Facility) plus the applicable margin (as defined).  No amounts were outstanding under the Revolving Credit Facility as of July 31, 2017 or January 31, 2017.

The Revolving Credit Facility is tied to a borrowing base formula and has no maintenance financial covenants.  This Revolving Credit Facility matures in May 2020. The credit agreement is collateralized by the Company’s assets and contains customary affirmative covenants, negative covenants, restrictions on the payment of dividends and the repurchase of our stock, and conditions precedent for borrowings, all of which were met as of July 31, 2017.

Letters of credit issued under the Revolving Credit Facility aggregated $5.5 and $5.5 at July 31, 2017 and January 31, 2017, respectively.

Note 9.Fair Value Measurements

All short-term financial instruments are generally carried at amounts that approximate estimated fair value. The fair value is the price at which an asset could be exchanged in a current transaction between

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knowledgeable, willing parties. Assets measured at fair value are categorized based upon the lowest level of significant input to the valuations.

Level 1 – quoted prices in active markets for identical assets and liabilities.

Level 2 – quoted prices for identical assets and liabilities in markets that are not active, or observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3 – unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

The carrying amounts of cash and cash equivalents (which the Company classifies as Level 1 assets), accounts receivable – trade and accounts payable represent their respective fair values due to their short-term nature. There was no debt outstanding under the Revolving Credit Facility as of July 31, 2017. The fair value of the Company’s 5.875% Notes, based on market prices for publicly-traded debt (which the Company classifies as Level 2 inputs), was $1,256.2 and $1,260.7 as of July 31, 2017 and January 31, 2017, respectively.

Note 10.Commitments, Contingencies and Off-Balance Sheet Arrangements

Lease Commitments - The Company finances its use of certain facilities and equipment under committed lease arrangements provided by various institutions. Since the terms of these arrangements meet the accounting definition of operating lease arrangements, the aggregate sum of future minimum lease payments is not reflected on the condensed consolidated balance sheets. At July 31, 2017, future minimum lease payments under these arrangements approximated $106.9, the majority of which related to long-term real estate leases.

Future payments under operating leases with terms greater than one year as of July 31, 2017 are as follows:

Year Ending January 31,
2018	$	9.0
2019		20.5
2020		22.6
2021		19.4
2022		14.5
Thereafter		20.9
Total	$	106.9

Litigation - The Company is a defendant in various legal actions arising in the normal course of business, the outcomes of which, in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect on the Company’s condensed consolidated financial statements.

Indemnities, Commitments and Guarantees - During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to other parties to certain acquisition agreements. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. Many of these indemnities, commitments and guarantees provide for limitations on the maximum potential future payments the Company could be obligated to make. However, the Company is unable to estimate the maximum amount of liability related to its indemnities, commitments and guarantees because such liabilities are contingent upon the occurrence of events that are not reasonably determinable. Management believes that any liability for these indemnities, commitments and guarantees would not be material to the accompanying condensed consolidated financial statements. Accordingly, no significant amounts have been accrued for indemnities, commitments and guarantees.

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The Company has employment agreements with certain key members of management with three year initial terms and which renew for one additional year on each anniversary date. The Company’s employment agreements generally provide for certain protections in the event of a change of control. These protections generally include the payment of severance and related benefits under certain circumstances in the event of a change of control.

Note 11.Accounting for Stock-Based Compensation

The Company has a Long-Term Incentive Plan (“LTIP”) under which the Company’s Compensation Committee has the authority to grant stock options, stock appreciation rights, restricted stock, restricted stock units or other forms of equity-based or equity-related awards.

The Company accounts for share-based compensation arrangements in accordance with the provisions of FASB ASC 718, Compensation—Stock Compensation, whereby share-based compensation cost is measured on the date of grant, based on the fair value of the award, and is recognized over the requisite service period.

Compensation cost recognized during the three and six months ended July 31, 2017 and 2016 related to KLX restricted stock and stock options was $6.9 and $4.9, and $12.6 and $9.5, respectively. Unrecognized compensation expense related to these grants was $31.6 at July 31, 2017.

KLX has established a qualified Employee Stock Purchase Plan, the terms of which allow for qualified employees (as defined in the Plan) to participate in the purchase of designated shares of KLX’s common stock at a price equal to 85% of the closing price on the last business day of each semi‑annual stock purchase period. The fair value of employee purchase rights represents the difference between the closing price of KLX’s shares on the date of purchase and the purchase price of the shares. Compensation cost was $0.1 and $0.1 for the three months ended July 31, 2017 and 2016, respectively, and $0.2 and $0.2 for the six months ended July 31, 2017 and 2016, respectively.

Note 12.Segment Reporting

The Company is organized based on the products and services it offers. The Company’s reportable segments which are also its operating segments, are comprised of ASG and ESG. The segments regularly report their results of operations and make requests for capital expenditures and acquisition funding to the Company’s chief operational decision-making group (“CODM”). This group is comprised of the Chairman and Chief Executive Officer and the President and Chief Operating Officer. As a result, the CODM has determined the Company has two reportable segments.

The Company has not included product line information for the ASG segment due to the similarity of the product offerings and services and the impracticality of determining such information.

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The following table presents revenues and operating earnings (losses) by reportable segment:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
Revenues	2017		2016		2017		2016
Aerospace Solutions Group	$	357.1	$	346.5	$	704.6	$	662.3
Energy Services Group		73.5		32.4		137.3		69.4
Total revenues		430.6		378.9		841.9		731.7
Operating earnings (loss) (1)
Aerospace Solutions Group		60.1		55.9		118.8		110.0
Energy Services Group		(7.8)		(23.5)		(17.9)		(54.4)
Total operating earnings		52.3		32.4		100.9		55.6
Interest expense		19.0		19.1		38.0		38.0
Earnings before income taxes	$	33.3	$	13.3	$	62.9	$	17.6

(1) Operating earnings (loss) include an allocation of employee benefits and general and administrative costs primarily based on the proportion of each segment’s number of employees for the three and six months ended July 31, 2017 and 2016.

The following table presents capital expenditures by reportable segment:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
	2017		2016		2017		2016
Aerospace Solutions Group	$	2.6	$	3.5	$	5.3	$	6.3
Energy Services Group		15.5		2.6		27.3		19.0
	$	18.1	$	6.1	$	32.6	$	25.3

Corporate capital expenditures have been allocated to the above segments based on each segment’s percentage of total capital expenditures.

The following table presents goodwill by reportable segment:

	July 31,		January 31,
	2017		2017
Aerospace Solutions Group	$	1,022.7	$	996.4
Energy Services Group		-		-
	$	1,022.7	$	996.4

The following table presents total assets by reportable segment:

	July 31,		January 31,
	2017		2017
Aerospace Solutions Group	$	3,526.0	$	3,471.4
Energy Services Group		262.7		226.9
	$	3,788.7	$	3,698.3

Corporate assets (primarily cash and cash equivalents) of $364.8 and $378.2 at July 31, 2017 and January 31, 2017, respectively, have been allocated to the above segments based on each segment’s percentage of total assets.

As discussed in Note 15 in the 2016 Form 10-K, Selected Quarterly Data (Unaudited), during our Fiscal 2016 preparation of the annual 10-K, the Company restated its 2016 interim financial statements to reflect the correction of errors that were identified related to the ASG segment’s product revenues and cost of sales. These errors related to the application of an accounting principle on claims related to the termination of programs under a long-term contract and other errors associated with inventory and sales reserves. The Company concluded the corrected errors were immaterial individually and in the aggregate, and the Company’s

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Condensed Consolidated Balance Sheet, Statement of Earnings and Comprehensive Income and Statement of Cash Flows reflect the correction of errors for the prior three-month and six-month periods ended July 31, 2016. The impact of the restatement to the three-month and six-month periods ended July 31, 2016 are summarized in the table below:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	As Reported		As Restated		As Reported		As Restated
	July 31,		July 31,		July 31,		July 31,
	2016		2016		2016		2016
Accounts receivable - trade	$	289.0	$	261.1	$	289.0	$	261.1
Inventories, net		1,367.5		1,386.9		1,367.5		1,386.9
Total stockholders' equity		2,228.3		2,223.0		2,228.3		2,223.0
Total revenues		391.4		378.9		759.6		731.7
Total cost of sales		296.3		286.4		575.0		555.7
Income tax expense		6.3		5.3		10.3		7.1
Net earnings		9.6		8.0		15.8		10.5
Net earnings per share - basic		0.18		0.15		0.30		0.20
Net earnings per share - diluted		0.18		0.15		0.30		0.20

The Statement of Cash Flows was restated to reflect the impact of these errors. In addition, the Company separately disclosed the provision for inventory write-downs in the Statement of Cash Flows which was previously included in the change in inventory line item. There were no changes in total operating, investing, or financing cash flows. The restated results for the six months ended July 31, 2016 include the correction of amounts relating to prior periods that were reported in the three-months ended April 30, 2016, which correction resulted in a reduction of revenue, cost of sales, and net earnings of $12.1, $6.6 and $3.4, respectively. The impact of these prior period errors was not material to the year ended January 31, 2017 or to any prior periods.

Note 13.Net Earnings Per Common Share

Basic net earnings per common share is computed using the weighted average common shares outstanding during the period. Diluted net earnings per common share is computed by using the weighted average common shares outstanding including the dilutive effect of stock options, shares issued under the KLX LTIP and restricted shares based on an average share price during the period. For the three months ended July 31, 2017 and 2016, approximately no shares and 0.3 shares of the Company’s common stock, respectively, and for the six months ended July 31, 2017 and 2016, no shares and 0.3, respectively, were excluded from the determination of diluted earnings per common share because their effect would have been anti-dilutive. The computations of basic and diluted earnings per share for the three and six months ended July 31, 2017 and 2016 are as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
	2017		2016		2017		2016
Net earnings	$	20.7	$	8.0	$	39.1	$	10.5
(Shares in millions)
Basic weighted average common shares		50.9		51.9		51.0		51.9
Effect of dilutive securities - dilutive securities		0.8		0.3		0.7		0.3
Diluted weighted average common shares		51.7		52.2		51.7		52.2
Basic net earnings per common share	$	0.41	$	0.15	$	0.77	$	0.20
Diluted net earnings per common share	$	0.40	$	0.15	$	0.76	$	0.20

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Note 14.Income Taxes

In accordance with FASB ASC 740, Income Taxes, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. As of July 31, 2017 and 2016, the Company had $9.3 and $12.4, respectively, of uncertain tax positions, including accrued interest of $1.3 and $1.6 at July 31, 2017 and 2016, respectively, all of which would affect the Company’s effective tax rate if recognized.

Pursuant to the terms of the Tax Sharing Agreement with our former parent, B/E Aerospace, the Company may be liable for income tax in certain foreign jurisdictions arising from the examination of tax years during which the Company was part of the B/E Group.  The statute of limitations in these foreign jurisdictions is open for tax years 2007-2014. The Company is currently undergoing a U.S. federal income tax examination for the period from December 17, 2014 through December 31, 2015.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars In Millions, Except Per Share Data)

The following discussion and analysis addresses the results of our operations for the three and six months ended July 31, 2017 as compared to our results of operations for the three and six months ended July 31, 2016. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods.

As discussed in Note 15 Selected Quarterly Data (Unaudited) to our condensed consolidated financial statements contained in the 2016 Form 10-K, during our Fiscal 2016 preparation of the annual 10-K, the Company restated its July 31, 2016 interim financial statements to reflect the correction of errors that were identified. The Company concluded the corrected errors were immaterial individually and in the aggregate, and the Company’s Condensed Consolidated Balance Sheet, Statement of Earnings and Comprehensive Income and Statement of Cash Flows reflect the correction of errors for the prior three-month and six-month periods ended July 31, 2016.

We believe, based on our experience in the industry, that we are a 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. Founded in 1974 as M&M Aerospace Hardware, our Aerospace Solutions Group (“ASG”), formerly the consumables management segment of B/E Aerospace, has evolved into an industry leader through multiple acquisitions and strong organic growth. As of January 31, 2017, ASG’s global presence consisted of approximately 1.5 million square feet in 18 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 2016, we completed seven acquisitions, for an aggregate purchase price of approximately $2,100. We believe our organic growth together with these acquisitions enabled us to position ourselves as a preferred global supplier to our customers. We believe we have become an industry leader providing aerospace fasteners, consumable products and supply chain management services. Through our global facilities network and advanced information technology systems, we believe we offer unparalleled service to commercial airlines, business jet and defense original equipment manufacturers (“OEMs”), maintenance, repair and overhaul (“MRO”) operators, and fixed base operators (“FBOs”). We have a large and diverse global customer base, including commercial airlines, business jet and defense OEMs, OEM subcontractors and major MRO operators across five continents, and 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 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 just-in-time (“JIT”) deliveries and kitting solutions. In addition, through the acquisition of Herndon Aerospace & Defense LLC (“Herndon”) in May 2016, we expanded our capability to provide comprehensive supply chain management solutions to a broader portfolio of aftermarket customers. Herndon has established itself within the Department of Defense and its procurement arm, the Defense Logistics Agency, as a proven supplier of a broad range of consumables resulting in a number of long-term contracts with major military installations. We believe Herndon’s unique land-based military depot aftermarket product distribution platform will serve as an excellent new growth platform for ASG. The aforementioned operating business is operated within our ASG segment.

ASG also provides 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 ASG contemporaneously with the delivery of the product, and as such, once the product is delivered, ASG does 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, ASG has satisfied its obligations to the customer. We do not account for these services as a separate element, as the

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services do not have stand-alone value and cannot be separated from the product element of the arrangement.

In 2013, we initiated an expansion into the energy services sector. During 2013 and 2014, we acquired seven companies engaged in the business of providing technical services and related rental equipment to oil and gas exploration and production companies. As a result, we now provide a broad range of solutions and equipment, which bring 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 of oil and gas in North America, including in the Northeast (Marcellus and Utica Shales), Rocky Mountains (Williston and Piceance Basins), Southwest (Permian Basin and Eagle Ford Shale) and Mid‑Continent. This business is operated within our Energy Services Group (“ESG”) segment.

Revenues by reportable segment for the three and six months ended July 31, 2017 and 2016, respectively, were as follows:

	THREE MONTHS ENDED								SIX MONTHS ENDED
	July 31, 2017				July 31, 2016				July 31, 2017				July 31, 2016
	Revenues		%		Revenues		%		Revenues		%		Revenues		%
Aerospace Solutions Group	$	357.1	82.9	%	$	346.5	91.4	%	$	704.6	83.7	%	$	662.3	90.5	%
Energy Services Group		73.5	17.1	%		32.4	8.6	%		137.3	16.3	%		69.4	9.5	%
Total revenues	$	430.6	100.0	%	$	378.9	100.0	%	$	841.9	100.0	%	$	731.7	100.0	%

Revenues by geographic area (based on destination) for the three and six months ended July 31, 2017 and 2016, respectively, were as follows:

	THREE MONTHS ENDED								SIX MONTHS ENDED
	July 31, 2017				July 31, 2016				July 31, 2017				July 31, 2016
	Revenues		%		Revenues		%		Revenues		%		Revenues		%
United States	$	266.2	61.8	%	$	220.2	58.1	%	$	516.7	61.4	%	$	415.9	56.9	%
Europe		97.3	22.6	%		96.2	25.4	%		194.5	23.1	%		195.6	26.7	%
Asia, Pacific Rim, Middle East and other		67.1	15.6	%		62.5	16.5	%		130.7	15.5	%		120.2	16.4	%
Total revenues	$	430.6	100.0	%	$	378.9	100.0	%	$	841.9	100.0	%	$	731.7	100.0	%

Revenues from our domestic and foreign operations for the three and six months ended July 31, 2017 and 2016, respectively, were as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
	2017		2016		2017		2016
Domestic	$	428.9	$	356.7	$	838.7	$	683.6
Foreign		1.7		22.2		3.2		48.1
Total revenues	$	430.6	$	378.9	$	841.9	$	731.7

We are organized based on the products and services we offer. The Company’s reportable segments which are also its operating segments, are comprised of ASG and ESG. We determined that ASG and ESG met the requirements of a reportable segment each operating in a single line of business. 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.

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Current ESG Industry Conditions

Over the past several years, the price of crude oil declined from over $100.00 per barrel in 2014 to approximately $50.00 at July 31, 2017, and as a result, over this period, oil field service companies that provide services similar to ESG have all suffered significant reductions in demand and pricing from their oil exploration and production customers.  This severe change in industry conditions from the peak of the market in 2014 to the trough in 2016 resulted in a reduction of over 1,500 oil rigs, a loss of almost 200,000 U.S. jobs throughout the energy sector and a corresponding decrease in demand and pricing for oil field services as the exploration and production (“E&P”) companies cut back their spending for new exploration.

We implemented a business alignment and cost reduction initiative in 2015 to size our operations to current demand levels. We began to see a stabilization in demand in late 2016, and during the first half of Fiscal 2017, ESG experienced a 97.8% increase in revenues versus the same period in the prior year, and an increase of 15.2% for the second quarter of Fiscal 2017 as compared to the first quarter of Fiscal 2017. We believe ESG’s Fiscal 2017 performance reflects our business realignment and cost reduction initiatives as well as the improvement in industry conditions. We are continuing to carefully manage our costs, while continuing to invest in differentiating technologies, personnel and innovative product and service lines, as we build an industry leading platform in the services niche in which we operate.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2017

COMPARED TO THREE MONTHS ENDED JULY 31, 2016

($ in Millions, Except Per Share Data)

	REVENUES
	THREE MONTHS ENDED				Percent
	July 31, 2017		July 31, 2016		Change
Aerospace Solutions Group	$	357.1	$	346.5	3.1	%
Energy Services Group		73.5		32.4	126.9	%
Total revenues	$	430.6	$	378.9	13.6	%

Second quarter 2017 revenues of $430.6 increased 13.6% as compared with the prior year. Our consolidated revenue growth was driven by a 3.1% increase in ASG revenues and a 126.9% increase in ESG revenues.

Second quarter 2017 cost of sales was $312.0, or 72.5% of sales, as compared to the prior year period of $286.4, or 75.6% of sales. The 310 basis point year-over-year improvement in cost of sales as a percentage of revenues is primarily due to substantially improved results at our ESG business due to the benefits from our ESG cost reduction initiatives and improved market conditions combined with a 100 basis point improvement at our ASG business.

Selling, general and administrative (“SG&A”) expense during the second quarter of 2017 was $66.3, or 15.4% of revenues, as compared with $60.1, or 15.9% of revenues, in the prior year period. SG&A, as a percentage of revenues, decreased as compared with the prior year period by 50 basis points primarily due to increased operating leverage at ESG.

Operating earnings of $52.3 increased $19.9, or 61.4%. Operating margin increased by 360 basis points reflecting a 70 basis point expansion in ASG’s operating margin and the continued strong year-over-year improvement at ESG.

Interest expense for the three months ended July 31, 2017 was approximately flat as compared to the prior year period at approximately $19.0.

Income tax expense for the three months ended July 31, 2017 was $12.6, or 37.8% of earnings before income taxes, as compared with income tax expense of $5.3, or 39.8% of earnings before income taxes, in the prior year period.

Net earnings and net earnings per diluted share for the three months ended July 31, 2017 were $20.7 and $0.40, respectively, as compared to $8.0 and $0.15, respectively, in 2016. The changes in net earnings are due to the various factors discussed above. 

Segment Results

The following is a summary of operating earnings (loss) by segment:

	THREE MONTHS ENDED				Percent
	July 31, 2017		July 31, 2016		Change
Aerospace Solutions Group	$	60.1	$	55.9	7.5	%
Energy Services Group		(7.8)		(23.5)	66.8	%
Total operating earnings	$	52.3	$	32.4	61.4	%

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For the three months ended July 31, 2017, ASG revenues of $357.1 increased 3.1% compared to the same period in the prior year. The increase in revenues was driven by an approximate mid-single digit percentage increase in demand from commercial aerospace manufacturing customers partially offset by a decrease in business jet and military manufacturing demand. Aftermarket demand was essentially flat as compared to the prior year period. ASG operating earnings of $60.1 were up 7.5% as compared to the prior year period on the 3.1% increase in revenues resulting in a 70 basis point expansion in operating margin to 16.8%.

For the three months ended July 31, 2017, as compared to the prior year, ESG revenues of $73.5 increased by 126.9%, and operating loss decreased $15.7, or 66.8%, to $(7.8). As compared to the first quarter of 2017, revenues increased by 15.2%, and operating loss improved 22.8%.

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SIX MONTHS ENDED JULY 31, 2017

COMPARED TO SIX MONTHS ENDED JULY 31, 2016

	REVENUES
	SIX MONTHS ENDED				Percent
	July 31, 2017		July 31, 2016		Change
Aerospace Solutions Group	$	704.6	$	662.3	6.4	%
Energy Services Group		137.3		69.4	97.8	%
Total revenues	$	841.9	$	731.7	15.1	%

For the six months ended July 31, 2017, revenues of $841.9 increased $110.2, or 15.1%, as compared to the prior year period. Our consolidated revenue growth was driven by a 6.4% increase in ASG revenues and a 97.8% increase in ESG revenues as compared to the same period of the prior year.

Cost of sales for the period was $610.4, or 72.5% of sales, as compared to $555.7, or 75.9% of sales, in the prior year. The 340 basis point year-over-year improvement in cost of sales as a percentage of revenues is primarily due to substantially improved results at our ESG business due to the benefits from our ESG cost reduction initiatives and improved market conditions combined with a 40 basis point improvement at our ASG business.

SG&A expense during the six months ended July 31, 2017 was $130.6, or 15.5% of revenues, as compared with $120.4, or 16.5% of revenues, in the prior year. SG&A as a percentage of revenues decreased as compared with the prior year period by 100 basis points primarily due to increased operating leverage at ESG.

Operating earnings of $100.9 increased $45.3, or 81.5%. Operating margin increased 440 basis points as the strong year-over-year improvement at ESG continued and ASG generated a 30 basis point operating margin expansion. 

Interest expense for the six months ended July 31, 2017 was flat as compared to the prior year period at $38.0.

Income tax expense for the six months ended July 31, 2017 was $23.8, or 37.8% of earnings before income taxes, compared to $7.1, or 40.3%, in the prior year period.

For the six months ended July 31, 2016, net earnings and earnings per diluted share were $39.1 and $0.76, respectively, as compared to $10.5 and $0.20, respectively, in the prior year period.

Segment Results

The following is a summary of operating earnings (loss) by segment:

	SIX MONTHS ENDED				Percent
	July 31, 2017		July 31, 2016		Change
Aerospace Solutions Group	$	118.8	$	110.0	8.0	%
Energy Services Group		(17.9)		(54.4)	67.1	%
Total operating earnings	$	100.9	$	55.6	81.5	%

For the six months ended July 31, 2017, ASG revenues of $704.6 increased 6.4% compared to the same period in the prior year. Revenues from commercial aerospace manufacturing customers and aftermarket customers increased by an approximate mid-single digit percentage. ASG operating earnings of $118.8 increased 8.0% and operating margin was 16.9%.

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For the six months ended July 31, 2017, ESG revenues of $137.3 increased by 97.8%, as compared to the same period in the prior year, while operating loss of $(17.9) improved by 67.1%.

LIQUIDITY AND CAPITAL RESOURCES

Current Financial Condition

Cash on hand at July 31, 2017 decreased by $1.5 as compared with cash on hand at January 31, 2017 primarily as a result of capital expenditures of $32.6 and the Company’s repurchase of $29.6 of KLX common shares, partially offset by cash flows from operating activities of $53.3. 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 consist of cash on hand, cash flow from operations and availability under our $750.0 Revolving Credit Facility. At July 31, 2017, we had $275.8 of cash and cash equivalents. The substantial majority of our 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.

Working Capital

Working capital as of July 31, 2017 was $1,753.6, an increase of $51.1, as compared with working capital at January 31, 2017. As of July 31, 2017, total current assets increased by $73.2 and total current liabilities increased by $22.1 as compared with the prior fiscal year end amounts. Total current assets increased primarily as a result of a $50.5 increase in accounts receivable and an $16.7 increase in inventories. The increase in total current liabilities was primarily due to a $20.0 increase in accounts payable.

Cash Flows

As of July 31, 2017, our cash and cash equivalents were $275.8 as compared to $277.3 at January 31, 2017. Cash generated from operating activities was $53.3 for the six months ended July 31, 2017 as compared to $77.4 for the six months ended July 31, 2016, reflecting a $28.6 increase in net earnings, a $54.8 increase in accounts receivable, due to the 15.1% increase in consolidated revenues, as compared with a $7.6 decrease in the prior year, a $25.6 increase in inventories compared to a $3.3 decrease in the prior year and a $13.7 increase in other assets compared to a $8.8 decrease in the prior year. The decrease was partially offset by a $24.7 increase in accounts payable and accrued liabilities in the current period compared with a $21.0 decrease in the prior year. Cash used by investing activities was $32.6 for the six months ended July 31, 2017 as compared to $246.8 in the same period of the prior year due to the acquisition of Herndon for $221.5 in the prior year period offset by higher capital expenditures in the current year period. Cash used by financing activities was $28.6 for the six months ended July 31, 2017 as compared to $8.0 in the same period of the prior year due to an increase in share repurchases of $20.8.

Capital Spending

Our capital expenditures were $32.6 and $25.3 during the six months ended July 31, 2017 and 2016, respectively. We expect capital expenditures to be approximately $80.0 during 2017 reflecting significant investment related to the build-out of the Company’s new ASG global headquarters and discrete investments within the ESG business. We expect to fund future capital expenditures from cash on hand, cash flow from operations and from funds available from our secured $750.0 Revolving Credit Facility, none of which was drawn at July 31, 2017.

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Outstanding Debt and Other Financing Arrangements

Long-term debt at July 31, 2017 totaled $1,200.0 and consisted of our 5.875% senior unsecured notes. On a net basis, after taking into consideration cash on hand and the debt issue costs for the Term Loan Facility, total debt was $907.4.

We also have a $750.0 Secured Revolving Credit Facility tied to a borrowing base formula, which bears interest at the London interbank offered rate (“LIBOR”) plus the applicable margin (as defined). No amounts were outstanding under this credit facility as of July 31, 2017. We believe that our cash flows, together with cash on hand and funds available under the credit facility will provide us with the ability to fund our operations, make planned capital expenditures payments and meet our debt service obligations for at least the next twelve months. 

Contractual Obligations

The following table reflects our contractual obligations and commercial commitments as of July 31, 2017. 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	2017		2018		2019		2020		2021		Thereafter		Total
Long-term debt and other non-current liabilities (1)	$	0.5	$	0.8	$	0.8	$	0.9	$	1.1	$	1,225.3	$	1,229.4
Operating leases		9.0		20.5		22.6		19.4		14.5		20.9		106.9
Future interest payments on outstanding debt (2)		36.2		72.6		72.6		72.6		72.6		213.9		540.5
Total	$	45.7	$	93.9	$	96.0	$	92.9	$	88.2	$	1,460.1	$	1,876.8
Commercial Commitments
Letters of credit	$	5.5		—		—		—		—		—	$	5.5

(1) Our liability for unrecognized tax benefits of $9.3, including related interest and penalties at July 31, 2017, 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 any such change to have a material impact on our consolidated financial statements.

(2) Interest payments include interest payments due on the 5.875% senior unsecured notes based on the stated rate of 5.875%. To the extent we incur interest on the Revolving Credit Facility, interest payments would fluctuate based on LIBOR or the prime rate pursuant to the terms of the Revolving Credit Facility.

We believe that our cash flows, together with cash on hand and the availability under the Revolving Credit Facility, provide us with the ability to fund our operations, make planned capital expenditures and make scheduled debt service payments for at least the next twelve months. However, such cash flows are dependent upon our future operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors, including the conditions of our markets, some of which are beyond our control. If, in the future, we cannot generate sufficient cash from operations to meet our debt service obligations, we will need to refinance such debt obligations, obtain additional financing or sell assets. We cannot assure you that our business will generate cash from operations or that we will be able to obtain financing from other sources sufficient to satisfy our debt service or other requirements.

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 condensed

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consolidated balance sheets. Our aggregate future minimum lease payments under these arrangements totaled approximately $106.9 at July 31, 2017.

Indemnities, Commitments and Guarantees

During the normal course of business, we have made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These indemnities include indemnities to our customers in connection with the sale and delivery 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 which are not reasonably determinable. Management believes that any liability for these indemnities, commitments and guarantees would not be material to our condensed consolidated financial statements.

Backlog

We believe that backlog is not a relevant measure for our ASG segment, given the long-term nature of our contracts with our customers. Few, if any, include minimum purchase requirements, annually or over the term of the agreement. Our ESG segment operates under Master Service Agreements (“MSAs”) with our oil and gas 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, we do not record backlog.

Critical Accounting Policies

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 in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2016 Form 10-K. There have been no changes to our critical accounting policies since January 31, 2017.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information to investors. This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes forward-looking statements that 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.

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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. Factors that might cause such a difference include those discussed in our filings with the SEC, in particular those discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2017, 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;

· 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 or our ability to engage in strategic transactions;

· 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 Internal Revenue Code of 1986, as amended, or our inability to achieve some or all of the benefits of the Spin-Off;

· 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; and

· inability to successfully consummate acquisitions or integrate acquisitions after closing or inability to manage potential growth.

In light of these risks and uncertainties, you are cautioned not to put undue reliance on any forward-looking statements in this Form 10-Q. These statements should be considered only after carefully reading this entire Form 10-Q. 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 Form 10-Q not to occur.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of risks, including foreign currency fluctuations and changes in interest rates affecting the cost of our variable-rate debt.

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Foreign Currency – We have direct operations in Europe that receive revenues from customers primarily in U.S. dollars and we purchase component parts from foreign vendors primarily in British pounds or Euros. Accordingly, we are exposed to transaction gains and losses that could result from changes in foreign currency exchange rates relative to the U.S. dollar. Our largest foreign currency exposure results from activity in British pounds and Euros.

From time to time, we and our foreign subsidiaries may enter into foreign currency exchange contracts to manage risk on transactions conducted in foreign currencies. At July 31, 2017, we had no outstanding forward currency exchange contracts. In addition, we have not entered into any other derivative financial instruments.

Interest Rates – As of July 31, 2017, we have no adjustable rate debt outstanding. We do not engage in transactions intended to hedge our exposure to changes in interest rates.

As of July 31, 2017, we maintained a portfolio of cash and securities consisting mainly of taxable, interest-bearing deposits with weighted average maturities of less than three months. If short-term interest rates were to increase or decrease by 10%, we estimate interest income would increase or decrease by approximately $0.2.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, of the effectiveness, as of July 31, 2017, of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer concluded that due to the material weakness in internal control over financial reporting described in our Form 10-K, our disclosure controls and procedures were not effective as of July 31, 2017. The Company has designed and implemented controls to remediate the material weakness and is in the process of testing these controls for operating effectiveness.

Internal Control Over Financial Reporting

The Company created a data center substantially similar to the data center maintained by B/E Aerospace under a transition services agreement (“TSA”) through April 2017. The Company relied on the B/E Aerospace TSA to provide the appropriate controls. The Company adopted its own set of policies, procedures and controls when it transitioned to its data center in April 2017. Substantially all of the policies, procedures and controls were in place prior to April 2017; however, the Company continues to document and test its internal controls over financial reporting and may make changes aimed at enhancing their effectiveness.

We disclosed in our Annual Report on Form 10-K for the year ended January 31, 2017 that management had concluded that our internal control over financial reporting was not effective as of January 31, 2017 due the design and operating effectiveness of controls over the evaluation of the accounting treatment of significant events and transactions. We have designed and implemented controls to remediate the material weakness and are in the process of testing these controls for operating effectiveness. No other changes in our internal control over financial reporting occurred during our second fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchases

($ in Millions, Except Shares and Per Share Data)

The following table presents the total number of shares of our common stock that we repurchased during the three months ended July 31, 2017:

Period	Total number of shares purchased1		Average price paid per share2		Total number of shares purchased as part of publicly announced plans or programs3		Approximate dollar value of shares that may yet be purchased under the plans or programs
May 1, 2017 - May 31, 2017		617	$	48.77		—	$	183.7
June 1, 2017 - June 30, 2017		72,414		48.91		72,414		180.2
July 1, 2017 - July 31, 2017		221,385		51.76		221,385		168.7
Total		294,416				293,799

(1) Includes shares purchased from employees in connection with the settlement of income tax and related benefit withholding obligations arising from vesting of restricted stock grants under the Company’s Long-Term Incentive Plan.

(2) The average price paid per share of common stock repurchased under the share repurchase program includes the commissions paid to the brokers.

(3) In November 2014, our board of directors authorized a share repurchase program for the repurchase of outstanding shares of the Company’s common stock having an aggregate purchase price up to $250. In January 2016, our board of directors authorized management to repurchase up to $100 of the Company’s common stock under the existing $250 share repurchase program. In March 2017, our board of directors authorized an increase in the Company’s share repurchase authorization from $100 to $200 under the existing $250 repurchase program.

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ITEM 5. OTHER INFORMATION

The Annual Meeting of Stockholders of KLX Inc. (the “Company”), took place on August 24, 2017.  Proxies for the meeting were solicited and the proposals described below were submitted to a vote of the Company’s stockholders at the annual meeting.  The following is a brief description of each matter voted on and the results of voting.

1. Election of three Class III Directors.

2. Approval of a Non-Binding Advisory Note on Executive Compensation.

3. Ratification of the Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for the 2017 Fiscal Year.

The number of shares voted for, against and abstained/withheld, as well as the number of broker non-votes, were as follows:

			Abstained/
	For	Against	Withheld	Non-Votes
1. Election of Class III Directors
Richard G. Hamermesh	23,525,274	-	22,963,452	1,636,406
Theodore L. Weise	27,520,726	-	18,968,000	1,636,406
John T. Whates, Esq.	27,521,184	-	18,967,542	1,636,406
2. Advisory Vote on Named Executive Officer Compensation	44,942,905	1,519,651	26,170	1,636,406
3. Ratification of Appointment of Deloitte & Touche LLP	47,955,253	161,506	8,373	-

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ITEM 6. EXHIBITS

Exhibit 10 – Material Contracts
10.1	Amended and Restated Employment Agreement between KLX Inc. and Amin J. Khoury, dated as of May 25, 2017
10.2	Consulting Agreement between KLX Inc. and Amin J. Khoury, dated as of May 25, 2017
10.3	Executive Retiree Medical and Dental Plan, dated as of May 25, 2017
Exhibit 31 - Rule 13a-14(a)/15d-14(a) Certifications
31.1	Certification of Chief Executive Officer
31.2	Certification of Chief Financial Officer
Exhibit 32 - Section 1350 Certifications
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
Exhibit 101 – Interactive Data Files
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		KLX INC.
Date: August 24, 2017	By:	/s/ Amin J. Khoury
		Amin J. Khoury
		Chairman and
		Chief Executive Officer
	By:	/s/ Michael F. Senft
		Michael F. Senft
		Vice President, Chief Financial Officer

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EX-10.1

EXHIBIT 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”) dated as of May 25, 2017 (the “Effective Date”), is by and between KLX Inc., a Delaware corporation (the “Company”), and Amin J. Khoury (“Executive”).

WHEREAS, Executive and the Company entered into an Amended and Restated Employment Agreement dated as of May 25, 2016 (the “PriorAgreement”); and

WHEREAS, Executive, having provided services to the Company and its predecessors since August 1, 1987, agrees to continue to provide services for an additional period as provided herein, and the Company wishes to procure such services; and

WHEREAS, Executive and the Company wish to amend and restate the Prior Agreement in its entirety in the manner set forth herein.

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows:

1.          Arrangement.  Executive shall provide to the Company, and the Company shall accept from Executive, the services set forth in Section 3.2 below, subject to the terms and conditions set forth in this Agreement.

2.          Term.  Subject to Section 6 hereof, the Company agrees to employ Executive, and Executive agrees to be employed by the Company, in each case pursuant to this Agreement, from the Effective Date through the third anniversary of the Effective Date, and the Executive’s employment hereunder shall automatically be extended on the first anniversary date of the Effective Date and on each subsequent anniversary of the Effective Date for additional one (1) year periods until either the Company or the Executive gives the other party at least thirty (30) days’ written notice prior to the anniversary of the Effective Date of any such year of its or his desire to not renew the then current term of this Agreement, unless the Executive’s employment is terminated earlier pursuant to this Agreement as hereinafter set forth.  For purposes of this Agreement, the term “Employment Term” shall mean the initial three (3) year period and all extensions thereof in accordance with this Section 2, if any, as aforesaid, provided that the Executive continues to be employed by the Company; provided, however, that for the purposes of Section 6 of this Agreement, the Employment Term shall run through the last day of the then current Employment Term (assuming for this purpose Executive’s continued employment through such last day).

3.          Capacity, Services and Performance.

3.1          Capacity.  Executive shall serve the Company as its Chairman of the Board of Directors of the Company (the “Board”) and Chief Executive Officer, or in such other Board or executive capacity as the Board may designate from time to time, but only upon agreement with Executive.

3.2          Services.  In the capacity set forth in Section 3.1 above, Executive shall be retained by the Company and shall perform such duties and responsibilities on behalf of the Company as Executive and the Board shall by mutual agreement from time to time determine.

3.3          Performance.  During the Employment Term, Executive shall use his business judgment, skill and knowledge to the advancement of the Company’s interests and to the discharge of his duties and responsibilities hereunder; provided, however, that Executive shall be required only to devote so much time as Executive determines is reasonably necessary to discharge his duties as Chairman of the Board and Chief

Executive Officer, and, subject to the provisions of Section 5 below, Executive may engage in other business activities during the Employment Term, including, without limitation, serving as an employee, director or consultant of B/E Aerospace, Inc., a Delaware corporation, or its successor (“B/E”).

4.          Compensation and Benefits.

4.1          Salary.  During the Employment Term, Executive shall receive an annual salary (the “Salary”) of one million thirty thousand dollars ($1,030,000) during each year of the Employment Term.  The Salary shall be reviewed annually and may be adjusted upward (but not downward) by the Board or the Compensation Committee of the Board (the “Compensation Committee”) in its discretion.

4.2          Bonuses.  Executive may receive bonuses from the Company when, as and if determined from time to time by the Compensation Committee, with the target annual incentive opportunity for Executive to be no less than one hundred and seventy-five percent (175%) of Executive’s then current Salary (“Target Bonus”).  Any such bonuses paid to Executive shall be in addition to the Salary then in effect.  The incentive bonus shall be paid in accordance with Company policy, but in no event later than two and one-half months following the end of the fiscal year in respect of which Executive earned such bonus.

4.3          Benefits.  Except to the extent equivalent benefits are provided by B/E (including post-retirement benefits), during the Employment Term, Executive shall participate in all employee benefit plans, life insurance plans, disability income plans, incentive compensation plans and other benefit plans, as may be from time to time in effect for executives of the Company.  In addition, Executive shall be entitled to all rights and benefits pursuant to the Company’s travel policy, which shall be no less favorable for Executive than his rights and benefits pursuant to B/E’s travel policy as of July 1, 2014.

4.4          Business Expenses.  The Company shall pay or reimburse Executive for all reasonable business expenses incurred or paid by him during the Employment Term in the performance of his services for the Company.

4.5          Equity Incentive Compensation.  So long as employed by the Company, Executive shall be eligible to participate in any applicable equity incentive compensation program of the Company on the terms set forth by the Compensation Committee in its sole discretion, which program may include stock options, restricted stock awards or units (“Equity Awards”).The grant date fair value of the annual Equity Awards granted to Executive (determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, or any successor promulgation) shall be no less than three hundred and twenty-five percent (325%) of Executive’s then current Salary.

4.6          Retirement Compensation.  The Company shall maintain a deferred compensation plan (“SERP”) that is substantially similar to the B/E 2010 Deferred Compensation Plan, including allowing for the deferral of Equity Awards thereunder.  For each fiscal quarter during the Employment Term ending on or prior to January 31, 2017, the Company will make a tax deferred contribution to the SERP (the “Retirement Contribution”) on behalf of Executive equal to twenty-five percent (25%) of the Salary in effect as of the date of such contribution.  Effective for Retirement Contributions made for fiscal quarters during the Employment Term commencing on or after February 1, 2017, each Retirement Contribution shall be reduced and shall equal seven and one-half percent (7.5%) of the Salary in effect as of the date of such Retirement Contribution.  Each Retirement Contribution shall be allocated to Executive’s retirement account under the SERP, shall be fully vested on the date that such Retirement Contribution is made and shall otherwise be subject to the terms and conditions of the SERP.

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4.7          Automobile.  During the Employment Term and during the “Consulting Period” (as defined in Section 6.5 hereof), Executive shall receive either an automobile owned or leased by the Company or a monthly automobile allowance, as reasonably determined by the Company, which automobile or allowance shall be at least equivalent to that which the Company is providing to Executive as of the Effective Date.  To the extent that the Company elects to provide a monthly automobile allowance, such allowance shall be paid in accordance with Company policy, but in any event, no later than on a monthly basis in arrears.

5.          Proprietary Rights and Non-Competition.  Executive acknowledges that the Company is engaged in a continuous program of research, development and production in connection with its business, present and future, and hereby covenants as follows:

5.1        Confidentiality.  Executive will maintain in confidence and will not disclose or use, either during or after the Employment Term, any proprietary or confidential information or know-how belonging to the Company (“Proprietary Information” hereinafter defined), whether or not in written form, except to the extent required to perform duties on behalf of the Company.  For purposes of this Agreement, “Proprietary Information” shall mean any information, not generally known to the relevant trade or industry, which was obtained from the Company, or which was learned, discovered, developed, conceived, originated or prepared by Executive in connection with this Agreement (or any predecessor agreement with the Company).  Such Proprietary Information includes, without limitation, software, technical and business information relating to the Company’s inventions or products, research and development, production processes, manufacturing and engineering processes, machines and equipment, finances, customers, marketing and production and future business plans, information belonging to customers or suppliers of the Company disclosed incidental to Executive’s performance under this Agreement, and any other information which is identified as confidential by the Company, but only so long as the same is not generally known in the relevant trade or industry.

5.2        Inventions.

5.2.1          Definition of Inventions.  For purposes of this Agreement, “Inventions” shall mean any new or useful art, discovery, contribution, finding or improvement, whether or not patentable, and all related know-how.  Inventions shall include, without limitation, all designs, discoveries, formulae, processes, manufacturing techniques, semiconductor designs, computer software, inventions, improvements and ideas.

5.2.2          Disclosure and Assignment of Inventions.  Executive will promptly disclose and describe to the Company all Inventions which he may solely or jointly conceive, develop, or reduce to practice during the Employment Term (i) which relate at the time of conception, development, or reduction to practice of the Invention to the Company’s business or actual or demonstrably anticipated research or development, (ii) which were developed, in whole or in part, on the Company’s time or with the use of any of the Company’s equipment, supplies, facilities or trade secret information, or (iii) which resulted from any work performed by Executive for the Company (the “Company’s Inventions”).  Executive hereby assigns to the Company all of his right, title and interest world-wide in and to the Company’s Inventions and in all intellectual property rights based upon the Company’s Inventions; provided, however, that Executive does not assign or agree to assign any Inventions, whether or not relating in any way to the Company’s business or demonstrably anticipated research and development, which were made by him prior to December 16, 2014, or which were developed by him independently during the Employment Term and not under the conditions stated in subparagraph (ii) above.

5.3        Documents and Materials.  Upon termination of this Agreement or at any other time upon the Company’s request, Executive will promptly deliver to the Company, without retaining any copies, all

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documents and other materials furnished to him by the Company (other than personal copies of documents relating to Executive’s employment terms), prepared by him for the Company or otherwise relating to the Company’s business, including, without limitation, all written and tangible material in his possession incorporating any Proprietary Information.

5.4        Competitive Employment.  During the Employment Term and for a period of two (2) years thereafter (collectively, the “Restricted Term”), Executive will not engage in any employment, consulting, or other activity in any business directly competitive with the Company without the Company’s written consent, which consent shall not be unreasonably withheld; provided, however, that nothing in this Section 5.4 shall preclude Executive from serving as an employee or director of B/E, a consultant for B/E, a director of any other corporation, or a partner or investor in a private equity firm.

5.5        Non-Solicitation.  During the Restricted Term, Executive will not solicit or encourage, or cause others to solicit or encourage, any employees of the Company to terminate their employment with the Company.

5.6        Acts to Secure Proprietary Rights.

5.6.1          Further Acts.  Executive agrees to perform, during and after the Employment Term, all acts deemed necessary or desirable by the Company to permit and assist it, at its expense, in perfecting and enforcing the full benefits, enjoyment, rights and title throughout the world in the Company’s Inventions.  Such acts may include, without limitation, execution of documents and assistance or cooperation in the registration and enforcement of applicable patents and copyrights or other legal proceedings.

5.6.2          Appointment of Attorney-In-Fact.  In the event that the Company is unable, for any reason whatsoever, to secure Executive’s signature to any lawful and necessary document required to apply for or execute any patent, copyright or other applications with respect to any of the Company’s Inventions (including improvements, renewals, extensions, continuations, divisions or continuations in part thereof), Executive hereby irrevocably appoints the Company and its duly authorized officers and agents as his agents and attorneys-in-fact to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other rights thereon with the same legal force and effect as if executed by him, intending hereby to create a so-called “durable power” which will survive any subsequent disability.

5.7        No Conflicting Obligations.  Executive’s performance of this Agreement does not breach and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by him.

5.8        Corporate Opportunities.  Executive agrees that during the Employment Term, he will first present to the Board, for its acceptance or rejection on behalf of the Company, any opportunity to create or invest in any company which is or will be involved in the distribution of aerospace consumables products and logistics services or any provider of technical services and associated rental equipment and logistics to the energy sector, which comes to his attention and in which he, or any of his affiliates, might desire to participate.  If the Board rejects the same or fails to act thereon in a reasonable time, Executive shall be free to invest in, participate or present such opportunity to any other natural person, corporation, limited liability company, limited or general partnership, or any other entity (each, a “Person”).

5.9        Specific Performance.  Executive acknowledges that a breach of any of the promises or agreements contained herein could result in irreparable and continuing damage to the Company for which

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there may be no adequate remedy at law, and the Company shall be entitled to seek injunctive relief and/or a decree for specific performance.

6.          Termination and Change of Control.

6.1        Termination Date; Termination or Resignation other than Death. Incapacity or in connection with a Change of Control or Good Reason.

6.1.1          Termination Date.  The term “Termination Date” shall mean the date on which Executive incurs a Separation from Service (as defined below) with the Company and its subsidiaries and affiliates for any reason.

6.1.2          Termination by Executive.  If Executive resigns his employment with the Company for any reason other than (i) death pursuant to Section 6.2, (ii) Incapacity pursuant to Section 6.3, or (iii) Good Reason pursuant to Section 6.4.3, then on the Termination Date, Executive shall receive payment of (A) any accrued and unpaid Salary and benefits through the Termination Date and (B) any earned but unpaid bonuses payable to Executive as determined by the Compensation Committee for any fiscal periods of the Company ending prior to the Termination Date.

6.1.3          Termination by the Company.  If the Company terminates Executive’s employment hereunder for any reason other than (i) death pursuant to Section 6.2 or (ii) Incapacity pursuant to Section 6.3 then on the Termination Date, Executive shall receive payment of (A) any accrued and unpaid Salary and benefits through the Termination Date, (B) any earned but unpaid bonuses payable to Executive as determined by the Compensation Committee for any fiscal periods of the Company ending prior to the Termination Date, (C) a lump-sum amount equal to the sum of (i) a prorated portion of 175% of Executive’s then current Salary, with the prorated amount to be determined based on the number of days that Executive was employed by the Company in the year during which the Termination Date occurs, (ii) Executive’s Salary for the remainder of the Employment Term, (iii) the Retirement Contributions (at the rate in effect on January 31, 2017) that would have been made during the remainder of the Employment Term, and (iv) two (2) times Executive’s Target Bonus, in the case of each of clauses (ii) and (iv) at the rates in effect as of the Termination Date (the lump sum amount determined in accordance with this clause (C), the “Termination Amount”), (D) any Equity Awards granted to Executive that would not vest on or prior to the Termination Date shall vest and be exercisable immediately, and, notwithstanding any termination of employment provisions set forth in the applicable agreement or related plan, all Equity Awards shall continue to be exercisable until their original stated expiration date, and (E) a pro-rata portion of Executive’s annual bonus under Section 4.2 hereof for the fiscal year in which Executive’s termination occurs based on actual results for such fiscal year (determined by multiplying the amount of such annual bonus which would be due for the full fiscal year by a fraction, the numerator of which is the number of days during the fiscal year of termination that Executive is employed by the Company and the denominator of which is 365), payable within the time frame specified under Section 4.2 hereof (the “Pro Rata Actual Bonus”).  The cash payments described in this Section 6.1.3 (other than the benefit described in clause (E)) shall be made on the Termination Date.

6.2        Death.

6.2.1          Executive’s employment hereunder shall terminate upon his death.  In such event, the Company shall, within thirty (30) days following the date of death, pay to such Person as Executive shall have designated in a notice filed with the Company, or if no such Person shall have been designated, to his estate, a lump-sum amount equal to the Termination Amount.

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6.2.2          The Company shall, within thirty (30) days following Executive’s date of death, also pay to such Person as Executive shall have designated in a notice filed with the Company, or if no such Person shall have been designated, to his estate, a lump-sum amount equal to (i) any accrued and unpaid Salary and benefits through his date of death, (ii) any earned but unpaid bonuses payable to Executive as determined by the Compensation Committee for any fiscal periods of the Company ending prior to the date of death, and (iii) a pro-rata portion of Executive’s annual bonus under Section 4.2 hereof for the fiscal year in which Executive’s termination occurs (determined by multiplying the amount of such annual bonus which would be due for the full fiscal year (assuming achievement of 200% of the Target Bonus) by a fraction, the numerator of which is the number of days during the fiscal year of termination that Executive is employed by the Company and the denominator of which is 365) (the “Pro Rata Maximum Bonus”). 

6.2.3          Upon Executive’s death, any Equity Awards granted to Executive that would not vest on or prior to the Termination Date shall vest and, if applicable, be exercisable immediately and, notwithstanding any termination of employment provisions set forth in the applicable agreement or related plan, all Equity Awards shall continue to be exercisable until their original stated expiration date.

6.2.4          Upon Executive’s death on or after February 1, 2017, whether during or after the Employment Term, the Company shall, no later than ninety (90) days following the date of death, also pay to such beneficiary as Executive shall have designated in a notice filed with the Company, or if no such beneficiary shall have been designated, to his estate, a lump sum death benefit in an amount equal to three million five hundred thousand dollars ($3,500,000), which shall be funded from the proceeds of a life insurance policy to be held in trust by the Company.  The terms and conditions of such death benefit shall be set forth in a Death Benefit Agreement substantially in the form attached hereto as Exhibit A, which is hereby incorporated by reference.

6.3        Incapacity.  If, in the reasonable judgment of the Compensation Committee, as a result of Executive’s incapacity due to a medically determinable physical or mental illness, Executive shall have been absent from his full-time duties as described hereunder for the entire period of twelve (12) consecutive months (“Incapacity”), Executive’s employment shall terminate at the end of the twelve (12)-month period as provided in this Section 6.3.  In such event:

(i)          the Company shall give prompt notice to Executive of any such termination;

(ii)         the Company shall pay to Executive within thirty (30) days following the Termination Date, a lump-sum amount equal to the Termination Amount;

(iii)        the Company shall pay to Executive within thirty (30) days after the Termination Date a lump-sum amount equal to (A) any accrued and unpaid Salary and benefits through the Termination Date and (B) any earned but unpaid bonuses payable to Executive as determined by the Compensation Committee for any fiscal periods of the Company ending prior to the Termination Date;

(iv)        any Equity Awards granted to Executive that would not vest on or prior to the Termination Date shall vest and, if applicable, be exercisable immediately and, notwithstanding any termination of employment provisions set forth in the applicable agreement or related plan, such Equity Awards shall continue to be exercisable until their original stated expiration date; and

(v)         the Company shall pay Executive the Pro Rata Maximum Bonus within thirty (30) days following the Termination Date.

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Any dispute between the Compensation Committee and Executive with respect to Executive’s Incapacity shall be settled by reference to a competent medical authority mutually agreed to by the Compensation Committee and Executive or his personal representative, whose decision shall be binding on all parties.

6.4        Change of Control; Good Reason; Definitions.

6.4.1          Change of Control.  If a “Change of Control” of the Company occurs, the Company will be obligated as provided in this Section 6.4.  For purposes of determining the Company’s obligations under this Section 6.4, the date on which a Change of Control is effective shall be referred to as the “Change of Control Date.”  The payments described in Section 6.4.2 shall be made on the Change of Control Date.

6.4.2          Change of Control.  If a Change of Control occurs during the Employment Term, Executive’s employment shall be terminated as of the Change of Control Date and, upon the Change of Control Date, the Company or its successor shall pay or provide Executive with the following:

(i)          any accrued and unpaid Salary and benefits through the Change of Control Date;

(ii)         any earned but unpaid bonuses payable to Executive for any fiscal periods of the Company ending prior to the Change of Control Date;

(iii)        a lump-sum amount equal to the Termination Amount; provided, that the Termination Amount shall be calculated using rates as in effect on the Change of Control Date;

(iv)        any Equity Awards granted to Executive that would not vest on or prior to the Change of Control Date shall vest and be exercisable immediately upon the date immediately preceding the Change of Control Date, and, notwithstanding any termination of employment provisions set forth in the applicable agreement or related plan, all Equity Awards shall continue to be exercisable until their original stated expiration date; and

(v)         the Pro Rata Maximum Bonus.

6.4.3          Good Reason.  If Executive resigns his employment at any time for Good Reason, then the Company or its successor shall pay/provide to Executive:

(i)          any accrued and unpaid Salary and benefits through the Termination Date, as such term is defined in Section 6.1.1, above;

(ii)         any earned but unpaid bonuses payable to Executive for any fiscal periods of the Company ending prior to the Termination Date;

(iii)        a lump-sum amount equal to the Termination Amount;

(iv)        any Equity Awards granted to Executive that would not vest on or prior to the Termination Date shall vest and be exercisable immediately, and, notwithstanding any termination of employment provisions set forth in the applicable agreement or related plan, all Equity Awards shall continue to be exercisable until their original stated expiration date; and

(v)         Executive shall remain entitled to receive the Pro Rata Actual Bonus.

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The cash payments described in this Section 6.4.3 (other than the benefit described in clause (v)) shall be made on the Termination Date.

6.4.4      Definitions.

(i)          For purposes of this Agreement, a “Change of Control” means:

(A)          Individuals who, as of the Effective Date constitute the Board (the “Incumbent Board “) cease for any reason to constitute at least a majority of the Board, provided that any Person becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) shall be, for purposes of this Agreement, considered as though such Person were a member of the Incumbent Board;

(B)          a transaction or other event occurs such that any Person or Persons acting as a group acquires ownership of stock of the Company that, together with stock held by such Person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company;

(C)          a transaction or other event occurs such that any one Person or group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such Person or group) ownership of stock of the Company possessing 35% or more of the total voting power of the stock of the Company; or

(D)          a transaction or other event occurs such that any one Person or group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such Person or group) ownership of assets of the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that no acquisition of ownership of the assets of the Company shall be deemed a Change of Control if the acquiring Person or group is:

(1)          A stockholder of the Company in exchange for or with respect to its stock;

(2)          Any Majority Owned Entity, as defined below, of the Company;

(3)          A Person or group of which the Company is a Majority Owned Entity; or

(4)          A Majority Owned Entity of any Person or group described by (3), above.

(ii)        For the purposes of this Section 6.4.4, Persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as the result of the same public offering.  However, Persons will be considered to be acting as a group if they are owners of a Person that enters into a merger, consolidation, purchase or acquisition of stock or assets or similar business transaction with the Company.

(iii)      For the purposes of this Section 6.4.4, a “Majority Owned Entity” of any Person is any entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by such Person.

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(iv)        A Change of Control shall occur on the effective date of any event specified in Section 6.4.4(i) above.  In connection with any determination of ownership for purposes of Section 6.4.4(i) above, the attribution rules of Section 318(a) of the Internal Revenue Code of 1986, as amended (the “Code”), shall apply.

(v)        For purposes of this Agreement, “Good Reason” means:

(A)          Any decrease in Executive’s Salary or a failure by the Company to pay any material compensation due and payable to Executive in connection with his employment;

(B)          Any change in Executive’s responsibilities, positions, duties, status, title or reporting relationships;

(C)          Executive ceasing to be the Chief Executive Officer of the Company;

(D)          Requiring Executive to be based at any office or location other than Executive’s principal place of employment; or

(E)          A material breach by the Company of any term of this Agreement;

provided that Executive has given notice thereof to the Company and the Company has not cured the Good Reason within thirty (30) days after receiving such notice.

6.5        Consulting Agreement.  In the event that Executive’s employment terminates on or after February 1, 2017 for any reason (including, without limitation, Executive’s voluntary resignation) other than death pursuant to Section 6.2 or Incapacity pursuant to Section 6.3, the Company shall retain Executive to perform consulting services for a period of five (5) years following the Termination Date (the “Consulting Period”) for a fee of three hundred thousand dollars ($300,000) per annum, under the terms and conditions of a Consulting Agreement substantially in the form attached hereto as Exhibit B, which is hereby incorporated by reference.  In addition to the compensation, benefits and perquisites described in the Consulting Agreement, during the Consulting Period the Company shall provide Executive with the benefits described in Sections 4.3 and 4.7 to the extent permissible under applicable law and the applicable plan documents.

6.6        280G Matters.

6.6.1          Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution, benefit, equity-based or other compensation or other transfer or action by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “Payment”) would be subject to an excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by Executive with respect to any such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), the Accounting Firm (as defined below) shall, in consultation with Executive’s legal counsel or other advisor designated by Executive (“Executive’s Advisor”), calculate whether to reduce any of the Payments to Executive so that the Parachute Value (as defined below) of all Payments to Executive, in the aggregate, equals the applicable Safe Harbor Amount (as defined below). Payments shall be so reduced only if the Accounting Firm determines, subject to the approval of Executive’s Advisor, with such approval not to be unreasonably withheld or delayed, that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if the Payments were so reduced.

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6.6.2          If the Accounting Firm determines that the aggregate Payments to Executive should be reduced so that the Parachute Value of all Payments to Executive, in the aggregate, equals the applicable Safe Harbor Amount, and Executive’s Advisor approves such determination, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm and approved by Executive’s Advisor under this Section 6.6 shall be binding upon the Company and Executive and shall be made as soon as reasonably practicable and in no event later than 15 days following the date of Executive’s termination of employment.

6.6.3          The reduction contemplated by this Section 6.6, if applicable, shall be made by reducing payments and benefits (to the extent such amounts are considered Payments) under the following sections in the following order: (i) any Payments as a result of the acceleration of the vesting of performance-based Equity Awards pursuant to Section 6.4.2(iv), (ii) any Payments under Section 6.4.2(iii) that are “parachute payments” within the meaning of Section 280G of the Code, (iii) any other cash Payments that are “parachute payments” that would be made upon a Change of Control, beginning with payments that would be made last in time and (iv) any Payments as a result of accelerated vesting of Equity Awards for which the amount considered contingent on the change in ownership or control is determined in accordance with Treasury Regulation 1.280G-1, Q&A 24(c).

6.6.4          As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement that should not have been so paid or distributed (each, an “Overpayment”) or that additional amounts that will have not been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement could have been so paid or distributed (each, an “Underpayment”), in each case consistent with the calculation of the applicable Safe Harbor Amount hereunder.   In the event that the Accounting Firm, based on the assertion of a deficiency by the Internal Revenue Service against the Company or Executive which the Accounting Firm believes, and Executive’s Advisor agrees, has a high probability of success, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of Executive shall be repaid by Executive to the Company; provided, however, that (i) no such repayment shall be required if and to the extent such deemed repayment would not either reduce the amount on which Executive is subject to tax under Sections 1 or 4999 or generate a refund of such taxes; and (ii) to the extent such repayment would generate a refund of such taxes, Executive shall only be required to pay to the Company the Overpayment less the amount of tax to be refunded and to transfer the refund of such taxes to the Company when received. In the event that the Accounting Firm, based on controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

6.6.5          All fees and expenses of the Accounting Firm in implementing the provisions of this Section 6.6 shall be borne by the Company, and the Company shall reimburse Executive for all reasonable advisory fees incurred with respect to this Section 6.6(including for any services provided by Executive’s Advisor) and any legal and accounting fees incurred with respect to disputes related thereto (including for any services provided by Executive’s Advisor).

6.6.6          In connection with making determinations under this Section 6.6, the Accounting Firm shall take into account the value of any reasonable compensation for services to be rendered by Executive before or after the Change of Control, including any agreement not to render services to competitors pursuant to the non-competition provisions applicable to Executive under Section 5 of this agreement and any other non-competition provisions that may apply to Executive, and the Company shall cooperate in the valuation of any such services, including any non-competition provisions.

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6.6.7          The following terms shall have the following meanings for purposes of this Section 6.6:

(A)            “Accounting Firm” shall mean a mutually agreed upon nationally recognized accounting firm (a “Big Four” accounting firm) that is not serving as accountant or auditor for the Company or the individual, entity or group effecting the Change of Control.

(B)            “Net After-Tax Receipt” shall mean the Present Value of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state, local, and foreign laws, determined by applying the highest marginal rate under Section 1 of the Code and under state, local, and foreign laws that applied to Executive’s taxable income for the immediately preceding taxable year, or such other rate as such Executive shall certify, in Executive’s sole discretion, as likely to apply to Executive in the relevant tax year.

(C)            “Parachute Value” of a Payment shall mean the present value as of the date of the change in control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

(D)            “Present Value” of a Payment shall mean the economic present value of a Payment as of the date of the change in control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.

(E)             “Safe Harbor Amount” means (x) 3.0 times Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code, minus (y) $1.00.

7.          Withholding.  All payments made by the Company under this Agreement shall be reduced by any amounts in respect of income, social security, FICA and other similar taxes at the then-prevailing rates required to be withheld by the Company under applicable law.

8.          Indemnification.  To the maximum extent permitted under Delaware law as from time to time in effect, and subject to any mandatory exclusion of indemnification under Delaware law applicable to the indemnification of Executive under this Section 8, the Company hereby agrees to indemnify Executive and hold him harmless from, against and in respect of any and all damages, deficiencies, actions, suits, proceedings, demands, assessments, judgments, claims, losses, costs, expenses, obligations and liabilities arising from or related to the performance of the services under this Agreement by Executive.

9.          Legal Fees.  In the event of any litigation, dispute or contest arising from a breach of this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party all reasonable costs incurred in connection with such litigation, dispute or contest, including without limitation, reasonable attorneys’ fees, disbursement and costs, and experts’ fees and costs.

10.        Unfunded Status.  This Agreement is intended to constitute an unfunded plan for incentive compensation.  Nothing contained herein shall give Executive any rights that are greater than those of a general unsecured creditor of the Company.  In its sole discretion, the Compensation Committee may authorize the creation of trusts, acquisition of life insurance policies or other arrangements to meet the obligations created under this Agreement.

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11.        Section 409A.

11.1          If any amounts that become due under Section 6 of this Agreement constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, payment of such amounts shall not commence until Executive incurs a “Separation from Service” (as defined below) if and only if necessary to avoid accelerated taxation or tax penalties in respect of such amounts.

11.2          Notwithstanding any provision of this Agreement to the contrary, if Executive is a “Specified Employee” (as defined below) he shall not be entitled to any payments upon a Separation from Service until the earlier of (i) the date which is the first (1st) business day following the date that is six (6) months after Executive’s Separation from Service for any reason other than death or (ii) Executive’s date of death.  The Company shall establish a trust pursuant to Rev. Proc. 92-64, promulgated under subpart E, part I, subchapter J, chapter 1, subtitle A of the Code, as modified by Notice 2000-56, and fund any such payments that are deferred pursuant to this Section 11.2 that otherwise would be immediately payable to Executive.  The provisions of this Section 11.2 shall only apply if required to comply with Section 409A of the Code.

11.3          For purposes of this Agreement, “Separation from Service” shall have the meaning set forth in Section 409A(a)(2)(A)(i) of the Code and determined in accordance with the default rules under Section 409A of the Code.  “Specified Employee” shall have the meaning set forth in Section 409A(a)(2)(B)(i) of the Code, as determined in accordance with the uniform methodology and procedures adopted by the Company and then in effect.

11.4          It is intended that the terms and conditions of this Agreement comply with Section 409A of the Code.  If any provision of this Agreement contravenes any regulations or Treasury guidance promulgated under Section 409A of the Code, or could cause any amounts or benefits hereunder to be subject to taxes, interest and penalties under Section 409A of the Code, this Agreement or any provision hereof may be reformed by Executive, subject to the consent of the Company (which consent shall not be unreasonably withheld) to:  (i) comply with, or avoid being subject to, Section 409A of the Code, (ii) avoid the imposition of taxes, interest and penalties under Section 409A of the Code, and/or (iii) maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A of the Code, provided, however, that no such amendment shall have the effect of reducing the amount of any payment or benefit payable to Executive pursuant to this Agreement.

11.5          Anything in this Agreement to the contrary notwithstanding, no reimbursement payable to Executive pursuant to any provisions of this Agreement or pursuant to any plan or arrangement of the Company or its subsidiary or affiliate covered by this Agreement shall be paid later than the last day of the calendar year following the calendar year in which the related expense was incurred, except to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Section 409A of the Code.  No amount reimbursed during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year.

12.        Waiver.  Executive’s or the Company’s failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right that Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.  Similarly, the waiver by any party hereto of a breach of any provision of this Agreement by the other party will not operate or be construed as a waiver of any other or subsequent breach by such other party.

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13.          Mutual Waiver.  Executive and the Company agree to sign a mutual waiver and release of claims agreement effective as of the Termination Date substantially in the form attached hereto as Exhibit C, and hereby incorporated by reference (the “Mutual Waiver”).

14.          Severability.  If any part of this Agreement is found to be invalid or unenforceable, that part will be deemed amended to achieve as nearly as possible the same economic effect as the original provision, and the remainder of this Agreement will remain in full force and effect.

15.          Notices.  Any notice or other communication in connection with this Agreement shall be deemed to be delivered if in writing, addressed as provided below (or to such other Person or address as to which either party may notify the other in accordance with this Section 15) and actually delivered at said address:

If to Executive, to him at:

Amin J. Khoury

149 South Beach Road

Hobe Sound, FL  33455

If to the Company, to it at:

KLX Inc.

1300 Corporate Center Way,

Wellington, FL 33414

Attention:  General Counsel

16.          Survival.  The provisions of Sections 5 through 17 inclusive hereof shall each survive any termination or expiration of this Agreement in accordance with the applicable statute of limitation period(s).

17.          Miscellaneous.  This Agreement, including the attached exhibits, constitutes the entire understanding of the parties with respect to the subject matter hereof, and supersedes all such prior and contemporaneous understandings and agreements, whether oral or written, regarding such subject matter (including, without limitation, the Prior Agreement).  This Agreement may be amended or modified only by a written instrument signed by Executive and by a duly authorized representative of the Company.  This Agreement may be executed in any number of counterparts, which together shall constitute one and the same instrument.  Except as otherwise provided in this Agreement, this Agreement shall be governed by and construed in accordance with the laws (other than the conflicts of law rules) of the State of Florida.  The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and permitted assigns.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first above written.

EXECUTIVE	KLX INC.
/s/ Amin J. Khoury	By:	/s/ Thomas P. McCaffrey
Amin J. Khoury	Name:	Thomas P. McCaffrey
	Title:	President and Chief Operating Officer

[SIGNATURE PAGE FOR AMIN KHOURY AMENDED AND RESTATED EMPLOYMENT AGREEMENT]

EXHIBIT A

Form of Death Benefit Agreement

DEATH BENEFIT AGREEMENT

This Death Benefit Agreement (the “Agreement”) is entered into this 25th day of May, 2016, by and between KLX Inc., a Delaware corporation, hereinafter called the “Corporation,” and Amin J. Khoury, hereinafter called the “Executive.”

WHEREAS, the Executive renders valuable services to the Corporation which have contributed to the growth and prosperity of the Corporation; and

WHEREAS, the Corporation and the Executive wish to enter into an agreement to provide for the payment of a benefit to the Executive’s designated beneficiary in the event of the Executive’s death.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the parties agree as follows:

1.         DEATH BENEFIT.

A.        Upon the Executive’s death on or after February 1, 2017, whether during his employment with the Corporation or following the termination of his employment for any reason, the Corporation shall pay to the AJK Dynasty Trust dated March 17, 2003 (the “Beneficiary”) a payment of three million five hundred thousand dollars ($3,500,000) (the “Death Benefit”).  The Death Benefit shall be paid in a cash lump sum no later than ninety (90) days following the Executive’s death.

B.        The Death Benefit shall not be payable if the Executive’s death results from suicide, whether sane or insane, on or before February 1, 2019.

2.         CONDITIONS.  In order to fund its cash payment obligation under this Agreement, the Corporation shall purchase a life insurance policy.  The Executive agrees that the Corporation may insure the life of the Executive and agrees to cooperate with the Corporation and insurance carrier in order to facilitate the purchase of such life insurance policy.  The Executive further agrees that the Corporation or a Trust (as described in Section 3 of this Agreement) shall be the owner and the beneficiary of such life insurance policy.

3.         ESTABLISHMENT OF TRUST.  The Corporation shall establish a Death Benefit Only Trust (the “Trust”).  All benefits payable under this Agreement to the Beneficiary shall be paid directly by the Corporation from the Trust.  To the extent that such benefits are not paid from the Trust, the benefits shall be paid from the general assets of the Corporation.  The Trust shall be an irrevocable grantor trust which conforms to the terms of the model trust as described in IRS revenue procedure 92-64, I.R.B. 1992-33, except an independent individual third party may be designated as trustee.  The assets of the Trust shall be subject to the claims of the Corporation’s creditors in the event of the Corporation’s insolvency, as defined therein.  Except as provided under the Trust, the Corporation shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Agreement, and neither the Executive nor the Beneficiary shall have any

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property interest in any specific assets of the Corporation other than the unsecured right to receive payments from the Corporation, as provided in this Agreement.

4.         EMPLOYMENT RIGHTS.  This Agreement shall not be deemed to create a contract of employment between the Corporation and the Executive and shall create no right in the Executive to continue in the Corporation’s employ for any specific period of time, or to create any other rights in the Executive or obligations on the part of the Corporation, except as are set forth in this Agreement.

5.         EXECUTIVE RIGHT TO ASSETS.

A.        The rights of the Executive, the Beneficiary, or any other person claiming through the Executive under this Agreement, shall be solely those of an unsecured general creditor of the Corporation.  The Executive, the Beneficiary, or any other person claiming through the Executive, shall have the right to receive those payments specified under this Agreement only from the Corporation, and has no right to look to any specific or special property separate from the Corporation for payments.

B.        The Executive agrees that he, the Beneficiary, or any other person claiming through the Executive shall have no right or beneficial ownership interest whatsoever in any general asset used or acquired by the Corporation in connection with the liabilities it has assumed under this Agreement.  Such assets shall not be deemed to be held under any trust for the benefit of the Executive or the Beneficiary, nor shall any such general assets be considered security for the performance of the obligations of the Corporation.  Any such assets shall remain general, unpledged, and unrestricted assets of the Corporation.

C.        The Executive also understands and agrees that his participation in the acquisition of any such general asset for the Corporation shall not constitute a representation to the Executive, the Beneficiary, or any person claiming through the Executive that any of them has a special or beneficial interest in such general asset.

6.         INDEPENDENCE OF BENEFITS.  The benefits payable under this Agreement shall be independent of, and in addition to, any other benefits or compensation, whether by salary, or bonus or otherwise, payable under any other employment agreements that now exist or may hereafter exist from time to time between the Corporation and the Executive.  This Agreement between the Corporation and the Executive does not involve a reduction in salary or foregoing of an increase in future salary by the Executive.  Nor does the Agreement in any way affect or reduce the existing and future compensation and other benefits of the Executive.

7.         ASSIGNABILITY.  Except in so far as this provision may be contrary to applicable law, no sale, transfer, alienation, assignment, pledge, collateralization, or attachment of any benefits under this Agreement shall be valid or recognized by the Corporation.

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8.         AMENDMENT.  This Agreement may be amended at any time by mutual written agreement of the Corporation and the Executive.  The Corporation shall have no right to change the benefits under this Agreement without the prior written consent of the Executive. The Executive may change the Beneficiary under this Agreement upon prior written notice to the Corporation, Attn. General Counsel, 1300 Corporate Center Way, Wellington, Florida 33414.  If any provision of this Agreement contravenes any regulations or guidance promulgated under Section 409A of the U.S. Internal Revenue Code of 1986 (collectively, “Section 409A”), the Corporation shall amend this Agreement or any provision hereof to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A.

9.         LAW GOVERNING.  This Agreement shall be governed by the laws of the State of Florida.  This Agreement is solely between the Corporation and the Executive.  Further, the Executive, the Beneficiary or other persons claiming through the Executive shall only have recourse against the Corporation for enforcement of the Agreement.  However, it shall be binding upon the Beneficiary and the beneficiaries, heirs, executors and administrators of the Executive and upon the successors and assigns of the Corporation.

[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.

CORPORATION:		KLX INC.,
		a Delaware corporation
ATTEST:
By:		By:
Name:	Claire Dumas	Name:	Thomas P. McCaffrey
Title:	Corporate Counsel, Asst.	Title:	President and Chief Operating Secretary Officer
EXECUTIVE:
		AMIN J. KHOURY

[SIGNATURE PAGE FOR AMIN KHOURY DEATH BENEFIT AGREEMENT]

EXHIBIT B

Form of Consulting Agreement

May 25, 2017

Mr. Amin J. Khoury

c/o KLX Inc.

1300 Corporate Center Way,

Wellington, FL 33414

Consulting Agreement

Dear Mr. Khoury:

This letter agreement (the “Agreement”) confirms the agreement between KLX Inc. (the “Company”) and you to engage in a consulting arrangement and sets forth the agreement between the Company and you regarding the terms of such consulting arrangement.

1.         Term. The term of your services pursuant to this Agreement shall commence upon the separation of your employment as an officer and employee of the Company (the “Effective Date”) and terminate on the fifth anniversary of the Effective Date (the “Consulting Period”).

2.         Consulting Services.

(a)        Services. Your services hereunder during the Consulting Period shall consist of strategic planning, financial planning, merger and acquisition advice and consultation to the Company, as well as providing periodic advice and consultation regarding key staffing and recruitment issues and such other services mutually agreed to by you and the Company (the “Consulting Services”). At all times, the Consulting Services shall be non-exclusive and you shall only be required to devote so much time as is reasonably necessary to discharge the Consulting Services; provided,  however, that in no event shall the Consulting Services provided hereunder cause the termination of your employment with the Company to cease to be a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder.

(b)       Expenses. Except to the extent equivalent benefits are provided by B/E Aerospace, Inc. (or any successor thereto), during the Consulting Period the Company shall:

(i)        provide you with an office at its Wellington, Florida facility or such other location otherwise reasonably agreed by you and the Company;

(ii)       provide you with a full time assistant, consistent with the Company’s Post-Termination Personal Assistant letter to you dated May 25, 2017;

(iii)      provide you with travel in accordance with the Company’s Aircraft Usage Policy on a basis at least as favorable to such policy as in effect on May 25,

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2017, which shall include, among other things, personal and family use of the Company’s G450 aircraft currently leased under a leasing arrangement scheduled to expire on May 1, 2021, and thereafter, on a G450 or equivalent aircraft; and

(iv)      pay or reimburse you for reasonable out-of-pocket expenses incurred in connection with your performance of the Consulting Services in accordance with past practices within thirty (30) days following submission of documentation and substantiation of such expenses; provided,  however, that (x) in no event may you seek to receive any reimbursement less than thirty (30) days prior to the last day of the calendar year following the calendar year in which the related expense was incurred, and (y) no amount reimbursed during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year.

3.          Nature of the Relationship.

(a)        Independent Contractor. You acknowledge that the Consulting Services shall be performed in the capacity of an “independent contractor,” that you are solely responsible for determining your actions or inactions in carrying out and performing the Consulting Services, and that nothing in this Agreement shall be construed to create an employment relationship between you and the Company. You agree that, with respect to the Consulting Services provided hereunder, you are not an employee of the Company for any purpose, including, without limitation: (i) for federal, state or local tax, employment, withholding or reporting purposes; or (ii) for eligibility or entitlement to any benefit under any of the Company’s employee benefit plans (including, without limitation, those plans that are subject to the Employee Retirement Income Security Act of 1974, as amended), incentive compensation or other employee programs or policies, except as provided in this Agreement or the Amended and Restated Employment Agreement between you and the Company dated May 25, 2017, as may be subsequently amended and restated (the “Employment Agreement”) or as otherwise required by applicable law.

(b)       Code of Conduct.  During the Consulting Period, you shall comply with the Company’s Code of Business Conduct and its Delegations of Authority, each as in effect from time to time (as if you were a non-management employee with respect to the Delegations of Authority policy).

(c)       Payment of Taxes.  You shall be responsible for and shall maintain adequate records of expenses that you incur in the course of performing the Consulting Services hereunder and shall be solely responsible for and shall file, on a timely basis, tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to your performance of the Consulting Services. Neither federal, state, nor local income tax of any kind shall be withheld or paid by the Company with respect to any amount paid to you pursuant to this Agreement. You agree that you are responsible for withholding and paying all taxes as required.

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(d)       Indemnification.  To the fullest extent permitted under applicable laws, rules and regulations and the Company’s applicable corporate governance documents, the Company agrees to defend, indemnify and hold you harmless from any loss, liability, cost and expense (including, but not limited to, reasonable attorney’s fees) incurred by you as a result of you being made a party to any action or proceedings by reason of your provision of the Consulting Services.

4.         Consulting Fees.  During the Consulting Period, you shall receive a consulting fee of three hundred thousand dollars ($300,000) per calendar year (the “Fees”), payable in monthly installments in arrears on the last day of the month (pro-rated for partial months).

5.          Amendment, Modification or Termination of Agreement.  The Consulting Period may not be terminated (except as provided in Section 7 hereof), and the terms and conditions of this Agreement cannot be amended, modified or terminated without the prior written consent of both parties hereto.

6.         Proprietary Rights and Non-Competition. The restrictive covenant obligations set forth in section 5 of the Employment Agreement, are incorporated herein by reference and shall have the same legal force and effect as if fully set forth herein.

7.         Effect of Death or Incapacity.  In the event of the termination of the Consulting Period and your services hereunder due to death or Incapacity (as defined in Section 6.3 of the Employment Agreement), you or your estate or designated beneficiary, as applicable, shall be entitled to a lump sum payment equal to the total amount of Fees payable to you for the remainder of the Consulting Period.  Such lump sum payment shall be made within ten (10) business days following the date of termination.

8.         Documents and Materials.  Upon the termination of the Consulting Period, or at any other time upon the Company’s request, you shall promptly deliver to the Company, without retaining any copies, all documents and other materials furnished to you by the Company, prepared by you for the Company or otherwise relating to the Company’s business, including, without limitation, all written and tangible material in your possession incorporating any “Proprietary Information” (as defined in the Employment Agreement).

9.         General Provisions.

(a)        Entire Agreement. This Agreement and the Employment Agreement represent the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between you and the Company.

(b)       Governing Law. This Agreement will be governed by and construed in accordance with the laws of Florida, without giving effect to the conflicts of laws principles thereof.

(c)        Enforceability; Waiver.  If any arbitrator or court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions of this Agreement, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed, blue-

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penciled or reformed by the court or arbitrator in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed in such provision. Your or the Company’s failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right that you or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. Similarly, the waiver by any party hereto of a breach of any provision of this Agreement by the other party will not operate or be construed as a waiver of any other or subsequent breach by such other party.

(d)       Headings.  The descriptive headings in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

(e)        Counterparts.  This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed an original but all of which together shall constitute one and the same agreement.

(f)        Signatures.  Each party’s signature on the lines below constitutes his or its agreement with each provision contained in this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first above written.

EXECUTIVE	KLX INC.
	By:
Amin J. Khoury	Name:	Thomas P. McCaffrey
	Title:	President and Chief Operating Officer

[SIGNATURE PAGE FOR AMIN KHOURY CONSULTING AGREEMENT]

EXHIBIT C

Form of Mutual Waiver Agreement

SEPARATION AGREEMENT AND MUTUAL RELEASE

This Separation Agreement and Mutual Release (the “Agreement”), is made as of ______ __, 20___, by and between KLX Inc., a Delaware corporation (the “Company”) and Amin J. Khoury (“Employee”), for the purpose of memorializing the terms and conditions of the Employee’s departure from the Company’s employment.

Now, therefore, in consideration of the sum of one dollar ($1.00) and the mutual promises, agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, (the “Settlement Consideration”), the parties hereto, intending to be legally bound, hereby agree as follows:

1.          Termination; Employment Agreement.  Effective _________, 20__, Employee’s employment with the Company was terminated.  Upon Employee’s termination, Employee and the Company shall each have those respective surviving rights, obligations and liabilities described in that certain Employment Agreement, dated as of May ___, 2016, by and between Employee and the Company (the “Employment Agreement”).

2.          Non-Released Claims.

(a)          Employee Non-Released Claims.  It is explicitly agreed, understood and intended that the general release of claims provided for in this Agreement shall not include or constitute a waiver of the Company’s, its agent, representative or designee’s obligations to Employee (i) that are specified in the Employment Agreement as surviving the termination of Employee’s employment, (ii) that arise out of or from respondeat superior  principles, (iii) for claims for indemnification and defense under any organizational documents, agreement, insurance policy, or at law or in equity concerning either the Company, its subsidiaries, affiliates, directors, officers or employees, (iii) concerning any deferred compensation plan, 401(k) plan, equity plan or retirement plan, and (iv) any claims not waivable under applicable law, collectively, the “Employee Non-Released Company Claims”.

(b)          Company Non-Released Claims.  It is explicitly agreed, understood and intended that the general release of claims provided for in this Agreement shall not include or constitute a waiver of (i) the Employee’s obligations to the Company concerning the Company’s confidential information and proprietary rights that survive Employee’s termination of employment, including those specified in Section 6 of the Employment Agreement, (ii) any claim of the Company for fraud based on willful and intentional acts or omissions of Employee, other than those taken in good faith and in a manner that Employee believed to be in or not opposed to the interests of the Company, proximately causing a financial restatement by the Company, and (iii) any claims not waivable by the Company under applicable law, collectively, the “Company Non-Released Employee Claims”.

3.          General Release in Favor of the Company:  Employee, for himself and for his heirs, executors, administrators, trustees, legal representatives and assigns (collectively, the “Releasers”), hereby forever releases and discharges the Company, its Board of Directors, and any of its past, present, or future

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parent corporations, subsidiaries, divisions, affiliates, officers, directors, agents, trustees, administrators, attorneys, employees, employee benefit and/or pension plans or funds (including qualified and non-qualified plans or funds), successors and/or assigns and any of its or their past, present or future parent corporations, subsidiaries, divisions, affiliates, officers, directors, agents, trustees, administrators, attorneys, employees, employee benefit and/or pension plans or funds (including qualified and non-qualified plans or funds), successors and/or assigns (whether acting as agents for the Company or in their individual capacities) (collectively, the “Releasees”) from any and all claims, demands, causes of action, and liabilities of any kind whatsoever (upon any legal or equitable theory, whether contractual, common-law, statutory, federal, state, local, or otherwise), whether known or unknown, by reason of any act, omission, transaction or occurrence which Releasers ever had, now have or hereafter can, shall or may have against Releasees up to and including the date of the execution of this Agreement, except for the Employee Non-Released Company Claims.  Without limiting the generality of the foregoing, Releasers hereby release and discharge Releasees from:

(a)          any and all claims for backpay, frontpay, minimum wages, overtime compensation, bonus payments, benefits, reimbursement for expenses, or compensation of any kind (or the value thereof), and/or for liquidated damages or punitive damages (under any applicable statute or at common law);

(b)          any and all claims, relating to Employee’s employment by the Company, the terms and conditions of such employment, employee benefits related to Employee’s employment, the termination of Employee’s employment, and/or any of the events relating directly or indirectly to or surrounding such termination;

(c)          any and all claims of discrimination, harassment, whistle blowing or retaliation in employment (whether based on federal, state or local law, statutory or decisional), including without limitation, all claims under the Age Discrimination in Employment Act of 1967, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Civil Rights Act of 1866, 42 USC §§ 1981-86, as amended, the Equal Pay Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the Florida Civil Rights Act of 1992, the Florida Whistle-Blower Law (Fla. Stat. § 448.101 et seq.), the Florida Equal Pay Act, and waivable rights under the Florida Constitution;

(d)          any and all claims under any contract, whether express or implied;

(e)          any and all claims for unintentional or intentional torts, for emotional distress and for pain and suffering;

(f)          any and all claims for violation of any statutory or administrative rules, regulations or codes;

(g)          any and all claims for attorneys’ fees, costs, disbursements, wages, bonuses, benefits, vacation and/or the like;

which Releasers ever had, now have or hereafter can, shall or may have against Releasees for, upon or by reason of any act, omission, transaction or occurrence up to and including the date of the execution of this Agreement, except for the Employee Non-Released Company Claims.

4.          General Release in Favor of Employee.  The Releasees, and each of them, hereby release Releasers, and each of them, from all claims or causes of action whatsoever, known or unknown, including any and all claims of the common law of the State of Florida, including but not limited to breach of contract

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(whether written or oral), promissory estoppel, defamation, unjust enrichment, or claims for attorneys’ fees and costs and all claims which were alleged or could have been alleged against the Employee which arose from the beginning of the world to the date of this Agreement, except for the Company Non-Released Employee Claims.

5.          Non-Disparagement.  The parties agree that they will not (a) disparage or encourage or induce others to disparage the other party (including, without limitation, the Releasees and the Releasers), or (b) engage in any conduct or induce any other person to engage in any conduct that is any way injurious to either party’s (including, without limitation, the Releasees’ or the Releasers’) reputation and interests (including, without limitation, any negative or derogatory statements or writings).

6.          Covenants not to Sue.

(a)          Employee Covenant not to Sue.  Employee represents and warrants that to date, he has not filed any lawsuit, action, complaint or charge of any kind with any federal, state, or county court or administrative or public agency against the Company or any other Releasee.  Without in any way limiting the generality of the foregoing, Employee hereby covenants not to sue or to assert, prosecute, or maintain, directly or indirectly, in any form, any claim or cause of action against any person or entity being released pursuant to this Agreement with respect to any matter, cause, omission, act, or thing whatsoever, occurring in whole or in part on or at any time prior to the date of this Agreement, except for the Employee Non-Released Company Claims.  Employee agrees that he will not seek or accept any award or settlement from any source or proceeding with respect to any claim or right waived in this Agreement.

(b)          Company Covenant not to Sue.  The Company represents and warrants that to date, it has not filed any lawsuit, action, complaint or charge of any kind with any federal, state, or county court or administrative or public agency against Employee or any other Releaser.  Without in any way limiting the generality of the foregoing, the Company hereby covenants not to sue or to assert, prosecute, or maintain, directly or indirectly, in any form, any claim or cause of action against any person or entity being released pursuant to this Agreement with respect to any matter, cause, omission, act, or thing whatsoever, occurring in whole or in part on or at any time prior to the date of this Agreement, except for the Company Non-Released Employee Claims.  The Company agrees that it will not seek or accept any award or settlement from any source or proceeding with respect to any claim or right waived in this Agreement.

7.          No Admission.  The making of this Agreement is not intended, and shall not be construed, as an admission that the Company or any of the Releasees, has violated any federal, state or local law (statutory or decisional), ordinance or regulation, breached any contract or committed any wrongdoing whatsoever.

8.          Effectiveness.  This Agreement shall not become effective until the eighth day following Employee’s signing of this Agreement (“Effective Date”) and Employee may at any time prior to the Effective Date revoke this Agreement by giving notice in writing of such revocation to:

KLX Inc.

1300 Corporate Center Way,

Wellington, FL 33414

Attn: General Counsel

In the event that Employee revokes this Agreement prior to the eighth day after his execution thereof, this Agreement, and the promises contained herein, shall automatically be deemed null and void.

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9.          Employee Acknowledgement.  Employee acknowledges that he has been advised in writing to consult with an attorney before signing this Agreement, and that Employee has been afforded the opportunity to consider the terms of this Agreement for twenty-one (21) days prior to its execution.  Employee further acknowledges that he has read this Agreement in its entirety, that he fully understands all of its terms and their significance, that he has signed it voluntarily and of Employee’s own free will, and that Employee intends to abide by its provisions without exception.

10.        Severability.  If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, void or unenforceable, such provision shall have no effect, however, the remaining provisions shall be enforced to the maximum extent possible.

11.        Entire Agreement.  This Agreement and the Employment Agreement, taken together, constitute the complete understanding between the parties and supersedes all such prior agreements between the parties and may not be changed orally.  Employee acknowledges that neither the Company nor any representative of the Company has made any representation or promises to Employee other than as set forth herein or therein.  No other promises or agreements shall be binding unless in writing and signed by the parties.

12.        General Provisions.

(a)          Governing Law; Jurisdiction; Venue.  This Agreement shall be enforced, governed and interpreted by the laws of the State of Florida without regard to Florida’s conflict of laws principles. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled in a court of competent jurisdiction in the State of Florida in Palm Beach County.  Each party consents to the jurisdiction of such Florida court in any such civil action or legal proceeding and waives any objection to the laying of venue in such Florida court.

(b)          Prevailing Party.  In the event of any litigation, dispute or contest arising from a breach of this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party all reasonable costs incurred in connection with such litigation, dispute or contest, including without limitation, reasonable attorneys’ fees, disbursement and costs, and experts’ fees and costs.

(c)          Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed as an original, but all of which together shall constitute one and the same instrument.

(d)          Binding Effect.  This Agreement is binding upon, and shall inure to the benefit of, the parties, the Releasers and the Releasees and their respective heirs, executors, administrators, successors and assigns.

(e)          Interpretation.  Should any provision of this Agreement require interpretation or construction, it is agreed by the parties that the entity interpreting or construing this Agreement shall not apply a presumption that the provisions hereof shall be more strictly construed against one party who prepared the Agreement, it being agreed that all parties have participated in the preparation of all provisions of this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Separation Agreement and Mutual Release as of the date first written above.

		KLX INC.
		By:
Amin J. Khoury		PRINT NAME:
		TITLE:
STATE OF FLORIDA	)
	) ss.
COUNTY OF	)

I HEREBY CERTIFY, that on this day, before me, an officer duly authorized in the State and County aforesaid to take acknowledgments, personally appeared Amin J. Khoury, to me known to be the person described in and who executed the foregoing instrument, and acknowledged to and before me that he/she executed the same.  This individual is personally known to me or has produced a ______________________ as identification and did take an oath.

SWORN TO AND SUBSCRIBED before me this _____ day of _________, 20__.

	Notary Public
My Commission Expires:

EX-10.2

EXHIBIT 10.2

May 25, 2017

Mr. Amin J. Khoury

c/o KLX Inc.

1300 Corporate Center Way,

Wellington, FL 33414

Consulting Agreement

Dear Mr. Khoury:

This letter agreement (the “Agreement”) confirms the agreement between KLX Inc. (the “Company”) and you to engage in a consulting arrangement and sets forth the agreement between the Company and you regarding the terms of such consulting arrangement.

1. Term. The term of your services pursuant to this Agreement shall commence upon the separation of your employment as an officer and employee of the Company (the “Effective Date”) and terminate on the fifth anniversary of the Effective Date (the “Consulting Period”).

2. Consulting Services.

(a) Services. Your services hereunder during the Consulting Period shall consist of strategic planning, financial planning, merger and acquisition advice and consultation to the Company, as well as providing periodic advice and consultation regarding key staffing and recruitment issues and such other services mutually agreed to by you and the Company (the “Consulting Services”). At all times, the Consulting Services shall be non-exclusive and you shall only be required to devote so much time as is reasonably necessary to discharge the Consulting Services; provided,  however, that in no event shall the Consulting Services provided hereunder cause the termination of your employment with the Company to cease to be a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder.

(b) Expenses. Except to the extent equivalent benefits are provided by B/E Aerospace, Inc. (or any successor thereto), during the Consulting Period the Company shall:

(i) provide you with an office at its Wellington, Florida facility or such other location otherwise reasonably agreed by you and the Company;

(ii) provide you with a full time assistant, consistent with the Company’s Post-Termination Personal Assistant letter to you dated May 25, 2017;  

(iii) provide you with travel in accordance with the Company’s Aircraft Usage Policy on a basis at least as favorable to such policy as in effect on May 25, 2017, which shall include, among other things, personal and family use of the Company’s G450 aircraft currently leased under a leasing arrangement scheduled to expire on May 1, 2021, and thereafter, on a G450 or equivalent aircraft; and

(iv) pay or reimburse you for reasonable out-of-pocket expenses incurred in connection with your performance of the Consulting Services in accordance with past practices within thirty (30) days following submission of documentation and substantiation of such expenses;  provided,  however, that (x) in no event may you seek to receive any reimbursement less than thirty (30) days prior to the last day of the calendar year following the calendar year in which the related expense was incurred, and (y) no amount reimbursed during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year.

3. Nature of the Relationship.

(a) Independent Contractor. You acknowledge that the Consulting Services shall be performed in the capacity of an “independent contractor,” that you are solely responsible for determining your actions or inactions in carrying out and performing the Consulting Services, and that nothing in this Agreement shall be construed to create an employment relationship between you and the Company. You agree that, with respect to the Consulting Services provided hereunder, you are not an employee of the Company for any purpose, including, without limitation: (i) for federal, state or local tax, employment, withholding or reporting purposes; or (ii) for eligibility or entitlement to any benefit under any of the Company’s employee benefit plans (including, without limitation, those plans that are subject to the Employee Retirement Income Security Act of 1974, as amended), incentive compensation or other employee programs or policies, except as provided in this Agreement or the Amended and Restated Employment Agreement between you and the Company dated May 25, 2017, as may be subsequently amended and restated (the “Employment Agreement”) or as otherwise required by applicable law.

(b) Code of Conduct.  During the Consulting Period, you shall comply with the Company’s Code of Business Conduct and its Delegations of Authority, each as in effect from time to time (as if you were a non-management employee with respect to the Delegations of Authority policy).

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(c) Payment of Taxes.  You shall be responsible for and shall maintain adequate records of expenses that you incur in the course of performing the Consulting Services hereunder and shall be solely responsible for and shall file, on a timely basis, tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to your performance of the Consulting Services. Neither federal, state, nor local income tax of any kind shall be withheld or paid by the Company with respect to any amount paid to you pursuant to this Agreement. You agree that you are responsible for withholding and paying all taxes as required.

(d) Indemnification.  To the fullest extent permitted under applicable laws, rules and regulations and the Company’s applicable corporate governance documents, the Company agrees to defend, indemnify and hold you harmless from any loss, liability, cost and expense (including, but not limited to, reasonable attorney’s fees) incurred by you as a result of you being made a party to any action or proceedings by reason of your provision of the Consulting Services.

4. Consulting Fees.  During the Consulting Period, you shall receive a consulting fee of three hundred thousand dollars ($300,000) per calendar year (the “Fees”), payable in monthly installments in arrears on the last day of the month (pro-rated for partial months).

5. Amendment, Modification or Termination of Agreement.  The Consulting Period may not be terminated (except as provided in Section 7 hereof), and the terms and conditions of this Agreement cannot be amended, modified or terminated without the prior written consent of both parties hereto.

6. Proprietary Rights and Non-Competition. The restrictive covenant obligations set forth in section 5 of the Employment Agreement, are incorporated herein by reference and shall have the same legal force and effect as if fully set forth herein.

7. Effect of Death or Incapacity.  In the event of the termination of the Consulting Period and your services hereunder due to death or Incapacity (as defined in Section 6.3 of the Employment Agreement), you or your estate or designated beneficiary, as applicable, shall be entitled to a lump sum payment equal to the total amount of Fees payable to you for the remainder of the Consulting Period.  Such lump sum payment shall be made within ten (10) business days following the date of termination.

8. Documents and Materials.  Upon the termination of the Consulting Period, or at any other time upon the Company’s request, you shall promptly deliver to the Company, without retaining any copies, all documents and other materials furnished to you by the Company, prepared by you for the Company or otherwise relating to the Company’s business, including, without limitation, all written and tangible material in your possession incorporating any “Proprietary Information” (as defined in the Employment Agreement).

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9. General Provisions.

(a) Entire Agreement. This Agreement and the Employment Agreement represent the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between you and the Company.

(b) Governing Law. This Agreement will be governed by and construed in accordance with the laws of Florida, without giving effect to the conflicts of laws principles thereof.

(c) Enforceability; Waiver.  If any arbitrator or court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions of this Agreement, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed, blue-penciled or reformed by the court or arbitrator in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed in such provision. Your or the Company’s failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right that you or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. Similarly, the waiver by any party hereto of a breach of any provision of this Agreement by the other party will not operate or be construed as a waiver of any other or subsequent breach by such other party.

(d) Headings.  The descriptive headings in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

(e) Counterparts.  This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed an original but all of which together shall constitute one and the same agreement.

(f) Signatures.  Each party’s signature on the lines below constitutes his or its agreement with each provision contained in this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first above written.

EXECUTIVE	KLX INC.
/s/ Amin J. Khoury	By:	/s/ Thomas P. McCaffrey
Amin J. Khoury	Name:	Thomas P. McCaffrey
	Title:	President and Chief Operating Officer

[SIGNATURE PAGE FOR AMIN KHOURY CONSULTING AGREEMENT]

EX-10.3

EXHIBIT 10.3

KLX INC.

EXECUTIVE RETIREE MEDICAL AND DENTAL PLAN

May 25, 2017

ARTICLE I

FORWARD AND PURPOSE

This Executive Retiree Medical and Dental Plan (the “Plan”) is hereby adopted effective May 25,  2017,  by KLXInc. (the "Company") to provide medical and dental coverage for a select group of retired senior executives of the Company and their Dependents, as part of the existing KLXMedical Benefits Program and KLXDental Program.  

ARTICLE II

DEFINITIONS

The following words and phrases have meanings set forth below, unless a different meaning is plainly required by the context:

"Applicable Program" means the KLX Inc. Medical Benefits Program and KLX Inc. Dental Program, the employer-sponsored medical and dental benefit plans which are part of the KLX Employee Benefit Plan covering active employees of the Company under which the Retiree and his or her Eligible Dependents have medical and dental coverage.

"Board of Directors" means the Board of Directors of the Company.

"Change of Control" has the same meaning as that term is defined in the Retiree's employment agreement. If no change of control provision exists in Retiree's employment agreement or Retiree does not have an employment agreement, the first of the following to occur will be a Change of Control with regard to such Retiree: (1) a change in ownership of the Company on the date that any one person or more than one person acting as a group acquires stock that results in ownership by such person/group of more than 50% of the total fair market value or total voting power of the Company stock;  or (2) a change in the ownership of a substantial portion of the Company's assets on the date that any one person or more than one person acting as a group acquires assets from the Company that have a total gross fair market value equal to more than 1/3 of the total  gross fair market value of all the assets of the Company immediately prior to such acquisition.

"Code" means the Internal Revenue Code of 1986 and regulations and rulings issued thereunder,  as amended from time to time. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.

"Company" means KLXInc.  or its successor.

"Eligible Dependent" means any of the following:

(1)          A  Participant's spouse to whom the Participant is married on his or her date of retirement. Subsequent to retirement,  said spouse shall cease to be an Eligible Dependent six months and one day after the following: upon divorce or legal separation; subsequent to the death of a Participant if the spouse remarries; or upon becoming eligible for Medicare.

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(2)          A dependent child of the Participant who meets the definition of a "Dependent" under the Applicable Program.

"ERISA"  means the Employee Retirement Income Security Act of 1974, Public Law 93- 406,  29 U.S.C.  §  1001 et seq., and regulations and rulings issued thereunder, as amended from time to time.

"Participant" means a Retiree who has continued participation in the Applicable Program,  past the date coverage in the Applicable Program as an active employee would have otherwise terminated by commencing participation in this Plan and has not terminated participation as provided in Section 3.2.

"Plan" means the KLX Executive Retiree Medical and Dental Plan as set forth herein, together with any and all amendments and supplements thereto. This Plan is not a separate plan under ERISA, but is a program offered to Retirees under which they may continue their and their Eligible Dependents' coverage under the Applicable Program.

"Plan Administrator" means the individual who shall be an officer of the Company, or a Committee, appointed by the Board of Directors of the Company.

"Plan Year" means the twelve-month period beginning each January 1 and ending on the following December 31.

"Retiree" means:

(1)A former employee who was employed by the Company in one of the following positions at the time of employment termination:

Chairman of the Board / Chief Executive Officer

President / Chief Operating Officer

Chief Financial Officer

Corporate Treasurer

Corporate Chief Information Officer

Corporate Vice President - Investor Relations

Corporate Vice President -  Tax

Corporate Vice President of Law, General Counsel and Secretary

Corporate Vice President of Human Resources

Corporate Controller

and who had at least 10 Years of Service when his or her employment terminates; or

(i)an employee of the Company in one of the positions listed in (i) above, employed at the time there is a Change of Control, whether or not he or she has 1O Years of Service,  who ceases to be employed within 6 months of the date of Change of Control as a result thereof either because his or her employment is involuntarily terminated or because he or she resigns employment; or

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(ii)an employee of the Company in one of the positions listed in (i) above, pursuant to the Change of Control terms of his or her employment agreement, whether or not he or she has 1O Years of Service; or

(2)Any former employee who was employed by the Company and is determined in the Plan Administrator’s discretion to be eligible to participate in the Plan

"Year of Service" means a computation period during which the employee completes at least 1,000 hours of service. For purposes of determining a Year of Service, the initial computation period shall be the 12-consecutive month period beginning on the date the Employee first performs an hour of service (the "employment commencement date").  The succeeding computation periods commence on the first anniversary of the employment commencement date and on each anniversary thereafter.

ARTICLE III 

PARTICIPATION

3.1.Commencement of Participation. A Retiree shall commence participation in this Plan on the date of said Retiree's retirement from the Company.  In order to participate in the Plan,  a Retiree must commence participation at the time he or she terminates employment with the Company and maintain continuous participation in the Plan.  A Retiree may elect to cover any Eligible Dependent under this Plan at the same time or times that an active employee is permitted to cover Eligible Dependents. If an employee who would become a Retiree under this Plan dies while employed,  regardless of said employee's Years of Service, then his or her spouse and dependents who are otherwise Eligible Dependents as of said employee's date of death, shall be eligible to participate under this Plan so long as they elect to participate and remain Eligible Dependents.

3.2.Termination of Participation. A Participant shall continue to participate in this Plan so long as the applicable premiums are paid on a quarterly basis by the 1st day of the beginning of each calendar quarter,  until he or she becomes eligible for Medicare.  A Participant's dependent can continue to participate in the Plan as long as he or she is an Eligible Dependent, so long as applicable premiums are paid on a quarterly basis by the 1st day of the beginning of each calendar quarter.  If premiums are not paid when due, by the 15th day from the beginning of said quarter,  the Company will notify the Participant/Eligible Dependent that premiums have not been timely paid. If the Participant/Eligible Dependent does not pay the premiums by the 15th day from the date notice is given,  coverage will cease.

3.3.COBRA.  Participation under this Plan shall be concurrent with any continuation of group health coverage required by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), as amended,  ERISA §  601et seq.

ARTICLE IV

BENEFIT STRUCTURE

The Plan provides medical and dental benefits under and as set forth in the Programs. This Plan is incorporated by reference into said Applicable Programs, which Applicable Programs may be amended from time to time at the discretion of the Plan Administrator.

4

ARTICLE V

PARTICIPANT COST

For the elected medical and dental coverage, a Retiree and his or her Eligible Dependents shall pay the entire premium cost for their elected coverage (which premium for active employees may be paid in part by the Company and in part by the employee).

The premium paid by the Retiree or Eligible Dependent will change at the same time the premiums under the Applicable Program changes.

ARTICLE VI

COVERAGE

Subject to the provisions of Article V,  the Plan only provides the coverage that the Company provides for its active employees and their eligible dependents under the Applicable Programs. The benefit under this Plan is the ability to continue participation in the Applicable Program to a date after the date coverage would otherwise terminate due to termination of employment. The actual medical and dental benefits are paid under the Applicable Program and are set forth in the summary plan description (SPD) for the Applicable Program, as amended from time to time by the Plan Administrator and communicated to Retirees. Any interpretation as to benefit coverage shall be decided under the terms of the Applicable Program.

ARTICLE VII

ADMINISTRATION AND CLAIMS

The Plan is a part of and shall be administered as part of the Applicable Programs.  Claims shall be made and appealed in accordance with the provisions of the Applicable Program.

ARTICLE VIII

AMENDMENT OR TERMINATION OF THE PLAN

This Plan has been established by the Company with the intent that it shall be continued in operation indefinitely. However, the Company has reserved the right at any time by an instrument in writing, to amend or terminate the Applicable Programs for its active employees and it reserves the right to amend or terminate this Plan, in its complete discretion at any time.

The Company also reserves the right to amend the Plan to eliminate benefits as to any individual who is not holding a position listed in the definition of "Retiree" in Article 11 as of the date of such amendment.

The above notwithstanding,  if there is a Change of Control, the Company and its successor cannot change the terms of this Plan or eliminate the Plan as to any individual  who is a Retiree or Eligible Dependent as of the date of the Change of Control or any individual who becomes a Retiree or Eligible Dependent following the Change of Control,  and no changes made within 6 months prior to the Change of Control will be effective as to such individuals.

5

ARTICLE IX

GENERAL PROVISIONS

9.1.No Guarantee of Non-Taxability. Neither the Company nor the Plan Administrator shall in any way be liable for any taxes or other liability incurred by a Participant or anyone claiming through him or her by virtue of participation in this Plan.

9.2.Delegation of Authority by the Company and Administrator. Whenever the Company or the Plan Administrator under the terms of this Plan is permitted or required to do or perform any act, matter or thing,  it shall be done and performed by any officer or individual thereunto duly authorized by the Company or Plan Administrator.

9.3.Applicable Law. This Plan shall be construed according to the laws of the State of Florida and all provisions hereof shall be administered according to,  and its validity and enforceability shall be determined under, the laws of Florida, except where preempted by the Code, ERISA or other federal law.

9.4.Headings. The headings of sections and subsections are tor ease of reference only and shall not be construed to limit or modify the detailed provisions herein.

9.5.Entire Plan Stated. This document sets forth the entire Plan.  No other employee benefit or employee plan that is or may hereafter be maintained by the Company on a non-elective basis, other than the Applicable Programs,  shall constitute a part of this Plan.

9.6.Construction. As used in this Plan,  the masculine gender includes feminine gender,  and the singular includes the plural,  unless the context clearly indicates otherwise.  The words "hereof,"  and other similar compounds of  the word "here" mean and refer to the entire Plan,  not to any particular provision or section.

ARTICLE X

SIGNATURE

Adoption by Company.  This Plan is hereby adopted,  effective May 25, 2017,  by its officer thereunto duly authorized.

KLX INC.
	/s/ Roger Franks
Name:	Roger Franks
Title:	General Counsel, Vice President – Law & Human Resources

6

Acknowledged and approved by the Plan Administrator, this 25th day of May, 2017.

Plan Administrator:
	KLX Inc. Benefits Committee
		/s/ Roger Franks
	Name:	Roger Franks
	Title:	Chairman of the Benefits Committee

7

EX-31.1

Exhibit 31.1

KLX INC.

CERTIFICATIONS

I, Amin J. Khoury, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KLX Inc.;

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

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

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

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

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

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

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

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

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

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

Date:  August 24, 2017	By:	/s/ Amin J. Khoury
		Amin J. Khoury
		Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

KLX INC.

CERTIFICATIONS

I, Michael F. Senft, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KLX Inc.;

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

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

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

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

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

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

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

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

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

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

Date:  August 24, 2017	By:	/s/ Michael F. Senft
		Michael F. Senft
		Vice President—Chief Financial Officer

EX-32.1

Exhibit 32.1

KLX INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS REQUIRED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of KLX Inc. (the “Company”) on Form 10-Q for the quarter ended July 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Amin J. Khoury, Chairman and Chief Executive Officer of the Company, certify that to the best of my knowledge:

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

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

Date: August 24,  2017	By:	/s/ Amin J. Khoury
		Amin J. Khoury
		Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

KLX INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS REQUIRED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of KLX Inc. (the “Company”) on Form 10-Q for the quarter ended July 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael F. Senft,  Vice President—Chief Financial Officer and Treasurer of the Company, certify that to the best of my knowledge:

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

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

Date: August 24, 2017	By:	/s/ Michael F. Senft
		Michael F. Senft
		Vice President—Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jul. 31, 2017	Aug. 21, 2017
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Entity Current Reporting Status	Yes
Entity Registrant Name	KLX Inc.
Entity Central Index Key	0001617898
Current Fiscal Year End Date	--01-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		51,423,614

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Jul. 31, 2017	Jan. 31, 2017
Current assets:
Cash and cash equivalents	$ 275.8	$ 277.3
Accounts receivable–trade, less allowance for doubtful accounts ($10.6 at July 31, 2017 and $13.5 at January 31, 2017)	311.8	261.3
Inventories, net	1,398.1	1,381.4
Other current assets	47.1	39.6
Total current assets	2,032.8	1,959.6
Property and equipment, net of accumulated depreciation ($171.9 at July 31, 2017 and $149.4 at January 31, 2017)	257.5	248.3
Goodwill	1,022.7	996.4
Identifiable intangible assets, net	309.4	314.8
Deferred income taxes	135.3	147.0
Other assets	31.0	32.2
Total assets	3,788.7	3,698.3
Current liabilities:
Accounts payable	186.0	166.0
Accrued liabilities	93.2	91.1
Total current liabilities	279.2	257.1
Long-term debt	1,183.2	1,182.0
Deferred income taxes	6.2	5.0
Other non-current liabilities	38.7	33.1
Commitments, contingencies and off-balance sheet arrangements (Note 10)
Stockholders' equity:
Preferred stock, $0.01 par value; 1.0 million shares authorized; no shares outstanding
Common stock, $0.01 par value; 250.0 million shares authorized; 53.5 million shares issued as of July 31, 2017 and 53.5 million shares issued as of January 31, 2017	0.5	0.5
Additional paid-in capital	2,700.9	2,686.5
Treasury stock: 2.1 million shares at July 31, 2017 and 1.5 million shares at January 31, 2017	(84.0)	(54.4)
Accumulated deficit	(287.8)	(328.0)
Accumulated other comprehensive loss	(48.2)	(83.5)
Total stockholders' equity	2,281.4	2,221.1
Total liabilities and equity	$ 3,788.7	$ 3,698.3

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions	Jul. 31, 2017	Jan. 31, 2017
Condensed Consolidated Balance Sheets (Unaudited)
Accounts receivable - trade, allowance for doubtful accounts	$ 10.6	$ 13.5
Property and equipment, accumulated depreciation	$ 171.9	$ 149.4
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	53,500,000	53,500,000
Treasury stock	2,100,000	1,500,000

XML

Condensed Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Condensed Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) (Unaudited)
Product revenues	$ 357.1	$ 346.5	$ 704.6	$ 662.3
Service revenues	73.5	32.4	137.3	69.4
Total revenues	430.6	378.9	841.9	731.7
Cost of sales - products	248.3	244.5	490.8	464.4
Cost of sales - services	63.7	41.9	119.6	91.3
Total cost of sales	312.0	286.4	610.4	555.7
Selling, general and administrative	66.3	60.1	130.6	120.4
Operating earnings	52.3	32.4	100.9	55.6
Interest expense	19.0	19.1	38.0	38.0
Earnings before income taxes	33.3	13.3	62.9	17.6
Income tax expense	12.6	5.3	23.8	7.1
Net earnings	20.7	8.0	39.1	10.5
Other comprehensive income (loss):
Foreign currency translation adjustment	30.5	(15.7)	35.3	5.3
Comprehensive income (loss)	$ 51.2	$ (7.7)	$ 74.4	$ 15.8
Net earnings per share - basic	$ 0.41	$ 0.15	$ 0.77	$ 0.20
Net earnings per share - diluted	$ 0.40	$ 0.15	$ 0.76	$ 0.20

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$ 39.1	$ 10.5
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization	33.0	33.7
Deferred income taxes	21.0	5.3
Non-cash compensation	13.0	9.8
Amortization of deferred financing fees	2.2	2.1
Provision for inventory write-downs	9.1	10.5
Change in allowance for doubtful accounts and sales returns	4.8	3.3
Loss on disposal of property and equipment	0.5	3.5
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(54.8)	7.6
Inventories	(25.6)	3.3
Other current and non-current assets	(13.7)	8.8
Accounts payable	19.4	8.4
Other current and non-current liabilities	5.3	(29.4)
Net cash flows provided by operating activities	53.3	77.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(32.6)	(25.3)
Acquisitions, net of cash acquired		(221.5)
Net cash flows used in investing activities	(32.6)	(246.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock	(29.6)	(8.8)
Cash proceeds from stock issuance	1.0	0.8
Net cash flows used in financing activities	(28.6)	(8.0)
Effect of foreign exchange rate changes on cash and cash equivalents	6.4
Net decrease increase in cash and cash equivalents	(1.5)	(177.4)
Cash and cash equivalents, beginning of period	277.3	427.8
Cash and cash equivalents, end of period	275.8	250.4
Cash paid during period for:
Income taxes paid, net of refunds	0.1	2.9
Interest	36.2	35.9
Supplemental schedule of non-cash activities:
Accrued property additions	$ 6.1	$ 3.5

XML

Description of Business and Basis of Presentation

6 Months Ended

Jul. 31, 2017

Description of Business and Basis of Presentation

Description of Business and Basis of Presentation

Note 1.Description of Business and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown are of a normal recurring nature and have been reflected in the condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or for any future period. The information included in these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the KLX Inc. (the “Company” or “KLX”) Annual Report on Form 10-K (the “2016 Form 10-K”) for the fiscal year ended January 31, 2017 (“Fiscal 2016”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates. The provision for inventory write downs has been reclassified and separately disclosed in the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2016 to conform to current year presentation.

XML

Recent Accounting Pronouncements

6 Months Ended

Jul. 31, 2017

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Note 2.Recent Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09, Compensation–Stock Compensation (Topic 718). This ASU was issued to provide clarity and reduce diversity in practice regarding the application of guidance on the modification of equity awards. The ASU states that an entity should account for the effects of a modification unless all of the following are met: the fair value, vesting conditions and the classification of the instrument as equity or liability of the modified award is the same as that of the original award immediately before such award is modified. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual reporting periods with early adoption permitted and should be applied prospectively to an award modified on or after the adoption date. The Company does not expect a material impact upon adoption of this ASU to its condensed consolidated financial statements as the Company historically has accounted for all modifications in accordance with Topic 718 and has not been subject to the exception described under this ASU.

In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC Topic 842, Leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Earlier adoption is permitted. ASU 2016-02 requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the effect of this update on its condensed consolidated financial statements.

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which updated the guidance in ASC Topic 606, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this update deferred the effective date for implementation of ASU 2014-09 by one year and is now effective for annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period.  In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, and in May 2016, ASU 2016-12, Revenues from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients both of which provide supplemental adoption guidance and clarification to ASU 2014-09. ASU 2016-10 and ASU 2016-12 must be adopted concurrently with the adoption of ASU 2014-09. The Company has not determined the impact this guidance will have on the financial statements.  However, the identification of implementation project team members and the inventorying of contracts with customers, particularly large customer contracts, has begun. Other than increased disclosures, the impact of the revised accounting guidance to the results of operations and cash flows of the Company cannot be determined until the assessment process is complete.

XML

Business Combinations

6 Months Ended

Jul. 31, 2017

Business Combinations

Business Combinations

Note 3.Business Combinations

On May 17, 2016, the Company acquired Herndon Aerospace & Defense LLC (“Herndon”), an aftermarket aerospace supply chain management and consumables hardware distributor servicing principally aftermarket military depots as well as the commercial aerospace aftermarket, for an aggregate purchase price of $220.8 (net of cash acquired). The excess of the purchase price of the fair value of the net identifiable assets acquired approximated $119.6, of which $68.9 was allocated to identifiable intangible assets consisting of customer contracts and relationships and covenants not to compete and $50.7 is included in goodwill. The primary items that generated the goodwill recognized were the premium paid by the Company for future earnings potential and the value of the assembled workforce that does not qualify for separate recognition. The useful life assigned to the customer contracts and relationships is 20 years, and the covenants not to compete are being amortized over their contractual periods of five years.

The Herndon acquisition was accounted for as a purchase under FASB ASC 805, Business Combinations. The assets acquired and liabilities assumed have been reflected in the accompanying condensed consolidated balance sheets as of July 31, 2017 and January 31, 2017, and the results of operations are included in the accompanying condensed consolidated statements of earnings and comprehensive income (loss) from the date of acquisition.

The following table summarizes the fair values of assets acquired and liabilities assumed in the Herndon acquisition in accordance with ASC 805:

Accounts receivable-trade	$	12.3
Inventories		103.8
Other current and non-current assets		3.7
Property and equipment		2.1
Goodwill		50.7
Identified intangibles		68.9
Accounts payable		(9.7)
Other current and non-current liabilities		(11.0)
Total consideration paid	$	220.8

The majority of goodwill and intangible assets are expected to be deductible for tax purposes.

On a pro forma basis to give effect to the Herndon acquisition as if it occurred on February 1, 2016, revenues, net earnings and earnings per diluted share for the three months ended July 31, 2016 were $385.0,  $8.4 and $0.16, respectively, and $782.0,  $14.0 and $0.27, respectively, for the six months ended July 31, 2016.

The Company has substantially integrated Herndon into its Aerospace Solutions Group (“ASG”) segment systems. As a result, it is not practicable to report stand-alone revenues or operating earnings of the acquired business since the acquisition date.

XML

Inventories

6 Months Ended

Jul. 31, 2017

Inventories

Inventories

Note 4.Inventories

Inventories, made up of finished goods, consist primarily of aerospace fasteners and consumables. The Company values inventories at the lower of cost and net realizable value, using first‑in, first‑out or weighted average cost method. The Company reviews inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on historical demand, estimated product demand to support contractual supply agreements with its customers and the age of the inventory, among other factors. Demand for the Company’s products can fluctuate from period to period depending on customer activity.In accordance with industry practice, inventories include amounts relating to long-term contracts with long production cycles, some of which are not expected to be realized within one year. In addition, the Company supports a substantial portion of the global fleet of aircraft in service, and in its capacity as a stocking distributor will acquire and hold inventories for aircraft maintenance at periodic intervals as mandated by the Federal Aviation Administration (“FAA”) or similar regulatory agencies. Based on historical experience, the support of the aftermarket activities with products such as those which the Company sells will necessitate holding inventory in excess of the amount required to support new build production activity contracts.  Obsolescence has historically been immaterial for the Company due to the long life of an aircraft and nature of the products sold by the Company. Inventory with a limited shelf life is continually monitored and reserved for in advance of expiration. The annual provision for inventory with limited shelf life has historically been immaterial. Reserves for excess and obsolete inventory were approximately $63.8and $56.4 as of July 31, 2017 and January 31, 2017, respectively.

XML

Goodwill and Intangible Assets

6 Months Ended

Jul. 31, 2017

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Note 5.Goodwill and Intangible Assets

The table below sets forth the intangible assets by major asset class, all of which were acquired through business purchase transactions:

				July 31, 2017						January 31, 2017
	Useful Life			Original		Accumulated		Net Book		Original		Accumulated		Net Book
	(Years)			Cost		Amortization		Value		Cost		Amortization		Value
Customer contracts and relationships	8	-	30	$	404.3	$	118.1	$	286.2	$	422.0	$	129.1	$	292.9
Covenants not to compete	5				2.2		0.5		1.7		5.5		3.6		1.9
Developed technologies	15				3.3		0.4		2.9		3.3		0.2		3.1
Trade names	Indefinite				18.6		-		18.6		16.9		-		16.9
				$	428.4	$	119.0	$	309.4	$	447.7	$	132.9	$	314.8

Amortization expense associated with identifiable intangible assets was $4.8 and $5.2 for the three months ended July 31, 2017 and 2016, respectively, and $9.6 and $9.9 for the six months ended July 31, 2017 and 2016, respectively. The Company currently expects to recognize amortization expense related to intangible assets of approximately $20.0 in each of the next five fiscal years (primarily related to our ASG business). The future amortization amounts are estimates. Actual future amortization expense may be different due to future acquisitions, impairments, changes in amortization periods or other factors such as changes in exchange rates for assets acquired outside the United States. The Company expenses costs to renew or extend the term of a recognized intangible asset.  Goodwill increased by $26.3 as compared to January 31, 2017 primarily as a result of foreign currency translation adjustments.

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Related Party Transactions

6 Months Ended

Jul. 31, 2017

Related Party Transactions

Related Party Transactions

Note 6. Related Party Transactions

On December 17, 2014, B/E Aerospace, Inc. (“B/E Aerospace”) created an independent public company through a spin-off of its ASG and Energy Services Group (“ESG”) businesses to B/E Aerospace’s stockholders (“Spin-Off”).  Following the Spin-Off, the Company created in-house substantially all of the functions that were previously provided to it by B/E Aerospace. The Company entered into certain agreements with B/E Aerospace related to transition services and IT services through April 2017. In addition, the Company entered into an employee matters agreement and a tax sharing and indemnification agreement with B/E Aerospace in connection with the Spin-Off. Expenses incurred under those agreements were not material for the three and six months ended July 31, 2017 and were $2.3 and $5.0 for the three and six months ended July 31, 2016, respectively.

On April 13, 2017, B/E Aerospace was sold to Rockwell Collins, Inc. and is no longer a related party. Sales to B/E Aerospace were $4.4 through April 12, 2017 and $7.5 and $13.2 for the three and six months ended July 31, 2016, respectively.

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Accrued Liabilities

6 Months Ended

Jul. 31, 2017

Accrued Liabilities

Accrued Liabilities

Note 7.Accrued Liabilities

Accrued liabilities consisted of the following:

	July 31,		January 31,
	2017		2017
Accrued salaries, vacation and related benefits	$	28.9	$	31.6
Accrued commissions		6.3		8.7
Income taxes payable		13.6		10.3
Accrued interest		11.7		11.7
Other accrued liabilities		32.7		28.8
	$	93.2	$	91.1

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Long-Term Debt

6 Months Ended

Jul. 31, 2017

Long-Term Debt

Long-Term Debt

Note 8.Long-Term Debt

As of July 31, 2017, long-term debt consisted of $1,200.0 aggregate principal amount of the Company’s 5.875% senior unsecured notes due 2022 (the “5.875% Notes”). On a net basis, after taking into consideration the debt issue costs for the Term Loan Facility, total debt was $1,183.2.  As of July 31, 2017, the Company also had a $750.0 undrawn secured revolving credit facility pursuant to a credit agreement dated as of December 16, 2014 and amended and restated on May 19, 2015 (the “Revolving Credit Facility”).

Borrowings under the Revolving Credit Facility bear interest at an annual rate equal to the London interbank offered rate (“LIBOR”) (as defined in the Revolving Credit Facility) plus the applicable margin (as defined).  No amounts were outstanding under the Revolving Credit Facility as of July 31, 2017 or January 31, 2017.

The Revolving Credit Facility is tied to a borrowing base formula and has no maintenance financial covenants.  This Revolving Credit Facility matures in May 2020. The credit agreement is collateralized by the Company’s assets and contains customary affirmative covenants, negative covenants, restrictions on the payment of dividends and the repurchase of our stock, and conditions precedent for borrowings, all of which were met as of July 31, 2017.

Letters of credit issued under the Revolving Credit Facility aggregated $5.5 and $5.5 at July 31, 2017 and January 31, 2017, respectively.

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Fair Value Measurements

6 Months Ended

Jul. 31, 2017

Fair Value Measurements

Fair Value Measurements

Note 9.Fair Value Measurements

All short-term financial instruments are generally carried at amounts that approximate estimated fair value. The fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. Assets measured at fair value are categorized based upon the lowest level of significant input to the valuations.

Level 1 – quoted prices in active markets for identical assets and liabilities.

Level 2 – quoted prices for identical assets and liabilities in markets that are not active, or observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3 – unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

The carrying amounts of cash and cash equivalents (which the Company classifies as Level 1 assets), accounts receivable – trade and accounts payable represent their respective fair values due to their short-term nature. There was no debt outstanding under the Revolving Credit Facility as of July 31, 2017. The fair value of the Company’s 5.875% Notes, based on market prices for publicly-traded debt (which the Company classifies as Level 2 inputs), was $1,256.2 and $1,260.7 as of July 31, 2017 and January 31, 2017, respectively.

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Commitments, Contingencies and Off-Balance Sheet Arrangements

6 Months Ended

Jul. 31, 2017

Commitments, Contingencies and Off-Balance Sheet Arrangements

Commitments, Contingencies and Off-Balance Sheet Arrangements

Note 10.Commitments, Contingencies and Off-Balance Sheet Arrangements

Lease Commitments - The Company finances its use of certain facilities and equipment under committed lease arrangements provided by various institutions. Since the terms of these arrangements meet the accounting definition of operating lease arrangements, the aggregate sum of future minimum lease payments is not reflected on the condensed consolidated balance sheets. At July 31, 2017, future minimum lease payments under these arrangements approximated $106.9, the majority of which related to long-term real estate leases.

Future payments under operating leases with terms greater than one year as of July 31, 2017 are as follows:

Year Ending January 31,
2018	$	9.0
2019		20.5
2020		22.6
2021		19.4
2022		14.5
Thereafter		20.9
Total	$	106.9

Litigation - The Company is a defendant in various legal actions arising in the normal course of business, the outcomes of which, in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect on the Company’s condensed consolidated financial statements.

Indemnities, Commitments and Guarantees - During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to other parties to certain acquisition agreements. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. Many of these indemnities, commitments and guarantees provide for limitations on the maximum potential future payments the Company could be obligated to make. However, the Company is unable to estimate the maximum amount of liability related to its indemnities, commitments and guarantees because such liabilities are contingent upon the occurrence of events that are not reasonably determinable. Management believes that any liability for these indemnities, commitments and guarantees would not be material to the accompanying condensed consolidated financial statements. Accordingly, no significant amounts have been accrued for indemnities, commitments and guarantees.

The Company has employment agreements with certain key members of management with three year initial terms and which renew for one additional year on each anniversary date. The Company’s employment agreements generally provide for certain protections in the event of a change of control. These protections generally include the payment of severance and related benefits under certain circumstances in the event of a change of control.

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Accounting for Stock-Based Compensation

6 Months Ended

Jul. 31, 2017

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

Note 11.Accounting for Stock-Based Compensation

The Company has a Long-Term Incentive Plan (“LTIP”) under which the Company’s Compensation Committee has the authority to grant stock options, stock appreciation rights, restricted stock, restricted stock units or other forms of equity-based or equity-related awards.

The Company accounts for share-based compensation arrangements in accordance with the provisions of FASB ASC 718, Compensation—Stock Compensation, whereby share-based compensation cost is measured on the date of grant, based on the fair value of the award, and is recognized over the requisite service period.

Compensation cost recognized during the three and six months ended July 31, 2017 and 2016 related to KLX restricted stock and stock options was $6.9 and $4.9, and $12.6 and $9.5, respectively. Unrecognized compensation expense related to these grants was $31.6 at July 31, 2017.

KLX has established a qualified Employee Stock Purchase Plan, the terms of which allow for qualified employees (as defined in the Plan) to participate in the purchase of designated shares of KLX’s common stock at a price equal to 85% of the closing price on the last business day of each semi‑annual stock purchase period. The fair value of employee purchase rights represents the difference between the closing price of KLX’s shares on the date of purchase and the purchase price of the shares. Compensation cost was $0.1 and $0.1 for the three months ended July 31, 2017 and 2016, respectively, and $0.2 and $0.2 for the six months ended July 31, 2017 and 2016, respectively.

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Segment Reporting

6 Months Ended

Jul. 31, 2017

Segment Reporting

Segment Reporting

Note 12.Segment Reporting

The Company is organized based on the products and services it offers. The Company’s reportable segments which are also its operating segments, are comprised of ASG and ESG. The segments regularly report their results of operations and make requests for capital expenditures and acquisition funding to the Company’s chief operational decision-making group (“CODM”). This group is comprised of the Chairman and Chief Executive Officer and the President and Chief Operating Officer. As a result, the CODM has determined the Company has two reportable segments.

The Company has not included product line information for the ASG segment due to the similarity of the product offerings and services and the impracticality of determining such information.

The following table presents revenues and operating earnings (losses) by reportable segment:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
Revenues	2017		2016		2017		2016
Aerospace Solutions Group	$	357.1	$	346.5	$	704.6	$	662.3
Energy Services Group		73.5		32.4		137.3		69.4
Total revenues		430.6		378.9		841.9		731.7
Operating earnings (loss) (1)
Aerospace Solutions Group		60.1		55.9		118.8		110.0
Energy Services Group		(7.8)		(23.5)		(17.9)		(54.4)
Total operating earnings		52.3		32.4		100.9		55.6
Interest expense		19.0		19.1		38.0		38.0
Earnings before income taxes	$	33.3	$	13.3	$	62.9	$	17.6

(1) Operating earnings (loss) include an allocation of employee benefits and general and administrative costs primarily based on the proportion of each segment’s number of employees for the three and six months ended July 31, 2017 and 2016.

The following table presents capital expenditures by reportable segment:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
	2017		2016		2017		2016
Aerospace Solutions Group	$	2.6	$	3.5	$	5.3	$	6.3
Energy Services Group		15.5		2.6		27.3		19.0
	$	18.1	$	6.1	$	32.6	$	25.3

Corporate capital expenditures have been allocated to the above segments based on each segment’s percentage of total capital expenditures.

The following table presents goodwill by reportable segment:

	July 31,		January 31,
	2017		2017
Aerospace Solutions Group	$	1,022.7	$	996.4
Energy Services Group		-		-
	$	1,022.7	$	996.4

The following table presents total assets by reportable segment:

	July 31,		January 31,
	2017		2017
Aerospace Solutions Group	$	3,526.0	$	3,471.4
Energy Services Group		262.7		226.9
	$	3,788.7	$	3,698.3

Corporate assets (primarily cash and cash equivalents) of $364.8 and $378.2 at July 31, 2017 and January 31, 2017, respectively, have been allocated to the above segments based on each segment’s percentage of total assets.

As discussed in Note 15 in the 2016 Form 10-K, Selected Quarterly Data (Unaudited), during our Fiscal 2016 preparation of the annual 10-K, the Company restated its 2016 interim financial statements to reflect the correction of errors that were identified related to the ASG segment’s product revenues and cost of sales. These errors related to the application of an accounting principle on claims related to the termination of programs under a long-term contract and other errors associated with inventory and sales reserves. The Company concluded the corrected errors were immaterial individually and in the aggregate, and the Company’s Condensed Consolidated Balance Sheet, Statement of Earnings and Comprehensive Income and Statement of Cash Flows reflect the correction of errors for the prior three-month and six-month periods ended July 31, 2016. The impact of the restatement to the three-month and six-month periods ended July 31, 2016 are summarized in the table below:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	As Reported		As Restated		As Reported		As Restated
	July 31,		July 31,		July 31,		July 31,
	2016		2016		2016		2016
Accounts receivable - trade	$	289.0	$	261.1	$	289.0	$	261.1
Inventories, net		1,367.5		1,386.9		1,367.5		1,386.9
Total stockholders' equity		2,228.3		2,223.0		2,228.3		2,223.0
Total revenues		391.4		378.9		759.6		731.7
Total cost of sales		296.3		286.4		575.0		555.7
Income tax expense		6.3		5.3		10.3		7.1
Net earnings		9.6		8.0		15.8		10.5
Net earnings per share - basic		0.18		0.15		0.30		0.20
Net earnings per share - diluted		0.18		0.15		0.30		0.20

The Statement of Cash Flows was restated to reflect the impact of these errors. In addition, the Company separately disclosed the provision for inventory write-downs in the Statement of Cash Flows which was previously included in the change in inventory line item. There were no changes in total operating, investing, or financing cash flows. The restated results for the six months ended July 31, 2016 include the correction of amounts relating to prior periods that were reported in the three-months ended April 30, 2016, which correction resulted in a reduction of revenue, cost of sales, and net earnings of $12.1,  $6.6 and $3.4, respectively. The impact of these prior period errors was not material to the year ended January 31, 2017 or to any prior periods.

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Net Earnings Per Common Share

6 Months Ended

Jul. 31, 2017

Net Earnings Per Common Share

Net Earnings Per Common Share

Note 13.Net Earnings Per Common Share

Basic net earnings per common share is computed using the weighted average common shares outstanding during the period. Diluted net earnings per common share is computed by using the weighted average common shares outstanding including the dilutive effect of stock options, shares issued under the KLX LTIP and restricted shares based on an average share price during the period. For the three months ended July 31, 2017 and 2016, approximately no shares and 0.3 shares of the Company’s common stock, respectively, and for the six months ended July 31, 2017 and 2016, no shares and 0.3, respectively, were excluded from the determination of diluted earnings per common share because their effect would have been anti-dilutive. The computations of basic and diluted earnings per share for the three and six months ended July 31, 2017 and 2016 are as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
	2017		2016		2017		2016
Net earnings	$	20.7	$	8.0	$	39.1	$	10.5
(Shares in millions)
Basic weighted average common shares		50.9		51.9		51.0		51.9
Effect of dilutive securities - dilutive securities		0.8		0.3		0.7		0.3
Diluted weighted average common shares		51.7		52.2		51.7		52.2
Basic net earnings per common share	$	0.41	$	0.15	$	0.77	$	0.20
Diluted net earnings per common share	$	0.40	$	0.15	$	0.76	$	0.20

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Income Taxes

6 Months Ended

Jul. 31, 2017

Income Taxes

Income Taxes

Note 14.Income Taxes

In accordance with FASB ASC 740, Income Taxes, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. As of July 31, 2017 and 2016, the Company had $9.3 and $12.4, respectively, of uncertain tax positions, including accrued interest of $1.3 and $1.6 at July 31, 2017 and 2016, respectively, all of which would affect the Company’s effective tax rate if recognized.

Pursuant to the terms of the Tax Sharing Agreement with our former parent, B/E Aerospace, the Company may be liable for income tax in certain foreign jurisdictions arising from the examination of tax years during which the Company was part of the B/E Group.  The statute of limitations in these foreign jurisdictions is open for tax years 2007-2014. The Company is currently undergoing a U.S. federal income tax examination for the period from December 17, 2014 through December 31, 2015.

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Description of Business and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 31, 2017

Description of Business and Summary of Significant Accounting Policies

Recent Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09, Compensation–Stock Compensation (Topic 718). This ASU was issued to provide clarity and reduce diversity in practice regarding the application of guidance on the modification of equity awards. The ASU states that an entity should account for the effects of a modification unless all of the following are met: the fair value, vesting conditions and the classification of the instrument as equity or liability of the modified award is the same as that of the original award immediately before such award is modified. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual reporting periods with early adoption permitted and should be applied prospectively to an award modified on or after the adoption date. The Company does not expect a material impact upon adoption of this ASU to its condensed consolidated financial statements as the Company historically has accounted for all modifications in accordance with Topic 718 and has not been subject to the exception described under this ASU.

In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC Topic 842, Leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Earlier adoption is permitted. ASU 2016-02 requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the effect of this update on its condensed consolidated financial statements.

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which updated the guidance in ASC Topic 606, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this update deferred the effective date for implementation of ASU 2014-09 by one year and is now effective for annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period.  In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, and in May 2016, ASU 2016-12, Revenues from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients both of which provide supplemental adoption guidance and clarification to ASU 2014-09. ASU 2016-10 and ASU 2016-12 must be adopted concurrently with the adoption of ASU 2014-09. The Company has not determined the impact this guidance will have on the financial statements.  However, the identification of implementation project team members and the inventorying of contracts with customers, particularly large customer contracts, has begun. Other than increased disclosures, the impact of the revised accounting guidance to the results of operations and cash flows of the Company cannot be determined until the assessment process is complete.

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Business Combinations (Tables)

6 Months Ended

Jul. 31, 2017

Herndon

Schedule of Fair Values of Assets Acquired and Liabilities Assumed

Accounts receivable-trade	$	12.3
Inventories		103.8
Other current and non-current assets		3.7
Property and equipment		2.1
Goodwill		50.7
Identified intangibles		68.9
Accounts payable		(9.7)
Other current and non-current liabilities		(11.0)
Total consideration paid	$	220.8

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jul. 31, 2017

Goodwill and Intangible Assets

Intangible Assets by Major Asset Class

				July 31, 2017						January 31, 2017
	Useful Life			Original		Accumulated		Net Book		Original		Accumulated		Net Book
	(Years)			Cost		Amortization		Value		Cost		Amortization		Value
Customer contracts and relationships	8	-	30	$	404.3	$	118.1	$	286.2	$	422.0	$	129.1	$	292.9
Covenants not to compete	5				2.2		0.5		1.7		5.5		3.6		1.9
Developed technologies	15				3.3		0.4		2.9		3.3		0.2		3.1
Trade names	Indefinite				18.6		-		18.6		16.9		-		16.9
				$	428.4	$	119.0	$	309.4	$	447.7	$	132.9	$	314.8

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Accrued Liabilities (Tables)

6 Months Ended

Jul. 31, 2017

Accrued Liabilities

Accrued Liabilities

	July 31,		January 31,
	2017		2017
Accrued salaries, vacation and related benefits	$	28.9	$	31.6
Accrued commissions		6.3		8.7
Income taxes payable		13.6		10.3
Accrued interest		11.7		11.7
Other accrued liabilities		32.7		28.8
	$	93.2	$	91.1

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Commitments, Contingencies And Off-Balance-Sheet Arrangements (Tables)

6 Months Ended

Jul. 31, 2017

Commitments, Contingencies and Off-Balance Sheet Arrangements

Future Payments under Operating Leases with Terms Greater Than One Year

Future payments under operating leases with terms greater than one year as of July 31, 2017 are as follows:

Year Ending January 31,
2018	$	9.0
2019		20.5
2020		22.6
2021		19.4
2022		14.5
Thereafter		20.9
Total	$	106.9

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Segment Reporting (Tables)

6 Months Ended

Jul. 31, 2017

Segment Reporting

Revenues and Operating Earnings (Losses) by Reportable Segment

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
Revenues	2017		2016		2017		2016
Aerospace Solutions Group	$	357.1	$	346.5	$	704.6	$	662.3
Energy Services Group		73.5		32.4		137.3		69.4
Total revenues		430.6		378.9		841.9		731.7
Operating earnings (loss) (1)
Aerospace Solutions Group		60.1		55.9		118.8		110.0
Energy Services Group		(7.8)		(23.5)		(17.9)		(54.4)
Total operating earnings		52.3		32.4		100.9		55.6
Interest expense		19.0		19.1		38.0		38.0
Earnings before income taxes	$	33.3	$	13.3	$	62.9	$	17.6

(1) Operating earnings (loss) include an allocation of employee benefits and general and administrative costs primarily based on the proportion of each segment’s number of employees for the three and six months ended July 31, 2017 and 2016.

Capital Expenditures by Reportable Segment

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
	2017		2016		2017		2016
Aerospace Solutions Group	$	2.6	$	3.5	$	5.3	$	6.3
Energy Services Group		15.5		2.6		27.3		19.0
	$	18.1	$	6.1	$	32.6	$	25.3

Goodwill by Reportable Segment

	July 31,		January 31,
	2017		2017
Aerospace Solutions Group	$	1,022.7	$	996.4
Energy Services Group		-		-
	$	1,022.7	$	996.4

Total Assets by Reportable Segment

	July 31,		January 31,
	2017		2017
Aerospace Solutions Group	$	3,526.0	$	3,471.4
Energy Services Group		262.7		226.9
	$	3,788.7	$	3,698.3

Schedule of impact of the Restatement segment

	THREE MONTHS ENDED				SIX MONTHS ENDED
	As Reported		As Restated		As Reported		As Restated
	July 31,		July 31,		July 31,		July 31,
	2016		2016		2016		2016
Accounts receivable - trade	$	289.0	$	261.1	$	289.0	$	261.1
Inventories, net		1,367.5		1,386.9		1,367.5		1,386.9
Total stockholders' equity		2,228.3		2,223.0		2,228.3		2,223.0
Total revenues		391.4		378.9		759.6		731.7
Total cost of sales		296.3		286.4		575.0		555.7
Income tax expense		6.3		5.3		10.3		7.1
Net earnings		9.6		8.0		15.8		10.5
Net earnings per share - basic		0.18		0.15		0.30		0.20
Net earnings per share - diluted		0.18		0.15		0.30		0.20

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Net Earnings Per Common Share (Tables)

6 Months Ended

Jul. 31, 2017

Net Earnings Per Common Share

Computation of Basic and Diluted Net Earnings Per Share

	THREE MONTHS ENDED				SIX MONTHS ENDED
	JULY 31,		JULY 31,		JULY 31,		JULY 31,
	2017		2016		2017		2016
Net earnings	$	20.7	$	8.0	$	39.1	$	10.5
(Shares in millions)
Basic weighted average common shares		50.9		51.9		51.0		51.9
Effect of dilutive securities - dilutive securities		0.8		0.3		0.7		0.3
Diluted weighted average common shares		51.7		52.2		51.7		52.2
Basic net earnings per common share	$	0.41	$	0.15	$	0.77	$	0.20
Diluted net earnings per common share	$	0.40	$	0.15	$	0.76	$	0.20

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Business Combinations (Details) - USD ($) $ in Millions		3 Months Ended	6 Months Ended
	May 17, 2016	Oct. 31, 2016	Jul. 31, 2017	Jul. 31, 2016	Jan. 31, 2017
Business Combinations
Purchase price, net of cash acquired				$ 221.5
Goodwill			$ 1,022.7		$ 996.4
Herndon
Business Combinations
Purchase price, net of cash acquired	$ 220.8
Identified intangible assets including goodwill		$ 119.6
Identified intangibles		68.9
Goodwill		$ 50.7
Customer contracts and relationships | Minimum
Business Combinations
Useful Life (years)			8 years
Customer contracts and relationships | Maximum
Business Combinations
Useful Life (years)			30 years
Customer contracts and relationships | Herndon
Business Combinations
Useful Life (years)		20 years
Covenants not to compete
Business Combinations
Useful Life (years)			5 years
Covenants not to compete | Herndon
Business Combinations
Useful Life (years)		5 years

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Business Combinations (Assets Acquired and Liabilities Assumed) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended	6 Months Ended
	Jul. 31, 2016	Jul. 31, 2016	Jul. 31, 2017	Jan. 31, 2017	Oct. 31, 2016
Business Combination, Separately Recognized Transactions [Line Items]
Goodwill			$ 1,022.7	$ 996.4
Herndon
Business Combination, Separately Recognized Transactions [Line Items]
Accounts receivable-trade					$ 12.3
Inventories					103.8
Other current and non-current assets					3.7
Property and equipment					2.1
Goodwill					50.7
Identified intangibles					68.9
Accounts payable					(9.7)
Other current and non-current liabilities					(11.0)
Total consideration paid					$ 220.8
Pro forma
Unaudited pro forma revenues	$ 385.0	$ 782.0
Unaudited pro forma net earnings (loss)	$ 8.4	$ 14.0
Unaudited pro forma diluted net earnings (loss) per share	$ 0.16	$ 0.27

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Inventories (Details) - USD ($) $ in Millions	Jul. 31, 2017	Jan. 31, 2017
Inventories
Inventory reserves	$ 63.8	$ 56.4

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Goodwill and Long-Lived Assets, Net (Major Asset Classes) (Details) - USD ($) $ in Millions	6 Months Ended
	Jul. 31, 2017	Jan. 31, 2017
Goodwill and Intangible Assets Disclosure [Line Items]
Original Cost	$ 428.4	$ 447.7
Accumulated Amortization	119.0	132.9
Net Book Value	309.4	314.8
Indefinite Life, Trade Name
Goodwill and Intangible Assets Disclosure [Line Items]
Original Cost	18.6	16.9
Net Book Value	18.6	16.9
Customer contracts and relationships
Goodwill and Intangible Assets Disclosure [Line Items]
Original Cost	404.3	422.0
Accumulated Amortization	118.1	129.1
Net Book Value	$ 286.2	292.9
Customer contracts and relationships | Minimum
Goodwill and Intangible Assets Disclosure [Line Items]
Useful Life (years)	8 years
Customer contracts and relationships | Maximum
Goodwill and Intangible Assets Disclosure [Line Items]
Useful Life (years)	30 years
Covenants not to compete
Goodwill and Intangible Assets Disclosure [Line Items]
Useful Life (years)	5 years
Original Cost	$ 2.2	5.5
Accumulated Amortization	0.5	3.6
Net Book Value	$ 1.7	1.9
Developed Technologies
Goodwill and Intangible Assets Disclosure [Line Items]
Useful Life (years)	15 years
Original Cost	$ 3.3	3.3
Accumulated Amortization	0.4	0.2
Net Book Value	$ 2.9	$ 3.1

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Goodwill and Long-Lived Assets, Net (Goodwill and Amortization Expenses) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Amortization expense of intangible assets	$ 4.8	$ 5.2	$ 9.6	$ 9.9
Expected amortization expenses in year one	20.0		20.0
Expected amortization expenses in year two	20.0		20.0
Expected amortization expenses in year three	20.0		20.0
Expected amortization expenses in year four	20.0		20.0
Expected amortization expenses in year five	$ 20.0		20.0
Aerospace Solutions Group
Goodwill increase during period			$ 26.3

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Related Party Transactions (Details) - Former parent - USD ($) $ in Millions	2 Months Ended	3 Months Ended	6 Months Ended
	Apr. 12, 2017	Jul. 31, 2016	Jul. 31, 2016
Cost incurred pursuant to arrangements		$ 2.3	$ 5.0
Sales	$ 4.4	$ 7.5	$ 13.2

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Accrued Liabilities (Details) - USD ($) $ in Millions	Jul. 31, 2017	Jan. 31, 2017
Accrued Liabilities
Accrued salaries, vacation and related benefits	$ 28.9	$ 31.6
Accrued commissions	6.3	8.7
Income taxes payable	13.6	10.3
Accrued interest	11.7	11.7
Other accrued liabilities	32.7	28.8
Total accrued liabilities	$ 93.2	$ 91.1

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Long-Term Debt (Details) $ in Millions	6 Months Ended
	Jul. 31, 2017 USD ($) item	Jan. 31, 2017 USD ($)
Debt Instrument [Line Items]
Long-term debt	$ 1,183.2	$ 1,182.0
Revolving Credit Facility
Debt Instrument [Line Items]
Amount outstanding	0.0	0.0
Revolving credit facility	$ 750.0
Number of maintenance financial covenants | item	0
Outstanding letter of credit amount	$ 5.5	$ 5.5
Senior Unsecured Notes 5.875 Percent Due 2022
Debt Instrument [Line Items]
Senior unsecured notes	$ 1,200.0
Debt, interest rate	5.875%
Long-term debt	$ 1,183.2

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Fair Value Measurements (Details) - USD ($) $ in Millions	6 Months Ended
	Jul. 31, 2017	Jan. 31, 2017
Senior Unsecured Notes 5.875 Percent Due 2022
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt, interest rate	5.875%
Revolving Credit Facility
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amount outstanding	$ 0.0	$ 0.0
Fair Value, Inputs, Level 2 | Senior Unsecured Notes 5.875 Percent Due 2022
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior unsecured notes, fair value	$ 1,256.2	$ 1,260.7

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Commitments, Contingencies and Off-Balance Sheet Arrangements (Details) $ in Millions	6 Months Ended
	Jul. 31, 2017 USD ($)
Commitments, Contingencies and Off-Balance Sheet Arrangements
Initial term of employment agreements	3 years
Number of additional years for which employment agreements may renew.	1 year
2018	$ 9.0
2019	20.5
2020	22.6
2021	19.4
2022	14.5
Thereafter	20.9
Total	$ 106.9

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Accounting for Stock-Based Compensation (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Accounting for Stock-Based Compensation
Share based compensation	$ 6.9	$ 4.9	$ 12.6	$ 9.5
Unrecognized compensation cost	31.6		$ 31.6
Qualified employees purchase of stock at a price equal to percentage of closing price			85.00%
Compensation expense	$ 0.1	$ 0.1	$ 0.2	$ 0.2

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Segment Reporting (Revenues and Operating Earnings (Losses) by Reportable Segment) (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2017 USD ($)	Jul. 31, 2016 USD ($)	Jul. 31, 2017 USD ($) segment	Jul. 31, 2016 USD ($)
Reportable Segments [Abstract]
Number of reportable segments | segment			2
Revenues
Revenues	$ 430.6	$ 378.9	$ 841.9	$ 731.7
Operating earnings (loss)
Operating earnings	52.3	32.4	100.9	55.6
Interest expense	19.0	19.1	38.0	38.0
Earnings (loss) before income taxes	33.3	13.3	62.9	17.6
Aerospace Solutions Group
Revenues
Revenues	357.1	346.5	704.6	662.3
Operating earnings (loss)
Operating earnings	60.1	55.9	118.8	110.0
Energy Services Group
Revenues
Revenues	73.5	32.4	137.3	69.4
Operating earnings (loss)
Operating earnings	$ (7.8)	$ (23.5)	$ (17.9)	$ (54.4)

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Segment Reporting (Capital Expenditures by Reportable Segment) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Property, Plant and Equipment [Line Items]
Capital expenditures	$ 18.1	$ 6.1	$ 32.6	$ 25.3
Aerospace Solutions Group
Property, Plant and Equipment [Line Items]
Capital expenditures	2.6	3.5	5.3	6.3
Energy Services Group
Property, Plant and Equipment [Line Items]
Capital expenditures	$ 15.5	$ 2.6	$ 27.3	$ 19.0

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Segment Reporting (Goodwill by Reportable Segment) (Details) - USD ($) $ in Millions	Jul. 31, 2017	Jan. 31, 2017
Goodwill [Line Items]
Goodwill	$ 1,022.7	$ 996.4
Aerospace Solutions Group
Goodwill [Line Items]
Goodwill	$ 1,022.7	$ 996.4

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Segment Reporting (Total Assets by Reportable Segment) (Details) - USD ($) $ in Millions	Jul. 31, 2017	Jan. 31, 2017
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	$ 3,788.7	$ 3,698.3
Aerospace Solutions Group
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	3,526.0	3,471.4
Energy Services Group
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	$ 262.7	$ 226.9

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Segment Reporting (Corporate Assets by Reportable Segment) (Details) - USD ($) $ in Millions	Jul. 31, 2017	Jan. 31, 2017
Segment Reporting Information [Line Items]
Total assets	$ 3,788.7	$ 3,698.3
Corporate, Non-Segment
Segment Reporting Information [Line Items]
Total assets	$ 364.8	$ 378.2

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Segment Reporting (The impact of the Restatement segment) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended			6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Apr. 30, 2016	Jul. 31, 2017	Jul. 31, 2016	Jan. 31, 2017
Accounts Receivable - trade	$ 311.8	$ 261.1		$ 311.8	$ 261.1	$ 261.3
Inventories, net	1,398.1	1,386.9		1,398.1	1,386.9	1,381.4
Stockholders' equity	2,281.4	2,223.0		2,281.4	2,223.0	$ 2,221.1
Revenues	430.6	378.9		841.9	731.7
Cost of sales	312.0	286.4		610.4	555.7
Income tax expense	12.6	5.3		23.8	7.1
Net earnings	$ 20.7	$ 8.0		$ 39.1	$ 10.5
Basic net earnings per common share	$ 0.41	$ 0.15		$ 0.77	$ 0.20
Diluted net earnings per common share	$ 0.40	$ 0.15		$ 0.76	$ 0.20
Aerospace Solutions Group
Revenues	$ 357.1	$ 346.5		$ 704.6	$ 662.3
Application Of Accounting Principle [Member] | Aerospace Solutions Group
Revenues			$ (12.1)
Cost of sales			(6.6)
Net earnings			$ (3.4)
As Reported
Accounts Receivable - trade		289.0			289.0
Inventories, net		1,367.5			1,367.5
Stockholders' equity		2,228.3			2,228.3
Revenues		391.4			759.6
Cost of sales		296.3			575.0
Income tax expense		6.3			10.3
Net earnings		$ 9.6			$ 15.8
Basic net earnings per common share		$ 0.18			$ 0.30
Diluted net earnings per common share		$ 0.18			$ 0.30

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Net Earnings Per Common Share (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Net Earnings Per Common Share
Anti-dilutive securities excluded from determination of diluted earnings per common share	0.0	0.3	0.0	0.3

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Net Earnings Per Common Share (Computations of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Net Earnings Per Common Share
Net earnings	$ 20.7	$ 8.0	$ 39.1	$ 10.5
Basic weighted average common shares (in millions)	50.9	51.9	51.0	51.9
Effect of dilutive securities - dilutive securities	0.8	0.3	0.7	0.3
Diluted weighted average common shares (in millions)	51.7	52.2	51.7	52.2
Basic net earnings per common share	$ 0.41	$ 0.15	$ 0.77	$ 0.20
Diluted net earnings per common share	$ 0.40	$ 0.15	$ 0.76	$ 0.20

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Income Taxes
Unrecognized tax benefits that would affect effective tax rate, if recognized	$ 9.3	$ 12.4	$ 9.3	$ 12.4
Liability for unrecognized tax benefits for interest and penalties	1.3	1.6	1.3	1.6
Income tax expense	$ 12.6	$ 5.3	$ 23.8	$ 7.1